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LIFT Act: Low-Income First-Time Home Buyers [Explained]

First-time home buyers may soon be eligible for a new low-downpayment mortgage with subsidized mortgage interest rates and no monthly mortgage insurance.

The program, called the Low-Income First-Time Homebuyers (LIFT) Act, is a bill first introduced in the 2021-2022 Congress. The current Congress re-introduced the program as a bicameral bill on July 12, 2023, with two alternate names: 

  1. The Low-Income First-Time Homebuyers Act of 2023
  2. The LIFT Homebuyers Act of 2023

The LIFT Act aims “to establish a program to provide low- and moderate-income first-time, first-generation homebuyers with access to affordable and sustainable wealth-building home loans.”

It’s a “wealth-building home loan,” according to the bill, and the program is one of multiple first-time home buyer programs making their way through Congress.

This article explains how The LIFT Act works, which first-time buyers qualify, and when to expect the bill to pass into law.

Let’s go into the details.

The LIFT Act: Modified FHA Mortgages For First-Time Buyers

What is the LIFT Act?

The LIFT Act is a bill that creates a new, government-backed mortgage program for low- and moderate-income Americans. 

The bill lowers mortgage rates, removes annual mortgage insurance premiums, and shortens an FHA loan term from 30 years to 20 years without changing its payment. The LIFT Act mortgage builds home equity faster, which generates more household wealth and protects home buyers from foreclosure.

The LIFT Act is a new first-time home buyer program type because it’s a mortgage loan. It’s not a cash grant program like the $25,000 Downpayment Toward Equity bill, nor a tax credit like the $15,000 DASH Act and the First-Time Home Buyer Tax Credit.

The LIFT Act is the first congressional program to accelerate mortgage payoffs. It changes the amount of principal and interest in each mortgage payment so homeowners get free-and-clear faster. LIFT Act mortgages generate wealth at twice the rate of a typical mortgage loan. 

The bill calls for the LIFT Act program to end on December 31, 2025.

How Does the LIFT Act Work?

The LIFT Act legislation modifies FHA mortgages to make them pay off faster. The bill’s language explains how the LIFT Act works.

HUD and the U.S. Treasury form a partnership to reduce mortgage rates

The LIFT Act creates a union between the U.S. Treasury and the Department of Housing & Urban Development (HUD), which is the parent of the FHA.

In the partnership, the Treasury’s role is to purchase FHA-backed mortgages from mortgage lenders at below-market interest rates. HUD’s role is establishing rules and rates for the first-time buyer program.

20-year mortgage rates are reduced 

The LIFT Act authorizes HUD and the U.S. Treasury to make below-market interest rates for FHA loans so that a 20-year LIFT Act mortgage will match the payment on a 30-year FHA mortgage.

This $150,000 mortgage example shows how the LIFT Act works:

  • LIFT Act Loan: 20 years at 5.125% with no mortgage insurance = $1,000 per month 
  • FHA Loan: 30 years at 6.50% with 0.55% mortgage insurance = $1,000 per month

LIFT Act mortgage rates are prescribed to make payments that are at least equal to, and not more than 10 percent above, the 30-year FHA mortgage counterpart.

LIFT Act interest rates can be 2 percentage points or more beneath the effective standard rate.

The program self-funds via upfront mortgage insurance premiums

LIFT Act mortgages are self-insured and do require taxpayer money. 

LIFT Act loans collect mortgage insurance premiums at closing like all FHA-backed loans. However, unlike standard FHA loans, an upfront mortgage insurance premium is the only premium eligible buyers will pay.

The FHA will finance four percent of the loan amount at closing into the loan size, and no additional mortgage insurance is due for the life of the loan.

Who Qualifies for the LIFT Act?

The LIFT Act is not yet law, so when we discuss its eligibility requirements, note that the bill’s language is not final and may change before its passage into law.

As of April 13, 2024, the LIFT Act of 2023 requires that home buyers meet the following requirements:

Must be a first-time home buyer

Home buyers must be purchasing their first home ever or have not owned a home in the last 36 months. If two or more people are co-applicants on the mortgage, every home buyer who will make their home their primary residence must be a first-time home buyer. 

Must be a first-generation home buyer

Eligible home buyers’ parents or legal guardians may not have owned a home during the 36 months before purchase. For buyers whose parents or guardians are no longer alive, the bill requires that parents and guardians did not own a home at their time of passing.

The parental / guardian requirements are waived for buyers who previously lived in foster care.

Home buyers living with a spouse or domestic partner who owned their primary residence within the last three years do not qualify as first-generation home buyers, whether the spouse or domestic partner is a co-borrower on the mortgage.

Must buy a 1-unit home

The LIFT Act is for single-unit homes only. Eligible home types include:

  • Single-family detached homes
  • Single-family attached homes
  • Townhomes
  • Condominiums

Manufactured and mobile homes may be eligible if the home is on a permanent foundation, is taxed as real estate, and built after June 15, 1976, among other FHA mortgage requirements.

Co-operative homes and 2-4 unit residential properties are ineligible.

Must earn a low- or moderate-income for your area

Eligible home buyers must earn an income that’s at most 20 percent over the median income for their metropolitan area. For example, in Coral Gables, Florida, where the median income is $113,620, first-time home buyers must earn $136,350 per year or less to be LIFT Act-eligible.

The program makes income exceptions in high-cost areas, such as San Francisco, Denver, and other cities where the cost of living is high. 

In high-cost areas, eligible home buyers must earn an income at most 40 percent above the area median income. In Orange County, California, the 2023 area median income is near $127,800. Therefore, home buyers must earn $179,000 annually or less to use the LIFT Act wealth-building mortgage.

Must be FHA mortgage-eligible

The LIFT Act is based on FHA financing, so eligible first-time buyers must qualify for an FHA loan with their lender.

The minimum approval standards for an FHA mortgage include the following: 

  1. Credit score of 500 or higher
  2. Down payment of at least 3.5%
  3. Evidence of reliable employment
  4. Evidence of reliable income
  5. Manageable balance between debts and income

There are other FHA mortgage minimums, too.

Get pre-approved to check your eligibility.

What Is The LIFT Act’s Current Status?

As of April 13, 2024, the Low-Income First-Time Homebuyer (LIFT) Act of 2023 is still a bill with the 2023-2024 Congress. The bill replaces the Low-Income First-Time Homebuyer (LIFT) Act (S. 2797), which expired at the end of the last congressional session.

Sen. Mark Warner authored the current and former versions of The LIFT Act in the Senate. Rep. Emanuel Cleaver, II, wrote the bill’s current version in the House of Representatives.

The LIFT Act timeline is as follows:

  • September 22, 2021: S. 2797 introduced as LIFT Homebuyers Act of 2021 with 4 co-sponsors
  • July 12, 2023: H.R. 5473 introduced as The LIFT Act of 2023 with 6 co-sponsors
  • July 13, 2023: S. 2295 introduced as The LIFT Act of 2023 with 4 co-sponsors

Home buyers can only use a LIFT Act loan once the bill is enacted. Until then, buyers can consider the Conventional 100 mortgage, which provides 100% financing plus closing costs for first-time buyers with reduced mortgage interest rates.

Apply for the Conventional 100 mortgage here.

Will The LIFT Act Become Law?

The LIFT Act is unlikely to pass into law before the late-2024 because the program requires the U.S. Treasury and HUD to coordinate, and both agencies are large and often slow-moving. 

Once the bill passes, the Secretary of Housing & Urban Development must write the program rules and establish a LIFT HOME program, as described in the legislation. 

The bill also requires rules for the Secretary of the Treasury.

Frequently Asked Questions about the LIFT Act

The common questions we receive about the LIFT Act are from our website, emails, and YouTube comments.

I already bought a home. Can I use the LIFT Act?

The LIFT Act works by changing mortgage terms and interest rates. Therefore, it can’t be applied to a mortgage already in process.

Can I refinance my mortgage using the LIFT Act?

No, the LIFT Act is for purchase mortgages only. Homeowners cannot use the LIFT Act to refinance an existing mortgage.

Do I have to use an FHA mortgage with the LIFT Act?

Yes, the LIFT Act is for FHA mortgages only. The bill language modifies how FHA loans are treated and does not mention other government-backed mortgages, including conventional, USDA, and VA mortgages.

My spouse is a former homeowner. I am not. Can I use the LIFT Act if my spouse is not on the mortgage application?

The language of the LIFT Act bill states that both the home buyer and their spouse must meet the first-time home buyer guidelines.

My sibling is a homeowner. They are co-signing on my mortgage but not living with me. Can I use the LIFT Act?

The LIFT Act language states that co-borrowers are not considered for first-time home buyer status unless they also live in the home.

What to do next

See how much home you can afford to buy. Use our no-risk Immediate Mortgage Approval and find your mortgage eligibility in an instant.

Get approved here.

       First-time home buyers may soon be eligible for a new low-downpayment mortgage with subsidized mortgage interest rates and no monthly mortgage insurance. The program, called the Low-Income First-Time Homebuyers (LIFT) Act, is a bill first introduced in the 2021-2022 Congress. The current Congress re-introduced the program as a bicameral bill on July 12, 2023, with two alternate […]

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