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

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There’s another first-time home buyer program making its way through Congress. The Low-Income First Time Home Buyer Act (LIFT), introduced by members of the Senate Committee on Banking, Housing and Urban Affairs, uses low mortgage rates – as low as 1.5 percent – to make homeownership more accessible.

The LIFT act is lawmakers’ latest effort to help first-time buyers remove obstacles to buying, and begin building wealth through homeownership.

Let’s go into the details.

What is the LIFT Act?

First-Time Homebuyer Program That Lowers Your Mortgage Rate [LIFT Act]

The LIFT Act is a pro-homebuyer bill that helps low- and middle-income people buy homes with low mortgage rates.

The LIFT Act is different from other first-time buyer programs in Congress. Other programs offer cash and tax incentives that make buying a home easier. By contrast, the LIFT Act subsidizes low mortgage rates for first-time buyers which supports them after they’ve already bought. 

The LIFT Act’s low mortgage rates build equity in homes faster, which reduces foreclosures.

According to mortgage data company Black Knight, homeowners with equity, are 40 percent less likely to lose their house to after defaulting on a loan.

How Does the LIFT Act Work?

The LIFT Act modifies standard FHA mortgages with subsidized mortgage rates and accelerated payoff periods. Homeowners make the typical, low 30-year mortgage payment with the benefit of paying off their loan in just twenty years. 

The LIFT Act is the first home buyer program to accelerate mortgage payoffs. It changes the standard mortgage payback schedule. Instead of front-loading loans with interest, the LIFT Act increases the amount of principal included in each payment so homeowners get free-and-clear faster.

The LIFT Act can be used in conjunction with other first-time home buyer programs, too, including the First-Time Home Buyer Tax Credit of 2021 which provides a tax credit of up to $15,000, and the Downpayment Toward Equity Act of 2021 which gives cash grants of up to $25,000.

Who Qualifies for the LIFT Act?

The LIFT Act is written for FHA mortgages, which means most first-time buyers are eligible.The bill’s last update lists these additional eligibility standards, too. 

Note: The LIFT Act is a congressional bill and may change before it’s passed into law.

First time home buyers

Home buyers must be purchasing their first home ever, or their first home in the last 36 months. If two or more people are co-buying a home, all buyers must be first-time home buyers. 

First-generation home buyer

Home buyers must have grown up in a rented home, and their parents may not be current or former homeowners. If two or people are co-buying a home, all buyers must be first-generation home buyers.

An exception is made for home buyers who lived in foster or institutional care at any point in their lives. Buyers who lived in foster or institutional care are first-generation home buyers for purposes of the Lift Act.

Low- or Middle-Income Earner

Home buyers must earn an income that’s middle-of-the-pack or lower for the area in which they’re buying. Ultra-high income earners are ineligible.

Household income may not exceed what’s typical for the area by more than 20 percent except in high-cost areas such as California, New York, Hawaii where home buyers can earn up to 40 percent more than the median.

Find the median income in your neighborhood by visiting this calculator at HUD.

Credit score over 500

The LIFT Act is based on FHA financing so home buyers must meet the FHA’s 500 minimum credit score threshold. If two or more people are co-buying a home, the lowest credit score from among the co-buyers determines eligibility. 

Home buyers with credit scores of at least 580 can make a down payment of 3.5 percent.

Frequently Asked Questions about the LIFT Act

These are the top questions about the LIFT Act fromour website chat, email newsletters, and YouTube comment sections.

What other first-time home buyer programs can I use?

The LIFT isn’t the only program for first-time home buyers making its way through Congress. There are also programs like the First-Time Home Buyer Tax Credit Act of 2021 and the Downpayment Toward Equity Act of 2021, which give actual money to first-time buyers to make homes more affordable. 

When will the LIFT Act pass?

The LIFT Act is a bill in Congress with five co-sponsors – Sen. Mark R. Warner, Sen. Chris Van Hollen, Sen. Rev. Raphael Warnock, Sen. Jon Ossoff, and Sen. Tim Kaine. The bill is not yet passed into law and, as of now, has not faced a vote in the House or Senate. The LIFT Act could pass tomorrow, next week, next month, or maybe not at all.

Check out this post to see the status of all proposed first-time home buyer government grants and programs.

I bought a home last month. 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 makes no mention of other government-backed mortgages including conventional mortgages, USDA mortgages, and VA mortgages.

Can I sell my house if I use a LIFT Act mortgage? 

Yes, you can sell your home at any time whether or not you used the LIFT Act. It’s your home – you can do what you want!

Our Advice – Get Pre-Approved to See if You Are Eligible

Pay attention to the status of all government grants and programs with our post on the topic. Then, if you are serious about buying a home, be sure to get pre-approved first. A mortgage expert will help you understand the grants and programs that might be available to you.

Get pre-approved for a mortgage today.

Dan Green
Dan Green

Dan Green is a former mortgage loan officer and an industry expert. He's appeared on NPR and CNBC, and in The Wall Street Journal, Bloomberg, and dozens of local newspapers. Dan has helped millions of first-time home buyers get educated on mortgages, real estate, and personal finance. Have mortgage questions? Ask Dan in the chat.

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