Posted by The Downpayment Toward Equity Act of 2021 (dubbed “Biden’s First Time Homebuyer Program”) seeks to provide first time / first generation homebuyers with $20,000 to $25,000 in homebuying assistance.
Proposed Plan Helps First Time Homebuyers
The shape defining passage of time has revealed a clearer outline of Biden’s proposed homebuyer credit plan. While still in the “discussion phase” we now know more about the program’s potential features.
If passed, the plan provides eligible first time homebuyers with significant financial assistance. In short, the Downpayment Toward Equity Act of 2021 is Godzilla if the 2008/2009’s homebuyer tax credit programs are the Geico Gecko.
The proposed version currently contains several amazing benefits including:
- $20,000 to $25,000 in assistance to eligible buyers
- Funds may be used for down payment, closing costs or discount points
- Eligible buyers receive funds right at closing
Eligibility For Biden’s Homebuyer Plan
At present, proposed eligibility criteria appear straight forward with one twist. Biden’s plan targets generational home ownership instead of just first time homeownership.
Eligible buyers must meet 3 criteria.
1. Must be a first time homebuyer
2. Must be a first generation homebuyer
3. Must meet income cap limits
Those not owning a home in the past 3+ years are considered First Time Homebuyers.
First Generation Homebuyer’s parents or guardians either never owned a home OR owned a home and lost it due to foreclosure, short sale or deed in lieu of foreclosure during the buyers lifetime and do not currently own a home.
Buyers Receive A Larger Credit This Time
The proposed version’s bells and whistles place it in a category of it’s own. Eligibility criteria, total funds provided to buyers and when buyers receive funds one up Obama’s retired first time buyer tax credit programs of 2008 and 2009.
Buyers would receive between $20,000 and $25,000
Eligible buyers may receive $20,000 to $25,000 using Biden’s Homebuyer Credit Program. “Socially Disadvantaged Individuals” (Asian American, Black, Hispanic, Native American and other) have access to the higher amount. Alternatively, all other eligible buyers receive up to $20,000.
Funds would be available prior to closing on the home
One of the most talked about proposed tweaks is borrowers receiving funds from the program right at the closing table. Prior tax credit programs delivered funds to eligible buyers as a part of their “year of home purchase” tax filing.
Eligible buyers would be able to use funds for down payment, closing costs and discount points
As a result of the above benefit, the programs funds can go toward the following:
- Down payment
- Closing costs
- Discount fees paid to lower the interest rate
Is It Free Money?
This proposed plan nearly debunks the “there is no such thing as a free lunch” rule. Eligible buyers pay back nothing if they occupy the purchased home for 5+ years. Those vacating before the 5 years finish line are subject to a scaled repayment penalty of the funds.
Oddly, the program carves out an exception for buyers who sell prior to the 5 year mark. According to the proposed version, buyers that sell within 5 years who also realize a gain less than the amount they are on the hook for would be forgiven. In other words, they would not owe anything.