Catch a Glimpse of the Downpayment Toward Equity Act of 2021

by Contributor

(Apr. 26, 2021) — The legislative body drafts bills that they think would improve the quality of life. The Downpayment Toward Equity Act of 2021 is one of them. What is this bill about? Read on to find out.

Buying a home for the first time is an exciting milestone. But it could also be a challenging task. Legalities about conveyancing matters may confuse first-time homebuyers. Also, one has to be careful about unexpected costs or hidden charges. A trusted property settlement lawyer can help you have hassle-free transactions. When legal matters are not on the way, a person can focus on the joy of owning their first residential property.

The dream of homeownership is still a far cry for most people. The pandemic affected the buying power and perspective of some people. “Downpayment toward Equity Act of 2021″could be good news to first-time homebuyers. It is still in its very young stage in the legislation table. It is only in its drafting stage this April. But, here are some important things worth noting about it.

What Are the Inclusions in the Bill?

The Grant:

The bill seeks to offer $20,000 for first-time homebuyers who will meet the qualifications. Another $5,000 tops up the amount for “socially and economically disadvantaged individuals.”

Qualifications:

• The grant is for first-time homebuyers. By law, this means anyone who has not owned a house for the previous three years.
• The homebuyer must be in the average or lower bracket income. The measure of this qualification is the area median income (AMI). It could be in the property’s location or the place of residence of the borrower. To be eligible, the homebuyer must have 120 percent or less of the AMI. For high-cost housing markets, it could go up to 180 percent of the AMI.
  
• The individual must be a first-generation homebuyer. By definition of the bill, this means that their parents or guardians have not owned any home before. Homebuyers also qualify if their parents have owned a home but lost it due to foreclosure or short sale.
  
  
• Socially disadvantaged individuals are those that experienced racial or ethnic prejudices from society. This group includes Black, Hispanic, Asian American, or Native American. Any combination of these races.
  
  
  
• Homebuyers considered for this grant must undergo a home purchasing counseling program.

The Boon of this Bill:

• Funds are available at the time of purchase of the house. This is unlike other programs where the buyer receives the tax credits a year after.
  
  
• The homebuyer does not need to repay the assistance if they live in the home for at least five years. In case they need to sell the house, the amount of repayment decreases by 20 percent for each year they live in it. The homeowner can waive the repayment if the profit they got is lower than the needed amount.

What Are Some Implications of This Bill?

For those who will qualify for this assistance, it would help them fulfill a dream. They would have a place they can call their home. Having enough to pay for down payment or closing costs is a big load off the homebuyer’s shoulder.

But, they must be cautious and grounded on how much they can afford. Receiving such a financial cushion may tempt them to overestimate their budget. In turn, they may get a home that they cannot fund in the long run. Homebuyers must be realistic about their capacity to pay. This is regardless if they receive any government aid or none.

If this bill passes as a law, it would be a big help to boost the economy. It would increase the buying power of an individual. Also, there would be more job opportunities in the real estate industry. This includes realtors, mortgage lenders, and inspectors, only to name a few. The construction industry would also need more people.

As homeownership rates increase, there would be positive changes in the local economy. Schools, stores, and local businesses will thrive. There would be progress even in small communities.

One issue of this bill is the probable imbalance between supply and demand. As more people become qualified to buy homes, residential property costs may skyrocket. This strategy helps to keep up with the demand. But, there would be stiff competition during the bids. This is because of the fewer properties available compared to those willing to buy.

This bill is still in its preliminary stage in the legislative. Amendments are possible as it goes through the House and Senate. Its ratification as a law is still unclear. The allocation of its funding is also another thing that must be definite. There is only hope that this bill will bring prospective homebuyers a step closer to realizing their dream of having a home of their own.