One of the biggest challenges to homeownership is coming up with money for a down payment. Fortunately, there are a number of initiatives by the federal, state, and local governments, as well as nonprofit organizations that offer first-time homebuyer programs to help. The proposed $25,000 First-Time Home Buyer Grant, if passed, may help you achieve homeownership.

The average first-time homebuyer pays about 6% of the home purchase price as a down payment. The average sales price of homes in the U.S. was $420,800 in Q1 2024, which equates to a down payment of approximately $25,200. While a grant can be very helpful, qualifying is not always easy.

Read on to learn more about how this grant works, eligibility requirements, and current status.  

What Is the $25000 First-Time Home Buyer Grant?

The $25,000 First-Time Home Buyer Grant or the Downpayment Toward Equity Act of 2023 is a proposed bill that may give eligible first-time homebuyers up to $25,000 to purchase a home. The grant funds can be used for a down payment, a lower mortgage interest rate, or closing costs.

“If this bill passes, this could help many first-time buyers get into their first home,” says Teresa Dodson, a debt expert and the founder of Greenbacks Consulting.

While the bill allows any eligible first-generation, first-time homebuyer to receive grants, its main aim is to help economically and socially disadvantaged homebuyers, including Asian American, Native American, Hispanic, and Black buyers.

If passed, the U.S. Department of Housing and Urban Development (HUD) will oversee the program, which will be administered by community-based and state-level organizations.

How Does the $25000 First-Time Home Buyer Grant Work?

The grant is not a tax credit or a loan. It’s a cash payment that will be made to eligible home buyers at closing and will be directly applied to the purchase.

For first-time home buyers, the proposed standard grant is $20,000, and an additional $5,000 will be awarded to socially and economically disadvantaged individuals. The bill defines a socially disadvantaged individual as anyone who identifies as Native American, Asian American, Hispanic, Black, or a combination, or someone who has been subjected to cultural bias, ethnic or racial prejudice.

The grant money can be used for anything related to the purchase of the primary residence. It can also be split and applied towards a variety of costs, such as mortgage loan discount points, title closing costs, and down payment. The grant can also be used for accessibility renovations.   

What Is the Current Status of the Downpayment Toward Equity Act?

The $25,000 First-Time Home Buyer Grant is a bill with the 2023-2024 Congress. It hasn’t passed yet. The former and current versions of the bill were authored by Rep. Maxine Waters, and an identical version was authored by Senator Raphael Warnock in the Senate.

Here’s a general timeline of the Downpayment Toward Equity Act:

  • July 17, 2021: H.R 4495 was introduced
  • September 30, 2021: S. 2920 was introduced
  • February 10, 2022: Hearings in Senate
  • June 22, 2022: Hearings in Senate
  • March 9, 2023: White House budget allocates $10 billion for first-time home buyers grants
  • June 21, 2023: H.R.4231 was introduced
  • July 6, 2023: Bill co-sponsored by 31 members of the House of Representatives
  • September 14, 2023: Bill co-sponsored by four additional members of the House of Representatives
  • March 12, 2024: S.3930 was introduced

Who Is Eligible for the $25000 First-Time Home Buyer Grant?

If passed, first-generation, first-time home buyers would be able to get up to $25,000 in cash grants for their home purchase. However, all buyers within the household must meet the eligibility requirements of the program.

Here are the qualification requirements for the Downpayment Toward Equity Act:

  • You must qualify as a first-time homebuyer. This means that you must not have co-signed on a first mortgage or owned a home in the last three years.  
  • You may qualify if your parents, domestic partner, spouse, or legal guardians have not owned a home in the last three years. This requirement doesn’t apply to those who have lived in foster care.
  • Your income must be less than 120% of your area’s median income. Buyers who live in a high-cost market may qualify with an income of up to 180% of the area’s median income.
  • The grant can be used to purchase a condo, manufactured home, or single-family home. It can also be used for a multi-unit property with up to four units if you live in one and rent out the others.
  • The grant can’t be used to buy a rental property or a second home.
  • The grant is available for conventional loans guaranteed by Fannie Mae or Freddie Mac. It will also apply to all qualified mortgage programs, such as Section 184 loans, USDA, FHA loans guaranteed by the Federal Housing Administration, and VA loans backed by Veterans Affairs.
  • Homeowners must live in the home they purchase for at least five years. If they sell the home sooner, they’ll need to repay all or part of the grant.
  • You must complete a homebuyer education course from a HUD-approved counseling agency.

Stay Updated on the Status of the Act So You’re Ready to Apply

It’s uncertain when the $25,000 First-Time Home Buyer Grant will pass. It’s currently a proposed bill that must go through the legislative process in Congress. It must be approved by the Senate and the House of Representatives and must be signed by President Biden before it becomes law.

Keep track of its status as it goes through this process so you’ll be ready to apply for the grant when you purchase your home.

Alternative Down Payment Assistance Programs

There are many down payment and homebuyer assistance programs offered by the federal government, financial institutions and mortgage lenders, state housing finance agencies, nonprofits, cities, and local programs. You can find a list of homeownership programs in your area through HUD.

Here are a few mortgage assistance programs you may qualify for: 

  • HomePath Ready Buyer
  • FHFA first-time homebuyer mortgage rate discount
  • Good Neighbor Next Door
  • National Homebuyer Fund
  • Wells Fargo Homebuyer Access Grants
  • Chase Homebuyer Grant
  • America’s Home Grant by Bank of America

When Will You Be Able To Submit the $25,000 First-Time Home Buyer Grant Application?

The $25,000 First-Time Home Buyer Grant Application is not open yet, and it's unlikely the bill will be passed into law by the end of 2024. Passing and executing cash grants requires multiple government agencies and participating lenders to work together.

Congress will also make the rules for distributing these grants and finalize other details. If you’re not planning to purchase a home in the near future, we recommend saving as much as possible toward your down payment and applying for the grant once it's available to lower your loan amount. In the meantime, you may also be able to take advantage of other alternatives, such as debt relief and grants.

If you’re planning to apply for a home loan soon, we recommend exploring other loan programs and down payment and closing cost assistance programs that we’ve listed above.