Help for Renters Who Want to Buy: Could This Proposed Law Be a Breakthrough?

The federal government could pass a law to help a new buyer pay for a home.

The major hurdles for home buyers are: saving for a down payment; qualifying for an affordable mortgage; and having to fork over private mortgage insurance payments when the down payment is small. People are working hard to buy homes, but real estate prices are off the charts. Where’s the government in all of this?

In fact, there’s a proposal for turning hopes into realities: the Downpayment Toward Equity Act of 2023.

With this idea still pending, we’ll add a few already-existing tips on how first-timers can get a boost, too.

$25,000 Downpayment Toward Equity Act: What’s the Scoop?

California Rep. Maxine Waters introduced a bill that could help people deal with rising rents and hefty home prices. It’s called the Downpayment Toward Equity Act of 2023. If it passes into law, it will make buying a home more achievable for many people, particularly those who currently rent.

The bill aims to:

Send $100 billion in assistance to some 5 million first-time homebuyers — up to $20,000 per household.

Help people in groups that have had the most difficulties on the way to homeownership. Socially and economically disadvantaged home buyers could apply for up to $25,000 in cash assistance for a down payment, closing costs, or to use in a buydown — an upfront payment that lowers the buyer’s mortgage interest rate.

Isn’t Assistance With a Mortgage Buydown Already Available?

Home buyers with the resources to pay more cash up front can buy points, so their monthly mortgage payment is cheaper over the course of its term. Each point costs 1% of the loan amount.

Points (or “buydowns”) reduce interest payments and this adds up to significant cost savings over the life of the loan. People who buy mortgage points can still get tax breaks on the interest, too.

But it’s hard enough to come up with a down payment, let alone buy points. So, check out the special initiatives offered by the industry right now, to help with Federal Housing Administration (FHA) or Department of Veterans Affairs (VA) loans:

Rocket Mortgage® offers temporary buydowns that take 1% off the rate for the first year. Buyers do need to be approved to handle the higher permanent interest rate after that initial year.

CrossCountry Mortgage^TMbuydowns reduce the mortgage burden for one, two, or three years. But will the seller agree to cover the upfront funding?

United Wholesale Mortgage, also known as UWM, offers similar temporary interest rate buydowns for between one and three years. The upfront funds can come from the seller or lender.

If you live outside of New York, have a 620+ credit score, and are going for an FHA loan, Movement Mortgage will let you borrow a loan to cover the 3.5% down payment in addition to taking out a regular FHA mortgage.

The Chase Homebuyer Grant℠ combined with an FHA mortgage is another way to get help with buying costs.

It never hurts to keep checking the major mortgage websites. For instance, in 2023, Zillow Home Loans LLC, Rocket Mortgage®, and UWM have 1% down payment mortgages to offer in specific states.

What Is the Housing Crisis Response Act of 2023?

Another bill Waters wants to see turned into the law of the land? The Housing Crisis Response Act of 2023. Here’s what it would do:

Allocate some $150 billion to deal with the housing affordability crisis.

Assist many thousands of struggling renters.

Promote fairness in housing and address the homeownership gap that sidelines so many hopeful buyers from minority groups. The act would focus grant assistance on new buyers, to help them cover down payments and closing costs.

There’s a huge racial housing wealth gap. But across the country, the quest for housing fairness is making gains.

So, the Housing Crisis Response Act of 2023 would help struggling buyers generally, with people impacted by historical barriers to homeownership opportunities gaining the most from it. The bill’s supporters also say it would have positive impacts on neighborhoods and local economies, and lead to more capable taxpayers!

The HELPER Act: Giving Back to Those Who Serve Our Communities

The HELPER Act hasn’t yet passed. It’s a good idea — meant to help teachers and first responders buy their first homes. In fact, anyone who hasn’t owned their home in the past three years counts as a first-time home buyer.

The HELPER Act allows for 100% financing through FHA loans — so down payments are no longer a barrier — without forcing private mortgage insurance (PMI) on these hardworking buyers.

What is PMI and why on Earth are buyers with less than 20% down expected to pay it? Learn all about private mortgage insurance right here, in the Deeds.com Guide to Private Mortgage Insurance.

To qualify for the updated HELPER Act of 2023, assuming it passes, potential home buyers must be first-time applicants, who are also…

Full-time K-12 teachers, fire or police officers, or paramedic/EMT professionals (in good standing, and in the job 4+ out of the last 5 years).

Working for a branch of government — whether local, state, federal, or Tribal.

Planning to keep working in their jobs for at least another year.

Buying a primary residence for personal use, not to rent out.

Any mortgage companies that works with FHA-backed loans will be able to issue a HELPER Act mortgage.

The HELPER Act has bipartisan support, and should pass. It will make homeownership easier on eligible professionals, acknowledging the strength and stability their presence adds to a community.

What Else Is Out There to Help Hopeful Buyers?

The DASH Act could pass. It would give first-time buyers a tax credit of 20% of the home purchase price, up to $15,000. We’ll be watching.

For now, there are some good plans out there that help people buy homes:

Fannie Mae’s HomeReady® mortgage requires a buyer to put just 3% down. Have a look at Fannie Mae’s other requirements, posted at the HomeReady page. You’re even OK to use rent income to qualify for this one.

Freddie Mac’s Home Possible® and HomeOne® mortgages offer the same 3% minimums. Home Possible® is great for people with modest incomes and at least a 660 credit score. Type an address into the Home Possible mapping tool to check for the maximum income. And the HomeOne® mortgage sets no income ceilings.

Regular FHA loans are available with down payments as low as 3.5%, and there are also options from the U.S. Department of Agriculture and the Department of Veterans Affairs.

Good news! This year, the federal government reduced the required PMI for FHA mortgages.

And that’s not all. The Consumer Financial Protection Bureau lists additional helpful options.

Will the Newly Proposed Laws Pass? If So, When?

These are important questions. In a time when homes are harder to buy than ever, hopeful buyers have to keep up to date on all available (and potential) options.

Watch this space! We’re following the country’s key housing initiatives — existing, and proposed.

Supporting References

Eliza Relman for Business Insider India via BusinessInsider.In: California Rep. Maxine Waters Introduces Bills to Spend Hundreds of Billions of Dollars to Fight Homelessness and Solve the Affordable Housing Crisis (Jun. 27, 2023).

Fact Sheet: The Downpayment Toward Equity Act of 2023 (PDF).

Deeds.com: Will the Cost of Borrowing a 30-Year Mortgage Ever Come Back Down? Are There Better Alternatives? (May 8, 2023).

And as linked.