US homebuyers could get $50,000 down-payment aid: Who qualifies

The proposal comes as high mortgage rates and elevated home prices continue to make homeownership difficult for many prospective buyers.

First-time homebuyers in the United States could receive up to $50,000 in federal down-payment assistance under a draft bill that Democratic Senators Jeff Merkley and Ron Wyden are set to introduce, Axios reported.

The Homeownership Promise Act would create a 5-to-1 federal matching programme for eligible first-time buyers who save money toward a down payment. The proposal comes as high mortgage rates and elevated home prices continue to make homeownership difficult for many prospective buyers.

How would the $50,000 down-payment aid work?

Under the proposed legislation, the federal government would contribute $5 for every $1 saved by an eligible first-time homebuyer, up to a maximum federal contribution of $50,000, according to the news outlet.

That means someone who saves $10,000 could receive a $50,000 federal match.

Employers and nonprofit organisations could also contribute toward a buyer's savings. However, money contributed by employers or nonprofits would not qualify for the federal match.

Who would qualify?

The proposal would be available to eligible first-time homebuyers, with no income limit for receiving the federal match.

There is, however, a restriction on the property they can purchase. Buyers would be limited to homes priced at or below the median home price in their local area.

The down-payment savings would also have to be held at participating financial institutions certified by the US Treasury Department as Community Development Financial Institutions (CDFIs).

These include community development banks and credit unions that generally focus on serving lower-income customers and underserved communities.

Why is the US considering the proposal?

The proposed assistance comes as affordability remains a challenge in the US housing market. Rising mortgage rates have increased the cost of borrowing and have pushed some prospective buyers out of the market.

The Congress passed a major bipartisan housing bill earlier this year, but that legislation did not come with direct funding and was largely focused on encouraging more home construction.

The Homeownership Promise Act would instead provide financial assistance directly to people trying to buy homes.

Merkley said the proposal would help restore the prospect of homeownership for working families by allowing Americans to save for a home.

US had an $8,000 first-time buyer tax credit

The proposal also has a precedent in federal housing policy.

After the 2008 financial crisis and housing-market meltdown, the US government offered an $8,000 first-time homebuyer tax credit, described as one of the most popular federal housing measures of that period.

The proposed Homeownership Promise Act would represent a much larger potential benefit, with federal matching assistance of up to $50,000.