New $100 Billion Program Targets First-Generation Homebuyers: Up to 10% Down Payment Covered

The Downpayment Toward Equity Act of 2025 establishes a massive, $100 billion federal grant program aimed squarely at helping first-time homebuyers who are also first-generation buyers. Essentially, this is a huge new pot of money, managed by the Department of Housing and Urban Development (HUD), designed to break down the biggest barrier to homeownership for many families: the down payment and closing costs. The funds are distributed primarily through state housing agencies (75%) and competitive grants to organizations like non-profits and Community Development Financial Institutions (CDFIs) (25%).

The First-Generation Advantage: Who Qualifies?

This bill isn't for every first-time buyer; it’s highly targeted. To qualify, you must meet income limits—generally up to 120% of the area median income, or 140% in high-cost areas—and be a first-generation buyer. The definition of a first-generation buyer is the key: neither of your parents or legal guardians can have owned a home in the U.S. when they passed away or currently own one. Crucially, the bill clarifies that inheriting property without a will (heir property) doesn't disqualify you, which is a significant detail for many families with complex ownership histories (Sec. 3).

If you meet the criteria, the assistance is substantial. You can receive up to $20,000 or 10% of the home’s purchase price, whichever is greater, for down payments, closing costs, or even buying down your mortgage interest rate. This aid can be stacked on top of other state or local assistance programs, giving eligible buyers real leverage in a tough housing market. For a buyer looking at a $300,000 home, that 10% means $30,000 in assistance, enough to cover a down payment and most closing costs.

More Than Just a Check: The Fine Print on Accountability

While the money is the headline, the bill includes strong mechanisms to ensure the funds are used equitably and responsibly. For starters, if you receive this grant, you must complete mandatory homeownership counseling before signing a purchase agreement (Sec. 6). This counseling covers financial management and fair housing rights, making sure buyers are prepared for the long haul. If counseling agencies are backed up, the state can offer an alternative education course, so the process doesn't grind to a halt.

States and grant recipients also face strict oversight. HUD will track the distribution of funds by race, ethnicity, and gender, broken down by ZIP code. If HUD finds that racial or ethnic groups historically blocked from homeownership aren't benefiting proportionally, the Secretary has the power to step in, require policy changes, or even reallocate unspent funds (Sec. 2). This essentially puts states on notice: they must actively work to “affirmatively further fair housing” to keep the money flowing.

The Five-Year Rule and Mobility Concerns

There is a catch for recipients: the bill requires you to live in the home as your primary residence for five full years. If you move out before that five-year mark, you may have to repay a portion of the grant, calculated proportionally based on how long you stayed (Sec. 4). This rule is designed to ensure the money is used for stable homeownership, not quick flips, but it does limit mobility for those first five years. However, the bill provides exceptions for significant hardship (like job loss or illness) or if you sell the house but don't make enough profit to cover the repayment.

Overall, this legislation represents a significant federal effort to address historic inequities in homeownership and wealth generation. By targeting assistance specifically at first-generation buyers and backing it with mandatory counseling and strong fair housing accountability, the program aims to create a new generation of homeowners. For those who meet the strict first-generation definition, this could be the financial boost that finally makes buying a home possible.