Recently five US senators introduced a bill that could help families with modest means build wealth through homeownership. This new proposal is called the LIFT Act, or Low-Income First-Time Homebuyers Act, and is currently only a bill.
This new bill is hoped to provide much-needed relief for any home buyer that is facing more challenges in today’s current real estate market. If you are within this category and planning to purchase a home in the coming months or years here are some things to know about this new proposed act.
What is the low-income first-time home buyer act?
If the LIFT Act is passed, it will allow for qualifying homebuyers to accelerate their ability to purchase a home and start building wealth more quickly. The act would do this by offering a 20-year fixed-rate mortgage with roughly the same monthly payments that are currently being offered in 30-year fixed-rate mortgages to homebuyers that qualify with more financial means.
This program would allow the qualifying homebuyer to pay off a home faster but without higher monthly payments that come with shorter-term loans. Some say that eligible homeowners would be able to build wealth at nearly twice the rate of someone with a 30-year loan.
Another great benefit of this new mortgage program would be that there is a hugely significant saving in the overall cost of interest paid upon a home over the term of the loan, as this program would offer a 10 year shorter lifespan for the mortgage.
How the LIFT Act is proposed to work
The LIFT Act would be a government-subsidized mortgage program and subsidies are planned to help bridge the gap between normal monthly payments on a 30-year loan and those on a 20-year LIFT mortgage. Subsidies would be provided by the US treasury and Ginnie Mae.
Ginnie Mae is another lesser-known program like those of Fannie Mae and Freddie Mac. Ginnie describes themselves as “the principal financing arm for government mortgage loans.”
LIFT Act mortgages would be administered by the US Department of Housing and Urban Development also known as HUD.
Who would qualify for the new LIFT Act mortgage program?
There is a broad qualifying criterion for low-income and first-time mortgages within this program. To qualify you must be a first-time homebuyer or have a household income that is not greater than 120% of the area median income at the time of borrowing money.
There is another third requirement that locks down a stricter parameter for borrowers, however. The third qualifier states that a borrower needs to be a first-generation homeowner in the family. And the borrower must not have parents that have owned their own home as it could hinder your ability to qualify for a lift act mortgage.
Those proposing the LIFT Act are hoping that it can help to bridge homeownership gaps
It of course will be illegal to racially discriminate under the LIFT Act program as it is with all other mortgage products. It will be open to everyone who qualifies under the act’s rules.
The five senators who are sponsoring the bill intend to narrow current disparities in wealth between certain types and sectors of homeowners. One senator backing the proposal has stated that one way middle-class Americans can build wealth is through homeownership which is an opportunity that should be readily available to all types of buyers.
Right now, the LIFT Act is only a bill under proposal waiting for the right attention. It is also competing with other similar programs such as first-generation homebuyer grants and tax credits. Right now, it is uncertain if the bill will become reality, but what is promising is that there are several proposed programs being looked at in hopes to help people become homebuyers.
For more information on all of your loan options in Mission Viejo and California please contact me anytime.
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