The LIFT Act of 2023
What is the LIFT Act of 2023?
The Low-Income First-time Homebuyers Act of 2023 is a bill introduced in the 2023-2022 Congress that aims to provide affordable housing to first-time, first-generation home buyers.
The LIFT Act also strives to boost wealth-building for first-time buyers by helping buyers generate wealth at twice the rate of a typical mortgage loan.
How the LIFT Act Helps Home Buyers
This act, if passed, shortens an FHA loan term from 30 years to 20 years with nearly the same monthly payment. The LIFT Act also:- Lowers mortgage rates
- Removes annual mortgage insurance premiums
- Facilitates wealth building through home equity
How Does the LIFT Act Work?
The LIFT Act creates a union between the U.S. Treasury and the Department of Housing & Urban Development (HUD). This partnership will encourage lenders to offer low-interest 20-year LIFT loans. See here for the full explanation of the mechanics.
Example:
Without the LIFT Program:
A first-time home buyer wants to purchase a property for $210,000. She puts down $10,000, and the lender offers her a 6.5% 30-year FHA-backed mortgage. The borrower pays an annual 0.55% FHA insurance fee and 1.75% up-front insurance free. Her monthly mortgage payment is $1,377.
With the LIFT Program:
In the same case as above, the lender would instead offer the buyer a 5.5% 20-year FHA-backed loan with a 4% upfront fee and no annual FHA premium. Her monthly mortgage payment would be $1,430.
Though she is paying slightly more monthly, this borrower is able to build equity two times faster than without the program. Plus, after the initial 4% premium, no additional mortgage insurance is due for the life of the loan.
Who Qualifies for the LIFT Program?
To be eligible for the LIFT Program, the borrower must:
- Be a first-time home buyer
- Be a first-generation home buyer*
- Buy a 1-unit home
- Earn equal to or less than 120% of their area’s median income
- Qualify for an FHA loan
*Eligible home buyers’ parents or legal guardians cannot have owned a home during the 36 months before purchase.
What is The LIFT Act's Current Status?
As of now, the LIFT Act of 2023 is still a bill with the 2023-2024 Congress. Senator Mark Warner authored the current and former versions of The LIFT Act in the Senate. Rep. Emanuel Cleaver II wrote the bill's current version in the House of Representatives.
There is still a possibility for the bill to be passed before the end of 2023, and if done, the Secretary of HUD must write the program rules and establish a LIFT HOME program, according to the legislation.
