Facts About the American Dream Downpayment Initiative

A Federal Grant Program to Increase Homeownership

Enthusiastic, affectionate couple hugging in new home, unpacking cardboard boxes

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President George W. Bush signed the American Dream Downpayment Initiative (ADDI) on December 16, 2003. The program provides grants to help lower income and minority homebuyers with down payments and closing costs. 

President Bush said at the time, “Today we bring many thousands of Americans closer to the great goal of owning a home. The American Dream Downpayment Initiative will help American families to achieve their goals, strengthen our communities, and our entire nation.”

The American Dream Downpayment Initiative's Goals

The idea behind ADDI is to increase the homeownership rate, especially among minority groups that tend to have lower rates of ownership when compared to the national average. The ADDI also aims to lower closing costs by approximately $700 per loan in order to stimulate homeownership for all Americans. By extension, this helps to upgrade neighborhoods.

The initial, upfront costs of homebuying can be prohibitive, and the American Dream Downpayment Act strives to lighten this burden by providing funding to make these expenses more manageable so more people can afford to buy homes. 

Eligibility Requirements

Grant recipients must be first-time homebuyers with annual incomes that do not exceed 80% of the county's median income based on the number of people in the household. Recipients must also complete eight or more hours in a homebuyer counseling class.

For purposes of eligibility, a first-time homebuyer is defined as someone who has not owned a home in the previous three years. When buyers are married, neither spouse can have owned a home during this time period.

The Dollar Amount of Grants

The maximum down payment grant is $10,000 or 6% of the purchase price of the home, whichever is greater. The average subsidy is approximately $7,500. The money can be used toward a down payment or for closing costs and other fees associated with the home buying transaction. It can also be used on rehabilitation costs that might be necessary to make the dwelling safely habitable. 

What Can You Buy?

The American Dream Downpayment Act covers a wide range of dwellings. It's not restricted to single-family homes. One- to four-family dwellings are acceptable, and the ADDI includes condominiums, co-ops, and manufactured homes as well.  

How Is This Program Different? 

The ADDI differs from other down payment assistance programs because homebuyers using this federal program receive their American Dream grants directly from the government. This is accomplished through the HOME Investment Partnerships Program which funds the Department of Housing and Urban Development as well as local housing agencies. 

Traditional down payment programs are funded by home sellers who agree to provide funds for buyers but usually tack the "donated" amount onto the price of the house. The Housing and Economic Recovery Act of 2008 eliminated these down payment programs. Most of the housing bubble occurred in the years after 2003, bursting by the end of 2008.

Government housing incentives coupled with banking and mortgage deregulation are two of the main factors behind the global financial crisis.

The American Dream program is administered by HUD. It became part of its existing HOME Investment Partnerships Program which sought to improve the availability of rental housing and stimulate homeownership throughout the country.