New Bill Could Unlock $35K For 1st-Time Homebuyers

Sens. Jon Husted, R-Ohio, and Michael Bennet, D-Colo., introduced the First-Time Homebuyer Empowerment Act on Aug. 4.

A bipartisan bill in Congress could give first-time homebuyers another way to overcome one of the biggest obstacles to homeownership: saving enough money for a down payment, Fast Company reports.

Sens. Jon Husted, R-Ohio, and Michael Bennet, D-Colo., introduced the First-Time Homebuyer Empowerment Act on Aug. 4. The legislation would allow people to transfer up to $35,000 in unused savings from a 529 education savings account to help purchase their first home without paying a penalty.

529 plans are state-administered, tax-advantaged accounts designed to help families save for education expenses. Unused funds can generally be put toward other eligible education costs, student loan payments, or, under certain requirements, transferred to a retirement account.

The proposed legislation would add a first-home purchase as another eligible use, potentially giving families greater flexibility with money remaining after education expenses are covered.

“Across Colorado, too many young people and working families struggle to afford their first home,” Bennet said. “This bill would allow first-time homebuyers to use the savings they already have to cover a down payment and help put homeownership within reach.”

The proposal comes as high housing costs continue to make homeownership difficult for many Americans. As the outlet reported, existing federal rules already allow first-time homebuyers to withdraw up to $10,000 from an individual retirement account without the typical early-withdrawal penalty for a qualifying home purchase. The proposed 529 provision would raise the potential pool of available funds to $35,000 without requiring buyers to tap retirement savings.

“I’m focused on helping working families get ahead and making life more affordable,” Husted said. “By freeing up existing resources, I’m proud this bipartisan bill gives first-time homebuyers another tool to use in pursuing their version of the American Dream.”

The Senate legislation has a bipartisan companion bill in the House. Reps. Tom Barrett, R-Mich.; Tracey Mann, R-Kan.; Mark Alford, R-Mo.; and Lou Correa, D-Calif., introduced the House version.

The proposal would still need congressional approval before the new 529 provision could take effect.