New Home Loan Proposal to Benefit Teachers and First Responders

If a new proposal goes through, teachers and first responders should have an easier time buying a home in the future.

Buying a home is hardly an easy thing to do. To achieve that goal, you need to save up money for a down payment on your home, and for some workers, that's a tough thing to do. But there's a new proposal in the works that may waive that requirement for certain mortgage applicants. Here's what you need to know.

A lifeline for teachers and first responders

A new proposal known as the HELPER Act was recently introduced in the House of Representatives. Its goal is to create a mortgage program specifically for public service workers like police officers, firefighters, paramedics, and teachers.

Short for "Homes for Every Local Protector, Educator, and Responder," the act would enable qualified buyers to apply for a HELPER loan. This loan would come with no down payment requirement at all, and no ongoing monthly mortgage insurance. HELPER loans would, however, come with an upfront mortgage premium worth 3.6% of the total loan amount taken out.

Now, there is already a mortgage product out there that allows buyers to purchase a home with no money down -- VA loans. But VA loans are only available to active U.S. military members, military veterans, or the surviving spouses of military veterans. Teachers and first responders are not eligible to apply.

There are also FHA loans, which allow buyers to purchase a home with as little as 3.5% down. But for those who really can't swing a down payment at all, even that lower threshold may be a dealbreaker. The HELPER Act could solve that, all the while making it possible for workers who serve their communities to start reaping the benefits of owning a home.

When might the HELPER Act pass?

The HELPER Act was first introduced in mid-May and was put in front of the House Committee on Financial Services on the same day. But it hasn't yet been scheduled for review. Once that happens, it can go through a full House vote before moving on to the Senate, where it will need approval to become reality.

The HELPER Act isn't the only provision in the works to make homeownership more attainable. President Biden has also proposed a first-time home buyer credit worth up to $15,000. That money can go toward the down payment of a home, so a lack of funds up front doesn't have to be a barrier to homeownership.

If the HELPER Act does go through, it could help many Americans purchase homes of their own, especially in today's difficult housing market. Home prices have risen substantially on a national level due to low mortgage rates and limited inventory, both of which have caused a surge in buyer demand. As such, coming up with a sizable down payment is a more difficult task now than it would be in a normal housing market. And since we don't know when home prices will start to creep down to more affordable levels, the HELPER Act may be coming at just the right time.