The Utah $20,000 New Construction Grant (S.B. 240): Your Path to Homeownership

by Lori Collins

For many Utahns, the dream of homeownership has felt increasingly out of reach over the last few years. Between rising interest rates and a competitive inventory, the "starter home" seemed to be disappearing. However, the Utah State Legislature stepped in with a powerful solution: Senate Bill 240, also known as the Utah First-Time Homebuyer Assistance Program.

This program allocates a massive $20,000 to eligible first-time homebuyers to help them break into the market. But like any government program, there are specific rules, qualifications, and strategies you need to know to successfully claim your share.

What is the S.B. 240 Grant?

The $20,000 grant isn’t just a "discount" on a house; it is a specialized loan provided through the Utah Housing Corporation (UHC). Technically, it is a 0% interest, no-payment second mortgage.

The most attractive feature of this program is that you do not make monthly payments on this $20,000. It stays attached to the home, interest-free, until you decide to sell the property or refinance your primary mortgage. At that point, the $20,000 is repaid into the fund to help the next generation of Utah homebuyers.

How Can You Use the $20,000?

The flexibility of these funds is what makes the program so effective. You aren't restricted to just one use; you can apply the $20,000 toward:

Down Payment: This can help you reach the 3.5% or 5% threshold required by many loan types.
Closing Costs: Covering the thousands of dollars in taxes, title fees, and lender costs that often catch buyers by surprise.
Interest Rate Buydowns: Perhaps the most impactful use in today’s market. You can use the funds to "buy down" your mortgage interest rate, potentially saving you hundreds of dollars every single month.

Qualifying for the Grant: The Five Big Requirements

To ensure these funds help those who need it most, the state has set specific eligibility criteria.

1. First-Time Homebuyer Status

You must be a first-time homebuyer, which the program defines as someone who has not owned a principal residence in the last three years. If you owned a home five years ago but have been renting since, you likely qualify!

2. Utah Residency

You must have been a resident of the State of Utah for at least 12 consecutive months prior to the date of your application. This program is designed to help locals settle down and build roots in the community.

3. New Construction Only

As the name suggests, this grant is specifically for newly constructed homes. This includes:

Single-family detached homes.
Townhomes.
Condominiums.
Note: The home must never have been lived in.

4. The Purchase Price Cap

To keep the program focused on "attainable" housing, there is a strict purchase price limit. The home cannot exceed $450,000. While this can be a challenge in certain parts of Salt Lake or Summit County, there are many incredible new developments in Utah County, Weber County, and further south that fit perfectly within this budget.

5. Loan Type

You must use a qualifying mortgage through a Utah Housing Corporation-approved lender. This usually includes FHA, VA, or Conventional loans that meet UHC standards.

Why "New Construction" Matters

The legislature chose to focus on new construction for a specific reason: Inventory. By incentivizing buyers to purchase new builds, the state encourages developers to build more "attainable" housing units.

For you as a buyer, there are additional perks to new construction:

Energy Efficiency: Lower utility bills from day one.
Warranties: Most builders offer a one-year "fit and finish" warranty and a multi-year structural warranty.
Low Maintenance: You won't have to worry about a roof leak or a dying HVAC system for a long time.

How to Get Started

The $20,000 grant is distributed on a first-come, first-served basis. When the money allocated for the fiscal year is gone, it’s gone. Here is your roadmap to securing the funds:

Talk to a Participating Lender: Not every bank can process S.B. 240 funds. You must work with a lender registered with the Utah Housing Corporation.
Get Pre-Approved: You need to know exactly what you can afford up to that $450,000 limit.
Find a New Build Specialist: Work with a real estate agent who understands the new construction landscape. They can help you find builders who have inventory priced under the cap.
Reserve Your Funds: Once you are under contract on a qualifying home, your lender will "lock in" your $20,000 reservation.

Final Thoughts

The $20,000 New Construction Grant is a game-changer for Utahns. It effectively bridges the gap between "I can't afford this" and "I'm a homeowner." Whether you use the money to lower your monthly payment or to cover your entire down payment, the advantage it provides is massive.

General Program Questions
1. Is this $20,000 a grant or a loan?
Technically, it is a 0% interest, no-payment subordinate loan. While it feels like a grant because you don't make monthly payments, the funds must be repaid if you sell the home or refinance your primary mortgage.

2. Can I use the funds for anything I want?
No. The funds must be used for specific home-buying costs: your down payment, closing costs, or a permanent interest rate buydown. Most buyers find the rate buydown to be the most valuable option as it lowers their monthly payment for the life of the loan.

3. Do I have to pay the money back?
Yes, but only when you "trigger" a repayment event. This happens if you:

Sell the home.

Refinance your mortgage.

Stop using the home as your primary residence.

The amount you repay is the lesser of the $20,000 originally received or 50% of your home's equity at the time of sale.

Eligibility & Requirements
4. Who qualifies as a "First-Time Homebuyer"?
Under this program, you qualify if you (and your spouse) have not owned a principal residence in the last three years. Exceptions are made for single parents and displaced homemakers who may have owned a home previously while married.

5. Is there a residency requirement?
Yes. You must have lived in the State of Utah for at least 12 consecutive months immediately prior to closing on the home.

6. What is the maximum purchase price?
The home price cannot exceed $450,000. This limit is set by the state to ensure the program supports "attainable" housing.

7. Are there income limits?
Yes. Since the program is administered by the Utah Housing Corporation (UHC), you must stay within their established income limits, which vary by county and household size. Typically, these limits are generous, but you should verify with your lender.

Property & Lending Questions
8. Does it have to be a brand-new house?
Yes. The home must be new construction or newly built and never previously inhabited. This includes detached single-family homes, townhomes, condos, and even manufactured or modular homes—provided they are attached to a permanent foundation.

9. Can I use any bank or lender?
No. You must work with a Utah Housing Participating Lender. These lenders are specifically trained to handle UHC's subordinate liens and ensure the $20,000 is reserved correctly through the state.

10. Is the money still available?
The state originally allocated enough funding for approximately 2,400 homebuyers. Because funds are distributed on a first-come, first-served basis, they are subject to availability. It is crucial to have your lender "reserve" your funds as soon as you are under contract.

Strategic Tips
11. Can I combine this with other programs?
In many cases, yes! You can often combine S.B. 240 with standard Utah Housing down payment assistance. However, it cannot be combined with the Utah Veterans Grant or the Law Enforcement Grant.

12. What if the home price is slightly over $450,000?
The $450,000 cap is strict. If the purchase price on the contract is $450,001, the home will not qualify. If you find a home just over the limit, talk to your agent about negotiating the price down or asking the builder for a price reduction in exchange for fewer upgrades.

Buyer’s "Grant Ready" Checklist

Before you start touring homes, ensure you can check off these five boxes. If you miss even one, the state may deny the fund reservation.

[ ] Residency: I have lived in Utah for the last 12 consecutive months.
[ ] First-Time Status: I (and my spouse) have not owned a home in the last 3 years.
[ ] Financials: My credit score is at least 620 (for FHA) or 700 (for Conventional).
[ ] Home Type: I am looking for a brand-new construction home (never lived in).
[ ] Price Point: The final purchase price will be $450,000 or less.

Frequently Asked Questions

1. Is the $20,000 really "free" money?

Not exactly. It is a 0% interest loan with no monthly payments. It acts like a "silent" second or third mortgage. You only pay it back if you sell the home, refinance your main mortgage, or move out. If you stay in the home for 30 years and pay off your first mortgage, the $20,000 is still technically due, but by then, the equity in your home will likely far exceed the loan amount.

2. What if my home loses value?

The state has a "safety valve" for this. If you sell the home and have no equity, you only have to repay the lesser of the $20,000 or 50% of the home's equity. This ensures you aren't stuck paying back $20,000 if the market has a major downturn.

3. Can I buy a "Fixer-Upper" or an existing home?

No. S.B. 240 is strictly for new construction. This includes detached houses, townhomes, and condos that have never been inhabited. The goal of the law is to encourage builders to create more affordable, new inventory.

4. Do I have to pay taxes on the $20,000?

Since this is structured as a loan (even at 0% interest) and not "income," it is generally not taxable. However, you should always consult with a tax professional regarding your specific situation.

5. Can I use this with a VA or USDA loan?

You must use a Utah Housing Corporation (UHC) mortgage. While UHC offers FHA and VA "tracks," this program cannot be combined specifically with the separate Utah Veterans Grant. It is designed to work as a standalone boost for those using standard UHC loan products.

Next Steps for You

Step 1: Connect with a UHC-Participating Lender. They are the only ones who can "reserve" these funds for you.
Step 2: Search specifically for "New Construction" under $450k in areas like Eagle Mountain, Saratoga Springs, or parts of Weber County.

Would you like me to generate a list of the current income limits for the major Utah counties (Salt Lake, Utah, Davis) so you can see if you qualify financially?

Utah First Time Home Buyers Assistance Program This video provides a great overview of the S.B. 240 program and explains why local realtors and lenders are excited about its impact on the market.