Lew Sichelman
Lawmakers in Washington have earmarked billions of dollars for down payment assistance for first-time homebuyers as part of the Build Back Better legislative package championed by President Joe Biden. But rookie buyers don’t have to wait for Congress to act – if it ever does.
Plenty of financial aid is available to help buyers who are short on cash for a down payment and closing costs. Indeed, while a good chunk of the economy shut down during the pandemic, the state entities that administer assistance programs have been chugging right along.
“All state housing finance agencies stayed open, and still are,” said Sean Moss of Down Payment Resource, an Atlanta firm that tracks nearly 2,200 different programs that buyers can tap for help.
Many Buyers Need a Boost
These agencies not only remained open, but in some cases, they set records.
“Business is booming,” said Lisa DeBrock of the Washington State Housing Finance Commission. “Our phones are ringing off the hook.”
The Florida Housing Finance Corporation saw its volume jump considerably last year; activity was so brisk that it stayed open 24/7 and increased its assistance amounts. And the Arizona Industrial Development Authority has helped 750 buyers so far this year.
“I expect our volume to drop off slightly next year – but then, I expected it to drop off this year, and it didn’t,” said Dirk Swift, AZIDA’s executive director.
According to the National Association of Realtors’ latest figures, about 17 percent of first-time buyers receive some sort of monetary help, mostly in the form of gifts or loans from parents, friends or other relatives. After all, saving for a down payment remains the highest hurdle for most buyers.
Less than 3 percent, NAR found, typically receive support from other entities. Had other rookies sought out these sources, perhaps many more of them would have been able to finally step onto the ownership ladder.
One problem is knowing what’s available. A new pact between DPR and Zillow should go a long way toward correcting that issue. The deal allows the popular real estate website – 2.7 billion unique visits in last year’s third quarter alone – to post all possible assistance programs that may be available to buyers searching for properties on its platform.
Another issue is knowing where to find help. And a third is that some lenders and real estate agents look down their noses at down payment assistance.
What’s Available
DPR says 84 percent of the 2,180 programs it tracks were actively funded and available from state and municipal governments, nonprofits and employers. Every state has more than one program, reports Moss, and several offer more than 100 options. California has the most options, with 350.
Programs include grants and no- or low-interest second mortgages with payments that may be deferred or even forgiven. Some are aimed specifically at veterans, first responders, educators, people with disabilities or other special circumstances.
Most programs are aimed at first-time buyers, but some are not. Most have some kind of income or sales price limitation. But in some high-cost markets, the income ceiling can exceed 180 percent of the area median income. Even with income ceilings, though, the benefits can range into tens of thousands of dollars. And they can be combined with each other and used with all types of mortgages, including those backed by Uncle Sam.
Benefits like that are worth looking into, if only because owning a house is the quickest, safest way to build wealth. If you had purchased a house three years ago using one of her state’s programs, Washington’s DeBrock pointed out, you would have already amassed thousands of dollars in equity.
Where to Find Help
One way to find what’s available is to go to downpaymentresource.com, Zillow.com or themortgagereports.com. Or simply search online for the benefits offered in your state.
You might even ask a lender or a real estate agent if they know about such programs in your state. DPR partners with a number of lenders, banks and multiple listing services. Some use the data as consumer-facing information on their websites, while others use it internally to inform their own people or members.
Unfortunately, not all housing professionals are as knowledgeable about down payment assistance as they should be. Some even turn away from such programs. So, if you run up against a brick wall, ask others until you find someone who is familiar with what’s available.
Some lenders believe that down payments that don’t come solely from the borrower’s wallet are not safe. Others think such loans are too difficult to deal with. But people who run the state agencies beg to differ.
Swift in Arizona said it’s actually more difficult to deal with applicants whose funds come from family or friends than those whose money comes from state-run assistance programs. DeBrock agreed.
“The strength of DPA programs is that lenders don’t have to worry about the funds being there at closing,” says DeBrock. “The buyer has to go to closing” to access the funds.
Added Charles White, who directs Florida’s programs: Assistance is “very trustworthy. … Borrowers are completely underwritten” to make sure they meet program requirements.
Another issue is that some lenders don’t prioritize affordable lending. But then, that’s another story.
Lew Sichelman has been covering real estate for more than 50 years. He is a regular contributor to numerous shelter magazines and housing and housing-finance industry publications. Readers can contact him at lsichelman@aol.com.
