A Key to Homeownership: Down Payment Assistance

The housing market is at a point where more than a third of homebuyers rely on down payment gifts from parents. However, many people, especially BIPOC people, don’t have the luxury of wealthy elders to gift them homeownership. 
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AHCOPA’s First-Time Homebuyer Program is the most popular program among our robust offerings of housing counseling services. Part of the success of this program is how well we connect prospective home buyers to down payment assistance programs!

What are down payment assistance programs?

Down payment programs help homebuyers afford their home by providing additional funds to pay down the loan, cover closing fees, or buy down the interest rate. These programs are offered by local, state, and private agencies. Some employers also offer assistance to employees seeking to purchase a home. 
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There is no “one size fits all” assistance program, from determining eligibility to dispersing funds, most programs have unique processes and procedures. Funds are limited for most programs, which forces some to close for a temporary period each year. AHCOPA’s counselors will help you navigate the ever-changing options.
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Why do down payment assistance programs exist?

Since there are a variety of down payment assistance programs, their objectives also vary. Some are looking to incentivize people to remain in a certain locale, such as employers who wish to retain employees. Many of them aim to combat inequality and eliminate the racial wealth gap. Some of them are legally mandated as restitution for communities where banks have practiced extensive redlining. 

Redlining refers to historic maps that outlined communities of color and painted them red to mark them as “undesirable” and “hazardous". Banks used these maps to justify unfair lending practices against BIPOC families and this became standard practice in the mortgage industry in the 1930s. An NPR article outlines that “The government's efforts were ‘primarily designed to provide housing to white, middle-class, lower-middle-class families,’" which cut off access to generational wealth for many capable and hardworking Black and Brown families. Unfortunately, Philadelphia is a stark example of the harmful effects of redlining. A 2020 report from the Office of Controller discussed the overlapping maps of crime and poverty and how similar they are to Philadelphia’s redlining map shown here. Redlining continues to be something informed consumers fight against in the modern day too, although now the term also refers to general discrimination in the mortgage industry. ​

There is a growing federal interest in down payment assistance. In October 2023, the Biden administration proposed a variety of actions to bolster homeownership nationwide. Two separate down payment programs are part of that initiative, one for $10 billion and the other for $100 million. The larger fund aims to help prospective buyers whose parents do not own homes. The $100 million fund is allocated for first-generation homebuyers. 

Eligibility & Requirements

Down payment assistance programs consider a range of factors, such as credit scores, occupation, financial counseling, occupancy, and location. These programs usually have a financial counseling/housing counseling requirement which we fulfill with AHCOPA’s first-time homebuyer program.

Several down payment assistance programs act as a lien or secondary loan. When structured this way, they are often set to be forgiven after certain requirements have been met, such as length of occupancy. This means that if you move out or sell the home before the set requirements are met, you will have to pay back the awarded funds. 

Some lenders offer funds with fewer restrictions. However, you will need to use their mortgage product to access their down payment assistance funds. Bank funds can be “layered” or combined with other down payment assistance funds. A counselor will suggest you review more than one bank's offer to find the best option for you. AHCOPA housing counselors are experts in identifying the ideal set of down payment assistance programs that you may qualify for and combine!
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Popular down payment assistance programs in Philadelphia 

Philly First Home
Managed by the City of Philadelphia. Prospective homeowners may receive up to $10,000! The grant funds can not exceed 6% of the purchase price. Some of the requirements include:

• Complete housing counseling before signing an agreement of sale
• Must be a first-time home buyer or not have had your name on a deed in the past 3 years
• Meet income eligibility standards
• The property must be a single-family home or duplex​

This grant acts as a lien against the property and is forgiven after 15 years. To learn more about the Philly First Home grant visit PHDC’s website.
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First-time Homeowners Match Saving Program
​Managed by ACHIEVEability and also known as the Lubert Individual Development Account program. Prospective homeowners may triple their down payment savings with this savings matching program! For example, a savings contribution of $2,000 will be matched with $4,000, for a total savings of $6,000. Some requirements include:

• Must not have had your name on a deed in the past 3 years
• Must be employed 
• Meet income requirements
• Live in the designated service locations

ACHIEVEability also requires that participants complete their money management education and complete counseling to receive funds. To learn more about the Lubert IDA program, call 215-748-8800. 

First Front Door
Managed by FHLBank Pittsburgh. Prospective first-time homeowners may receive up to $15,000. The Keys to Equity fund aims to serve minority and first-generation first-time homebuyers and may provide up to $20,000. Some of the requirements include:

• Complete 4 hours of housing counseling
• Must be a first-time home buyer or not have had your name on a deed in the past 3 years
• Make a minimum contribution toward the down payment ($1,000-$1,500)
• Meet income requirements
• May not receive cash back settlement
• The home must be in an eligible location

The grant requires that the home be the homebuyer's primary residence for at least 5 years. To learn more about First Front Door and Keys to Equity visit their website.

Keystone Forgivable in Ten Years Loan Program (K-FIT)
Managed by Pennsylvania Housing Finance Agency, PHFA. Prospective homeowners can receive up to 5% of the purchase price in assistance. PHFA does not set a dollar amount limit on the assistance funds received, instead, they set a maximum purchase price/appraised value and assistance can be up to 5% of that price. There is a minimum amount of assistance, set at $500. Some of the requirements include:

• Minimum credit score - 660
• Complete housing counseling
• Liquid assets can not be greater than $50,000

This program is unique because it is forgiven on an annual basis over ten years. So the repayment commitment is lower, if you do decide to move or sell before the end of the ten-year period. To learn more about the K-FIT down payment assistance fund visit PHFA’s website. 
    
For more down payment assistance programs, check out our resources page! To get started on your homeownership journey, the first step is to take a first-time homeownership workshop, find our next available workshop by clicking the button below. ​

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Naara Silva

Naara works with AHCOPA as an AmeriCorps VISTA through Housing Action Illinois.