Down payment assistance can be a game-changer for buying a house. Our Homeownership Insights™ podcast shares what it is and where to find it.
2104408 HIP Down Payment Assistance Campaign (1).mp3
Introduction: Welcome to the Homeownership Insights Podcast, Your leading mortgage podcast. Sponsored by Fairway Independent Mortgage Corporation. Listen. As experts from across the country share knowledge to help homebuyers and homeowners make the best decisions in their homeownership journey. Our next podcast begins right now.
Casey Morris: Welcome back to the Fairway Homeownership Insights Podcast. I'm Casey Morris. And today I'm talking with Rob Crane, who is the founder and CEO of Down Payment Resource. Rob, thanks so much for being here.
Rob Chrane: Thank you. It's great to be with you.
Casey Morris: I thought to get started. I just want to give you a chance to sort of introduce yourself and explain exactly what down payment resources.
Rob Chrane: Sure. Well, again, my name is Rob Crane. I'm the founder of Down Payment Resource. We launched this in 2008, so almost 15 years ago. And my background is mortgage banking. And I actually was just talk with the prospective customer before this call. And they were saying, well, you know, how did you get into this? And I said, Well, as a mortgage banker, I was aware of down payment assistance programs. And but, you know, even when you work and even if your market is just one metro area, there can be dozens of programs. And, you know, it was just always frustrating to try to keep up with, you know, all the different programs that are out there, which ones are funded, which are not funded. The different eligibility rules, it just gets very complicated. So, you know, I just said for years there's got to be a better way. You know, somebody needs to organize this. And especially once I mean, this goes way back. So, you know, once the Internet became the place where everybody went for information, for any information, but particularly real estate, I thought, well, that's a great opportunity, but I really had no intention of doing this. I just thought it was something somebody should do. So but if you say something enough times, sometimes you just simply hand you the baton and says, All right, wise guy, go do it.
Casey Morris: Right. Eventually you realize you're the one who does need to go out and do it.
Rob Chrane: They're really think of it. I guess there's two parts. The down payment resource, it's the platform is built on a database of about 2200 different affordable lending programs. And about 75% of those are some type of down payment assistance or closing cost help. The other programs are about 12 categories of programs, but the other programs include affordable first mortgage products that are offered through state housing finance agencies, mortgage credit certificates. And then as you go down the list, the other types of programs, you know, deed restricted programs and community land trust and things like that. So as you go down the list, those are more unique and sort of fewer and further between. So we built a national database for all these programs. Our team keeps them up to date on a monthly basis. And that's the hard part and the important part because things change. And in fact, each of the last two years, our team made over 200,000 updates to the database. So, you know, some of the updates are easier than others, but most of them are manual. You know, there's no API for this. In fact, we sort of think of ourselves as the de facto API because we're collecting it. And other people. Customers and partners can access it through APIs. So along with that, we built a proprietary software to automate the process of matching a borrower and a property with available programs. And so two analogies that we've heard people use over the years. One is one of our one of our tools is the down payment assistance directory. It's actually access into the database. It's licensed by the state. So whatever states lenders operating in, they would just license those states. And somebody said, it's like all regs for DPA. So it's an admin tool. It's for product managers, people in capital markets, secondary marketing. It's the people in an organization that have to really get into the nitty gritty of these programs and they have to be able to find them, vet them, decide which ones they want on board, and then get them on board it. The other part of it, somebody said described the other parts as sort of like Match.com for DPA. So loan officer Portal and the consumer portal loan officers and consumers who might be interacting with it answer six or seven questions and it just automates that, automates that matching process and takes some of that complexity away so that you're not you know, and again, I know having been a loan officer, you could be sitting there with a program matrices or program guidelines, sitting on your desk trying to sift through things. And, you know, it's like trying to make the stars or the moon align. If you're doing it manually. So yeah, that's basically what down payment resource is. And then we license it, obviously to lenders, lenders of all types from credit unions to ambos to the banks and all sizes from local, regional to national. And then we work with multiple listing services because again, there's that property element. You know, everybody thinks about they kind of get focused on the household or the borrowers qualifications or eligibility for the programs, but the property has to be eligible to programs, have geographic boundaries. So you need to know exact location of the property. They probably have maximum sales prices, certain property types are eligible, all that kind of stuff. So so we figured out early on that, you know, since everybody starts a home search online, wouldn't it be great if at the end, consumers don't know, even today, still don't know these programs exist, but everybody starts at home search online. So why not identify at the property level? Is that property eligible for any programs? And if so, which programs? And then put a message on it. If it's out, if there's down payment programs available, say that right on the property consumer says, oh, this, you know, what's the what's this thing down payment assistance. And you click on it again, answer about seven questions and find out if you're eligible. And that's what we do with Zillow and Redfin will be adding some others. But it's also what we do with multiple listing services. And you know, one thing that. That we were proud and excited about. But just back on December 15th, a few weeks ago was the first anniversary of launching this module on Zillow and Zillow, put out a press release and said that in that first year, more than 1 million unique consumers on Zillow.com found the module and entered their household information to see if they were eligible. And it's not easy to find. It's on the listing details page. They have all kinds of tools and widgets and things. You have to scroll and scroll and scroll, but if the home's eligible for down payment assistance, they'll eventually see that. And then they can enter their household information and see what they're eligible for. So, you know, that just tells you there's a huge opportunity. If you participate and offer these programs, just start the conversation with consumers and say down payment moneys available. Let's say, you know, let's see if you're eligible for any, we might be able to help you.
Casey Morris: Absolutely. I mean, that's huge, you know, because how many of those million people didn't even know what gun payment assistance was until they saw that? And so now it just maybe open their mind and let them know that there is some help out there going along with that. I was hoping you could define what down payment assistance is for someone who might be listening to this, who, you know, you can sort of infer what it means, you know, just from hearing the phrase. But, you know, to really understand what is this and what might be available depending where they live.
Rob Chrane: I think people are surprised at for one thing. Well, I'll talk about down payments and then I'll talk about sort of what the scope is or the, you know, the opportunity. So, I mean, it is like you said, it's pretty self-descriptive term. It is typically money to help towards the down payment and usually closing costs. And we found the methodology is pretty complex. So I won't get into that. But we did some research and determined, you know, because people ask all the time, well, what's the typical amount of down payment assistance? And so through this sort of complicated methodology, we determine that what's most the most commonly found average is around $17,000. So, I mean, there could be you know, there are programs where you might get 5000 or 7500 or 10,000. But look at across the country and all the different programs, around 17,000 was the number. Sometimes the program just has a fixed dollar amount. So again, like 5000, 10,000 or whatever the number might be, 20,000. But a lot of programs also the amount is based on a percentage, and it could be a percentage of the loan amount or percentage of the sales price. And even when it's a percentage, you know, it might be, you know, 3%, 4% of, let's say, of the sales price. That's still may there's still maybe a cap on that. So if the sales price gets high enough, you may max out. But it still has a lot of flexibility. So so basically, there's different versions of it. So, you know, is there are there payments required, yes or no? Is interest charged, yes or no? Is a payment deferred or is it repayable? Is it a grant? So all of those things come into play. So a grant, for example, that's the easiest. I mean, there's no lane filed. It's literally a grant, a gift. It's free money. So I'm trying to remember the percentage. Sorry, I. I don't remember the exact percentage of our database that are actual grants. But then you also have deferred payments so that that's probably the majority of them. And so the way deferred payment is, is typically it just means that you don't pay that money back until you either sell the home or refinance it. If you convert the property to a rental property, you're supposed to pay it off. But if it's it's deferred until some point, at some future point in time and you're not making payments and the majority of them don't have an interest charge. Some do. When they do, it's usually nominal. So those are sort of some of the different features and some of the different ways that the programs are structured. And so in terms of, you know, what you can find or how many homes would be eligible for downpayment assistance. You know, we find on average, as I mentioned, we do work with multiple listing services. And, you know, so we know at any given moment we can look and say how many how many homes, you know, how many total active residential listings does this MLS have and what percentage of those carries are down payment assistance flag. And we find on average, we certainly don't have every MLS in the country, but we have a range of geographic areas, range of sizes of MLS is an across the board. I think the average is about 80% of active residential listings. So, you know, sometimes when you talk to people about down payment assistance, they have this misperception that it's only for, you know, really low cost homes or it's only for homes and, you know, distressed neighborhoods or targeted census tracts. And it's not. We did some work with RealtyTrac. This is several years ago before they became Adam Data. And we found that at that time, about 86% of all residential properties across the U.S. were eligible for one or more programs. We also looked at, you know, how many how many programs, and I think there's something like 3143 counties in the U.S. and every county in the U.S. has at least one down payment assistance program. But somewhere around 2000 counties in the US have ten or more programs available. So, you know, again, it's it's not just this little niche that some people think it is. It's pretty broadly available.
Casey Morris: That's a great point because yeah, it's not you know, I think it's not widely known enough that these programs exist across the country. I think a lot of people wouldn't even think to look for them in their area. But more than likely, if they did, they would find that there, you know, a lot of options out there. So I think it's important that people know that, that it's, you know, to look into what's available to them and just see if they qualify. And, you know, along the qualifying. So I know you mentioned that the property has to be eligible. You know, are there any generalizations that can be made about like who qualifies for downpayment assistance or is that just like too variable based on where you are and what the program is?
Rob Chrane: It is hard to quantify that because of the variables that you mentioned. So, for example, the programs, typically one of the qualifications for a household is usually there's a household income limit. There's a maximum household income limit. It varies according to the household size. Not always, but most of the time. So if it's a single, single person household, the maximum household income limit may be lower than if it's four people in the household, for example. But again, it's part of the complexity. And from one program to the next, it can be different. So that's that's what makes it kind of hard to sort through not only the household size, but also what's the area median income, because a lot of the programs are tied to a percentage of the area median income. So, you know, the old rule of thumb used to be and some programs still do this, they may cap it at 80% of area median income, again, adjusted for household size. But the reason for that is that, you know, the area median income varies across the country. You can have some very high cost markets where the area median income is higher. So you can qualify with a higher household income, whereas other markets may have a lower median income. And, you know, in terms of the percentage, like I was saying back in the old days, it used to sort of be capped at 80% of area median income. But as as properties have got more expensive, a lot of the programs have made adjustments and they might be 100% of area median income, they might be 120% in some outliers. And these are outliers. But, you know, we've seen programs that allow up to 200% of area median income. So it's not, you know, again, depending on household size of where you are, but it's certainly not unusual to find programs where you could have potentially have a six figure income and qualify. Yeah, it's not going to be probably 500,000 annual income, but, you know, over 100,000 in some cases.
Casey Morris: Sure. And that's a great point, because I think it's possible for people to hear down payment assistance and think, okay, well, I'm not eligible for that unless I'm you know, if I unless I'm on low income or something like that. And and I know that there are programs that are that specifically cater to people who have lower incomes, but that's not necessarily the case, especially depending on where you live. So it's still worth looking into any programs in your area and just seeing if you do qualify.
Rob Chrane: That's such a great point. You know, it doesn't cost you anything to to find out. And as I was saying earlier, you know, it's six or seven questions to answer. You know, it's not very complicated. And then the course I didn't even touch on this yet, but sometimes there are programs or program enhancements for certain occupations. So typically community heroes, first responders, educators, health care workers, you know, veterans, active military, you know, they may have their own unique programs or there may be programs that are available to everybody, but they have enhanced features for those community heroes.
Casey Morris: Yeah, that's a really good point too, that, you know, depending on your profession, you might have some kind of assistance. On top of anything that you qualify for just based on your income and where you're living.
Rob Chrane: There's actually some programs out there that don't have a maximum sales price and don't have a maximum household income. Again, those are those are definitely in the minority, but there are some out there like that. But even if there's let's say the program had no household income limit, there's still going to be some arbitrary limit because for one thing is the big thing. Big point is you can't get downpayment assistance on a jumbo loan. So you're pretty much going to be limited to either the FHA maximum loan amounts or maximum conventional amounts. But again, you know, we know how much those have gone up in recent years, especially in the last year.
Casey Morris: Yeah, absolutely. And if someone does qualify for a down payment assistance or they see a program and they think, okay, I think I'm in the qualifying range here and the property is going to qualify as well. How does it work to apply that money to the loan? I mean, would they work with their loan officer to make that application or do they apply directly with the whichever agency is offering it? Like, how does that all come together?
Rob Chrane: Yeah, normally. And we recommend that they do work with their loan officer to help do it. Now, depending on the program and the program provider, you know, the loan officer or the lender may have to submit a, you know, kind of a copy package directly to the agency. If it's a state Housing Finance Agency program, it's pretty much all handled through the lender. And as is the borrower, you don't really see. With all that going on. I mean, the lender may sell that loan to that agency or whatever. But it's fairly transparent to the to the consumer in terms of what's happening. So but another reason why they need to work with their lender and their loan officer is because not every not every lender participates in these programs and even the lenders that do participate in the programs, there's no lender that I've ever seen that offers every program available in their footprint, whether they're national or regional or local. It's just operationally. It's that's a that's a big lift to try to do every program that's available because, again, there can be dozens and dozens of programs. And then if you're a lender operating in multiple markets, you can imagine how that how complicated that can get.
Casey Morris: Definitely. So it sounds like, you know, if they are thinking about applying for a down payment assistance, they should check with their lender first and make sure that that's going to be an option for them with the loan that they're using and that the lender, you know, allows that program as well.
Rob Chrane: Yeah, exactly. Exactly. And we find that where, you know, so we have we have a widget on our public facing site. We're not we’re really a B2B business model. Like I said, we work through lenders, work through MLS as other real estate search sites. But consumers or anybody, loan officers, realtors, anybody can come to our site and just do a search and see what they're eligible for. And if they search on our site, then they are going to see everything that's available. You know, in in the country, or at least in that area in which they're looking. And when we look at the analytics on those searches, we find that on average, most people, if they're eligible for one program, they're going to be eligible for an average of six programs, maybe even eight programs. There's that many different programs out there. But if you narrow it down to one lender, they're still going to be very likely that it's going to be more than one or two programs. So lots and lots of choices. And some of these programs actually can be layered, which really gets interesting if you think about multiplying, you know, potentially multiplying tens of thousands of dollars and layering those that, you know, that can be pretty dramatic.
Casey Morris: Yeah, I mean, that could really be a game changer for someone, especially if they are struggling to save up a down payment, plus closing costs to be able to combine a few programs. I mean, could be just a huge difference to what they're able to afford and then also how comfortable they are once they get into the home, you know, potentially not having to use up all of their savings just on their down payment. You know, they might have some money left over when they get into the home, which is great for having a buffer in case they fall behind, you know, job wise or something like that. Then they have money for their mortgage no matter what's happening, where they can make renovations. And so it's a huge opportunity for people.
Rob Chrane: You make a really good point that that you know and again, my goal you know my background in lending I don't know how many closings I sat at and at the end everybody back in the day when people actually went to, you know, sat around a closing table with the buyer and the seller and the closing agent and probably a real estate agent or two, and especially first time homebuyers. You know, at the end, everybody shaking hands. Everybody's excited. And the borrowers are excited about their new home. But is it ever inevitably somebody you know, so many times people would say, well, I guess we're going to be eating tuna out of a can for the next six months. Because what she said, a lot of times people just scrimp and save and walk away with only the very minimal reserves, maybe a couple of months of pity. And why do that? If you can find out that you're eligible for some programs and have that extra cushion? Because that's really what this is about. I mean, yes, it's about opening up homeownership to more households, but it's not. It's not. Intended to shoehorn people into homes that they can't really afford. Right. It's it's you know, it's it's. To do it in a sustainable, safe way. And what makes that what makes that happen is, you know, being able to walk away and have more reserves and to not, you know, not have to liquidate of an IRA or borrow against a for one. I mean, you know, people I, I want one of my homes that I bought a first home. I did I did borrow against a41k so I'm not saying don't ever do that. It might be the best strategy, but if you could do it another way, all the better.
Casey Morris: Absolutely. Yeah. Yeah, I can. It can make life a lot easier, much less complicated. Yeah. Do it this way if you can. And are there any downsides to using down payment assistance? I mean, any sort of I don't want to say loopholes, but, you know, any sort of guidelines or things. Fine print that people should know about that, you know, that might not make it just a total home run for them.
Rob Chrane: You know, off the top of my head, I can't think of any. I mean, definitely, you know, they want to know, you know, you should invest. Look at the program, look at the rules and especially the repayment, because that's going to be important. I would say maybe, yeah, I might get in trouble for saying this. I may regret may regret saying this. But, you know, there's some programs. You don't see a lot of them. But, you know, equity sharing, you know, that's sort of another version of down payment help. And I guess the loophole or the catch in those situations is that, you know, because you're getting into the home with the help of a nonprofit that, you know, you don't at some point you may have to share your equity when you sell the home. But again, again, again, that still may be that's you know, in your in a in a given person's household situation, that still may be a good strategy and it certainly could still be better than renting forever. But, you know, other than things like that, I think, you know, just be sure to know what the terms are and what the repayment, you know, what the repayment expectations are. But other than that, the if the if there's a disadvantage, I'm missing it.
Casey Morris: Okay, great. And if someone wanted to find out what's available in their area or their they listen to this podcast and now they're aware of down payment assistance, what would be the best first step? Is it talking to their loan officer like, you know what? What's the best sort of order of operations to figure out what they're eligible for?
Rob Chrane: I would definitely ask your loan officer, maybe ask your realtor. I mean, a loan officer is going to be more, you know, I guess more educated about it. Yeah, but there but we see again through our multiple listing service partners that we do see real estate agents that that have done what some loan officers do and just sort of made themselves subject matter experts and they're good at it. So I would ask them, you can, you know, you could just go online and do a search and just do a search, say, you know, do a search for down payment assistance or search for, you know, Housing Finance Agency, because that's where some of the money comes from. You do that and you can come to our website down payment resource dot com. As I said, we have that widget. It's free. So anybody can, you know, answer those six or seven questions. And even if you don't have, you know, the only the only information you have to put in there to get results is location, because that's how you narrow down the programs, because you know where the programs are based in part on a geographic boundaries. So but let's say you're just starting out or you're just thinking about buying a home and you don't have a specific property, you could still do a general search and you could type in a city or county in some cases and neighborhoods. And just see generally in the area you're looking in what's available. And the more of those six or seven questions you answer, the more accurate the results are going to be. But if all you want to do is see what's available in my area, you could put that in. And that's a good start.
Casey Morris: Okay, great. And we'll definitely put a link to the down payment resource in the show notes as well so people can find it really easily.
Rob Chrane: Thanks.
Casey Morris: Well, thank you so much. This is great and hopefully it's helpful to people and whether they had heard of down payment assistance or not. Hopefully it motivates them to look at what's available in their area, see what they're eligible for and see how they can use it as a strategy in their homebuying journey.
Rob Chrane: Well, great. Well, thank you so much, Casey. It's great talking with you. And I appreciate you sharing this information with your listeners that because it is important and it can make a huge difference in people's lives, in their financial lives.
Casey Morris: I hope so. I hope it does. I hope it does make that difference. Thank you so much.
Rob Chrane: All right. Thank you.
*Eligibility subject to program stipulations, qualifying factors, applicable income and debt-to-income (DTI) restrictions, and property limits. Fairway is not affiliated with any government agencies. These materials are not from HUD or FHA and were not approved by HUD or a government agency.
The information in this podcast is distributed for educational purposes only. The information is not guaranteed to be accurate and may not entirely represent the opinions of Fairway Independent Mortgage Corporation.
Copyright©2023 Fairway Independent Mortgage Corporation. NMLS#2289. 4750 S. Biltmore Lane, Madison, WI 53718, 1-866-912-4800. All rights reserved. Fairway is not affiliated with any government agencies. This is not an offer to enter into an agreement. Not all customers will qualify. Information, rates and programs are subject to change without notice. All products are subject to credit and property approval. Other restrictions and limitations may apply. Equal Housing Opportunity.
Fairway is required to disclose the following license information. AZ License #BK-0904162; Licensed by the Department of Financial Protection and Innovation under the California Residential Mortgage Lending Act, License No 41DBO-78367. Licensed by the Department of Financial Protection and Innovation under the California Financing Law, NMLS #2289. Loans made or arranged pursuant to a California Residential Mortgage Lending Act License; Georgia Residential Mortgage Licensee #21158; For licensing information, go to www.nmlsconsumeraccess.org; MA Mortgage Broker and Lender License #MC2289; Licensed Nevada Mortgage Lender; Licensed by the NJ Department of Banking and Insurance; Licensed Mortgage Banker-NYS Department of Financial Services; Rhode Island Licensed Broker & Lender; Fairway Independent Mortgage Corporation NMLS ID #2289 (www.nmlsconsumeraccess.org).
The information in this podcast is distributed for educational purposes only. The information is not guaranteed to be accurate and may not entirely represent the opinions of Fairway Independent Mortgage Corporation.
Copyright©2022 Fairway Independent Mortgage Corporation. NMLS#2289. 4750 S. Biltmore Lane, Madison, WI 53718, 1-866-912-4800. All rights reserved. Fairway is not affiliated with any government agencies. This is not an offer to enter into an agreement. Not all customers will qualify. Information, rates and programs are subject to change without notice. All products are subject to credit and property approval. Other restrictions and limitations may apply. Equal Housing Opportunity.
Fairway is required to disclose the following license information. AZ License #BK-0904162; Licensed by the Department of Financial Protection and Innovation under the California Residential Mortgage Lending Act, License No 41DBO-78367. Licensed by the Department of Financial Protection and Innovation under the California Financing Law, NMLS #2289. Loans made or arranged pursuant to a California Residential Mortgage Lending Act License; Georgia Residential Mortgage Licensee #21158; For licensing information, go to www.nmlsconsumeraccess.org; MA Mortgage Broker and Lender License #MC2289; Licensed Nevada Mortgage Lender; Licensed by the NJ Department of Banking and Insurance; Licensed Mortgage Banker-NYS Department of Financial Services; Rhode Island Licensed Broker & Lender; Fairway Independent Mortgage Corporation NMLS ID #2289 (www.nmlsconsumeraccess.org).
