Down Payment Assistance: Making Sustainable Homeownership More Achievable

By Corey Carlisle

The ability to own a home has long been a cornerstone of American life. Yet, the path to homeownership continues to be a challenge for many. Saving for a down payment is frequently cited a primary barrier to homeownership.

Consumers often think they need to put more down than lenders actually require, and many are unaware that low- or no-down payment assistant programs are available to eligible borrowers.

Woodforest National Bank in the Woodlands, Texas, believes increasing access to homeownership is critical to building thriving communities and helping low- and moderate-income families build wealth. As part of the $5.4 billion bank’s efforts to break down barriers to achieving homeownership, the bank formed a first-of-its-kind private-public venture with the Texas Department of Housing and Community Affairs to expand LMI homeownership though an innovative $10 million loan agreement that increased access to down payment and closing costs assistance. This transaction was an affordable source of capital for TDHCA that provided zero-interest DPA loans, which in turn enabled TDHCA to offer more first mortgages at more affordable rates to (mostly LMI) first-time homebuyers.

The Woodforest/TDHCA venture has been a great success. The full $10 million was deployed in six months, much faster than anticipated, and generated significant demand with more than 1,400 requests for DPA remaining on the waitlist as of 2017. Through DPA, TDHCA was able to make homeownership possible for nearly 1,600 new first-time homebuyers.

Wells Fargo and NeighborWorks America, the congressionally chartered nonprofit that supports community development in the U.S., have a long history of collaboration on providing home-buying tools, resources and credit to homeowners across the nation. In the wake of the housing crisis, the two organizations launched NeighborhoodLIFT, a program to support sustainable homeownership and advance neighborhood stability through down payment assistance and financial education. Program funding comes through the Wells Fargo Foundation—the single largest corporate philanthropic effort of its kind in the bank’s history—and the overall administration and operations of the program are undertaken by NeighborWorks America.

NeighborhoodLIFT has helped create more than 13,900 homeowners and revitalize neighborhoods in 52 communities since 2012. The program has three pillars. First, down payment assistance for first-time homebuyers and potential homebuyers ready to re-enter the market. Locally designed programs met local housing priorities, totaling more than $30 million in grant to support community revitalization efforts for a dozen of the participating housing markets. Second are local outreach events designed to provide homebuying education and support. Any applicant who is approved and receives the down payment assistance must take eight hours of pre-purchase counseling and education from a HUD-certified housing counseling agency. Finally, down payment assistance grant recipients are required to stay in the home for three to five years to ensure the buyer has full stake in the decision to purchase and occupy the property.

These commitments to responsibly create sustainable homeownership and advance neighborhood recovery were recognized by the American Bankers Association’s 2017 Community Commitment Award for affordable housing, with Woodforest winning the award and Wells Fargo receiving an honorable mention.