“Bowser Administration Announces Major Enhancements to DC’s First-Time Homebuyer Programs”

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Photo by PoPville flickr user Lorie Shaull

From a press release:

“Today, the Bowser Administration announced major enhancements to the District’s homebuyer programs, including increased financial assistance and longer loan payback periods, giving District residents who are first-time homebuyers more purchasing power and a greater pathway to homeownership.

“For nearly 40 years, our homebuyer programs have given the gift of homeownership to thousands of DC residents, but as housing prices rise, we must do even more to make homeownership and affordable housing a reality for every resident,” said Mayor Bowser. “The improvements we are introducing deliver on my promise to ensure safe and affordable housing for more Washingtonians. Come January 1, when these new enhancements go into effect, we will change the way home buying works in the District. I couldn’t think of a better way to ring in the New Year.”

The enhancements are being made to homebuyer programs administered by the DC Department of Housing and Community Development (DHCD) that provide down payment and closing cost assistance. Those programs include the Home Purchase Assistance Program (HPAP), which provides assistance to first time homebuyers making up to 110 percent of the area median income (AMI); the Employee Assistance Housing Program (EAHP), which provides assistance of up to $10,000 for eligible District government employees; and, the Negotiated Employee Affordable Housing Program (NEAHP) which provides assistance of up to $26,500 for certain unionized District government employees.

“My chief mission at DHCD is to do ‘more with more’ to get residents into affordable housing,” said DHCD Director Polly Donaldson. “That includes not just producing and preserving affordable housing units, but overseeing homebuyer programs that help residents get the keys to their first home. The new changes to these programs will give District residents more down payment assistance, loan them more money and give them more time to pay back their loan. This will give them more purchasing power and put the keys in their hand faster.”

The four enhancements will:

· Increase the FY2017 budget for the homebuyer programs by almost 50 percent, to $16 million. This will help approximately 75 more households finance their home purchases compared to FY2016 (300 households in FY17 compared to 226 households in FY2016).

· Increase HPAP’s maximum loan amount from $50,000 to $80,000. This will make the homes of many program participants more affordable and – in some cases – give residents a mortgage payment less than comparable market-rate rents. For example, using an $80,000 deferred payment HPAP loan, a four-person household with an income of $54,000 could qualify for a total housing payment of $1,650 per month, supporting the purchase price of a $340,000 house. Recent data shows that the average rent for a one bedroom apartment in the District is slightly over $2,000.

· Revise the repayment terms for 70 percent of HPAP borrowers. Currently, HPAP has a five-year loan deferral period, and when that period ends, some borrowers get sticker shock because of the higher mortgage payments. For borrowers with incomes below 80 percent AMI, the change will defer their loans until the property is sold, refinanced to take out equity, or is no longer their primary residence. Moderate-income borrowers who earn between 80 percent and 110 percent AMI will have payments deferred for five years with a 40 year principal-only repayment period.

· Add a second HPAP administrator to enable the District to more efficiently and effectively implement these major enhancements. The program will be co-administered by the DC Housing Finance Agency and the Greater Washington Urban League to accommodate the anticipated growth in requests for assistance from District residents.

More Affordable Housing Enhancements Coming

These enhancements are part of a series of actions Mayor Bowser is planning to further produce and preserve affordable housing in Washington, DC. The Administration is also aggressively moving vacant and blighted properties out of the pipeline – of the approximately 160 such properties in DHCD’s inventory, at least half are at various stages of disposition. Properties that DHCD disposes of typically must be affordable to households earning roughly $87,000 or less, a restriction that stays with the property for 15 years. In addition, any property disposed of within a historic district adheres to the standards and guidelines established by the Historic Preservation Review Board.

In the last two years, DHCD has enhanced the solicitations process to dispose of vacant and blighted properties. The agency has shortened its normal competitive Request for Proposals to disposition process for single family homes and lots from several years to up to 18 months. Last year, DHCD improved its solicitation process and now applicants can apply online, similarly to how applicants can apply for Housing Production Trust Fund (HPTF) and federal funding sources. In addition, an applicant can apply for DHCD development finance funding (HPTF and federal) and land (building or lot) in one competitive solicitation.

DHCD is committed to using fair, transparent, competitive, online processes to create affordable housing, achieve its first source and Certified Business Enterprise procurement ambitions, and get the best outcomes from the assets it owns. For example, DHCD’s November 29 solicitation of offers will turn six properties – including four buildings – in Historic Anacostia into affordable housing. The end result will be new, vibrant affordable homes for District residents making no more than 80 percent of the area median income. A pre-bid meeting will be held on December 13 at DHCD’s Housing Resource Center for all interested developers. To ensure that the development process moves expeditiously, DHCD has set January 12, 2017 as the deadline for applications.

In early 2017, DHCD will announce a new initiative that will dispose of single family properties (lots and buildings) for $250 to create new affordable homeownership opportunities for teachers, firefighters, police officers, and public servants.”

36 Comment

  • Lion of LeDroit

    Methinks somebody is getting ready for election season :).

  • Methinks someone wants to prevent folks fleeing the Donald.

  • Andie302

    LBP, did you see this?

    • Just did! I’m going to look into this, and FridayGirl sent me some info on some other programs – it would take me a while to get my sh*t together for this and/or any other financial assistance program, but again, maybe this is why the place that’s only open for a year is the right move….

      • Andie302

        It would certainly give you a purpose for your savings and time to get your ducks in a row! I think going into something temporarily is a whole different ballgame than feeling like it’s a life step you’re not quite okay with (summarizing my impression from your earlier comments). I’m going to ping my lender friend on this!

  • is there any substance to these enhancements for someone who makes ‘decent’ money but barely enough to buy a 1br condo?

    • Good question. I hope someone smarter than me can read through everything and give me an answer!

      • me three!

      • Bear

        I purchased my condo in 2010 with HPAP assistance. At that time, the upper income limit for a single person was about $60k, if I remember correctly. Now it appears that it’s $84k for a single person:
        .
        https://www.gwul.org/docs/hpap_2015_table_new_9-2015_income_maximum_assistance_table_w_logo.pdf
        .
        The amount you qualify for decreases as your income increases, but it looks like you’d still qualify for $10k in assistance at that upper limit.
        .
        I would not be where I am today financially if I hadn’t taken the leap and bought with HPAP assistance. That said, the process is very bureaucratic and the person handling my case was less than competent – paperwork lost, misinterpreted, closing delays galore, etc. So if anyone here is looking at this as an option, be prepared to be on top of your shit so they don’t screw up your application because of silly mistakes.

    • HPAP provides assistance to first time homebuyers making up to 110% of the area median income. So depends on your area’s median income, but for most neighborhoods 110% would be around $60-70k household income. Depends on how one defines “decent” money, but if you make around six figs or higher, you’re out of luck looks like. Also – FHA Loans only require 3.5% down, so thats an option too.

      • halle-friggin’-lujah! One of the few upsides to making so-so money at a non-profit, perhaps!

        • DC Open Doors is also a good program for 1st time home buyers making so-so money (at the time I made 54K). I used that program 3 years ago to buy my place.

          If you are thinking of going HPAP give it a long lead time. Like 6+ months. I started about 4 months out and was caught in the long (very long) approval process. I found a house I wanted to put an offer in on before HPAP approval came in so I went the DC Open Doors route and was approved immediately (in the normal pre-approval stage)

          • +1 on DC Opens Doors, you can make up to like $130K and still qualify for the downpayment assistance. It’s also much, much faster than HPAP. (Bought my first home with HPAP; bought my second with DC Opens Doors.)

          • same here… I started getting detailed info on both DC Opens Doors and the HPAP program earlier this fall with the intent to buy something next year. Then when something came on the market that was basically what I was looking for, I just went ahead without waiting for the HPAP to run its course. I’m kicking myself a little bit for not taking advantage of both programs, but at this point, I might not have been better off waiting.
            .
            The moral of the story here might be to start going through the HPAP process before you think you’re entirely ready to buy.

      • Area Median Income (AMI) is determined by DC and the surrounding counties. Its around 108k now. AMI is Federal regulation used by HUD, or other tax credits for low income housing development. There has been a push for DC to have its own AMI because that would lower it significantly. The median income in surrounding counties drives up DC’s. DC may have different income limits they can use for the programs but if they use AMI then they have to follow Fed guidelines.

    • dc open doors worked great for us to buy a really nice 1 br condo in our preferred neighborhood. they “lend” you the 3.5% FHA down payment at no interest and 20% is forgiven every year. once you are in the home 5 years, the down payment is fully forgiven. if you move out before 5 years, you need to repay only what hasn’t yet been forgiven.

      very smooth process. however, the interest rate is a little higher than a traditional mortgage product, plus you need to pay mortgage insurance since your down payment is low. and, the home/condo needs to be FHA approved. highly recommend the program.

      • Very full disclosure, people should read this carefully before getting too excited. Ask yourself if PMI and a higher rate is worth it. Counting your pennies and swinging for 20% with a traditional loan may be your best option in the long run. I hate to be a skeptic, but sometimes you wonder what the government is gaining by providing this type of assistance, and who is paying for it.

        • I think the single middle class struggles a lot in DC because of what you mention – downpayments. It’s rather unreasonable for someone making not making six figures to make a 20% downpayment. Your average middle class person doesn’t have $50k hanging around in their bank account. In addition, a lot of places for sale in DC don’t even accept FHA cause they don’t need to bother with it (not to mention it’s not uncommon for multiple offers which obviously hurts FHA buyers).
          .
          What Bowser has not addressed is the lack of supply in DC. I know it wasn’t their land to decide, but it would have been great to see some “high-rise” condos built on the RFK site and only sold them as FHA condos. It would help revitalize the area with residents that can better sustain retail in that area.
          .
          There just isn’t many options for people, particularly single people, unless you are getting something super expensive or qualify for low-income housing (and manage to get it).

        • This is incredibly true. An FHA Plus loan on a $500K property (3.5% down) is going to cost you ~$25K in MI premiums over the 5 years you can’t refinance if you use DC Open Doors. That includes the 1.75% upfront and .85% annual MI premiums. For that, you would get $17,500 towards your down payment “free” from the government. You come out almost $9K in the hole! (For a $300K property you come out ~$7K in the hole, etc.) This is before even considering the much higher interest rate (~$3K extra in just first year on $500K home, $1800 on $300K home).
          .
          These days, banks are making conventional loans with low down payments more readily. Even a few years ago, I bought a place with 10% down, no problems at all (at least with the financing part). My MIP was .5% annual (nothing upfront…though there was also the option of a one-time payment), and I was able to get out of it after 2 years with just an appraisal showing 75% LTV or less (i.e., I didn’t have to refinance, just pay the ~$450 appraisal fee). I know several people who have purchased in the last 12-18 months with 5-10% down and similar MIPs, and at least one sale in my (non-FHA) building in the last 12 months was a low down payment situation.
          .
          If you can even get to 5%, you can probably save money in the long run by avoiding FHA. Yes, you need a *really, really* good credit score to get the biggest benefits, but if you’re looking a year or more out, that’s a year you can spend working on your credit score, as well.

          • I also had a minute to sit down and look at the HFA option offered under DC Open Doors now, and it will also cost you $$ in insurance premiums, BUT MIGHT BE SIMILAR TO A CONVENTIONAL LOAN WITH PMI. Based on their 2016 fact sheet, the monthly insurance payment for a $500K home would add up to ~$3500/year, which is basically the amount DC will gift you when taken over the 5 years you can’t refinance. Basically, you pay that money back to the insuring agency in your mortgage. You could look at it as an interest-free loan that you DO pay back. Based on the estimates I looked at, the insurance premium was about .75%, which might compare favorably to a low-down-payment conventional.
            .
            HOWEVER, the interest rate is still a good bit higher than conventional financing. If your credit situation means that you’d be paying that higher rate anyway, it might make sense to go ahead and let DC front you the money. If, instead, you could qualify for a better rate, you could save a lot of money each year by saving up even 5% before buying.
            .
            And the final word of caution is on getting locked into a loan you can’t refinance for 5 years, given the current rate environment. It appears that HFA allows you to cancel the MI when you reach 80% LTV *on the original amortization schedule,* but FHA loans with less than 10% down have MI for the LIFE OF THE LOAN. 5 years from now, interest rates are all but guaranteed to be higher. So you’ll be staring down the barrel of continuing to pay thousands a year in MI premiums or refinancing into a higher rate (in either case, honestly…if you only put 3.5% down, it will be far more than 5 years before you reach 80% LTV based on the original amortization schedule). As I mentioned above, I was able to cancel my PMI after only 2 years with only an appraisal. Yes, I put 10% down rather than 5 or 3.5%, but I also knew the place was priced to move (the sellers were “highly motivated,” to put it mildly) and the neighborhood was rapidly appreciating. Particularly for properties that need improvement, getting locked into MI for long periods is a bad long-term financial move.
            .
            Don’t get me wrong, I understand the desire to own. I pay less than comparable rentals, my housing costs change little (sure, property taxes go up, but those increases are capped and amount to only a few bucks a month), get the benefit of appreciation, have more say over my home’s look/feel/functioning (though that comes at a price in terms of upgrades and replacements), and get a lot more respect from neighbors as an owner. But sometimes you have to take the 10,000 foot view. Is it better to buy now and pay tens of thousands in fees and additional interest, offset by the upfront “grant,” or wait a couple of years and buy under conventional programs? My opinion is that it’s never worth it if you have good credit or would be using DC Open Doors to buy an FHA property, but it might be worth it if you buy an HFA property and have marginal credit that you can’t improve quickly. In the former circumstances you’re likely to come out tens of thousands of dollars worse off down the line; in the latter, you could break even when considering the upfront money from DC.

  • I forget which home buyer assistance program I used but my property taxes were waived for the first 5 years as long as you met the salary criteria and were using the home as your primary residence. There are some decent programs out there to get your foot in the door with regards to home ownership.

  • “+1 on DC Opens Doors, you can make up to like $130K and still qualify for the downpayment assistance.”

    We used the DC Bond(?) program years ago. They offered down payment assistance or better interest rate. If I remember they were more flexible if you were buying in a ‘targeted area.’ We were buying in Woodridge. Are the current purchase assistance program structured this way?

  • I’m really glad to see that they’re adding a second administrator for HPAP. I recently went through the entire HPAP process to buy a condo. The day before I was scheduled to close, we found out that HPAP ran out of money and couldn’t finance my loan. The entire deal almost fell apart, and I ended up walking away from HPAP and financing my down payment in other ways. I’m not sure if it was all the red tape or general ineptitude on the part of the Urban League that caused the funding to fall through; hopefully the DC Housing Finance Agency is a little more professional.

    • I work with many people who use the Hpap program. Them running out of funds is a regular occurrence.

      • Since there are several people on here who seem to meet the guidelines and might be interested in using the program, is there some way to reduce the risk of that problem that you know of? Buying near the beginning of the fiscal or calendar year, perhaps?

        • I’m sorry to say, but there’s not. I bought near the beginning of the DC fiscal year (October) and they still ran out of money. HPAP sounds like a really great benefit, but the process is a nightmare. I also learned that using HPAP really hurts your chances of having an offer accepted because it has such a terrible reputation. Plus, many realtors don’t like working with HPAP buyers for the same reason. BUYERS BEWARE.

          I would recommend DC Open Doors and the DC tax abatement program.

  • The NACA program is really good.

  • Bowser takes credit for all these proposals which were authored by Anita Bonds and passed last spring by the DC Council.

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