Down payment assistance programs have been through the ringer in recent years, but now seem to be making a comeback. According to a Smart Money article I read this week, the number of programs across the country now stands at around 1,000 and has increased 3% to 5% in just the last six months. What does this mean for home buyers, home sellers and the market as a whole? I think it's a nice positive incentive and help for what continues to be one of the biggest hurdles to homeownership, the down payment – especially in high-cost areas like California and our own Bay Area and Silicon Valley.
Down payment assistance essentially comes in the form of programs that offer either grants or low/no-interest loans to qualifying first-time home buyers, or buyers who haven't owned in awhile. Programs obviously vary, but generally there is an income and home value limit that qualifies a buyer. It can be a lifesaver for qualified buyers in places like San Francisco, where 20% down on an average home easily costs in the six figures.
Banks in the past had been reluctant to work with these programs because the borrowers who qualify were seen as risky. But that seems to be what's changed this time around. Lenders are more willing to work with these borrowers now.
Programs like these are great for buyers in need of help. But they're also good news for the market as a whole. Remember: first-time buyers especially are a significant piece of the housing market food chain. We need first-time buyers to create demand that fuels sales at the lower end of the market – and those sales in turn fuel sales for move-up buyers. Any move this year that can help create demand – especially in a market segment that needs it – will result in a positive effect to the market.
I applaud this new movement toward down payment assistance and hope that we will see more positive help to buyers and the market like this going forward.