OppFund in the News: First-time homebuyers in Michigan find answer to prayers with these programs

Reposted from The Detroit News, Written by Candice Williams, December 28, 2023

As a long-time renter, Lillie Jones thought a lot about what it would be like to own a home.

This fall, she got to find out, thanks to down payment assistance programs that helped her finance the purchase of a four-bedroom home on Detroit’s east side.

Jones, 37, got $26,000 through two programs to put toward the $119,000 she paid for the house in October.

“It was kind of like a breath of fresh air,” she said.

Jones is among first-time homebuyers using down payment assistance programs to help offset costs and more easily afford a home at a time of rising prices, high interest rates and low inventory. Metro Detroit shoppers looking for their first home have been especially affected by higher prices: In October, Detroit posted the largest year-over-year increase in home prices, 8.1%, among 20 large U.S. cities, according to data released this week by S&P CoreLogic Case-Shiller.

Among the resources people can use to find these programs is Freddie Mac’s new DPA One website, launched in October. It’s designed to help mortgage lenders match borrowers to down payment assistance programs nationwide.

“Time and again research reveals that the down payment is the single largest hurdle first-time homebuyers need to overcome to attain homeownership,” said Sonu Mittal, Freddie Mac’s single-family senior vice president of acquisitions, in a statement at the time of the program’s launch.

“But finding and comparing the many programs and their guidelines is challenging,” he said. “DPA One delivers a one-stop shop at no cost that brings lenders and their borrowers greater detail and visibility into these programs while seamlessly connecting the right assistance program with the lender, housing counselors and borrowers who need this assistance the most.”

Filling a gap

Reginald Perryman, an associate broker with Keller Williams Metro in Royal Oak, said during his 30 years in the real estate business, he’s noticed an increase in down payment assistance programs available for first-time homebuyers. He said the need is there as housing prices continue to increase following the housing crash during the Great Recession.

“The prices of homes — there’s a gap probably within the past 10 years because the values have appreciated so much,” he said. “Before, someone that was renting a home, let’s say if they’ve been renting a home for five years and they decide to buy, prices didn’t appreciate as quick. And what they were paying for was more comparable to what they would pay on a mortgage.”

Perryman said that people who want to stop renting and find a home to purchase often face a financing gap.

Billy Slobin, a loan officer with Farmington Hills-based Billy Slobin Supreme Lending, said many prospective buyers don’t have much extra money saved for a down payment. He said the assistance programs make “something happen that otherwise wouldn’t. That’s a great thing.”

Slobin says the DPA One website, however, lacks specificity for consumers. He suggests that potential homebuyers contact loan officers like himself to get information about down payment assistance programs for which they qualify.

“… Because there’s a lot of fine print,” he said. “Let’s put it that way. I don’t mean deceptive fine print. There’s just interpretation. Certain things only work for certain people.”

Exceeding expectations

Among banks that offer down payment assistance programs are Chase Bank’s Chase Homebuyer Grant, offering up to $5,000, and Bank of America’s Down Payment Grant program, which pays up to 3% of the purchase price, with a maximum of $10,000.

The City of Detroit’s Downpayment Assistance Program is designed to help low- and moderate-income renters who can afford a monthly mortgage payment but don’t have enough savings to qualify for a home loan.

To be eligible, an applicant must demonstrate residence in Detroit for the previous 12 months, or that they lost a home in the city due to property tax foreclosure from 2010 to 2016. They also cannot have owned property in the previous three years, and must meet annual income limits that start at $43,740 for a single-person household and reach $151,860 for a household of eight.

More than 300 Detroiters had become first-time homeowners through the program by the time the first round closed Dec. 4, with another 76 approved applicants preparing to close on their new homes.

A second round of DPA applications is expected to open in early 2024.

The program, which Mayor Mike Duggan announced in March 2023, is funded with $12 million through the federal American Rescue Plan Act.

Recipients received an average of $24,400 toward homes with an average purchase price of $116,000, according to the city. Participants’ average household income was $47,810.

Julie Schneider, housing and revitalization department director, said the response exceeded the city’s expectations.

“When we launched the program, we were anticipating that it was going to take two years to deploy what was at that point about $5.9 million,” she said. “And so we not only exceeded that in the first year, but we ended up doubling the amount of money that we were putting into the program in the first year. So it’s really been a success and just something we’ve been wanting to do for a while, so ARPA afforded us the opportunity to do it in a bigger way.”

Participants in the city’s down payment assistance program have access to a homebuyer education class and financial coaching.

“It’s always helpful to be prepared for the demands that owning a home can bring in terms of ongoing maintenance and those sorts of things,” she said.

Building value

Jones, a residential cleaner, said she utilized two programs when purchasing her home: the City of Detroit down payment assistance program implemented by National Faith Homebuyers as well as the Opportunity Resource Fund, a nonprofit with offices in Detroit, Grand Rapids and Lansing. She said she went from paying $1,100 in monthly rent to $900 for a mortgage payment that includes her property taxes.

“It’s different,” she said. “You go from eating chicken to eating steak. It’s quite different. For me, I’m thankful for it.”

Lillie Jones scrapes caulk along bathtub tile in her home. She hopes buying her first home will serve as an example to her three children of how to accumulate wealth.

Jones said she wants to be an example for her three children, ages 19, 17 and 14, “so my kids know to build value and to build wealth throughout your life.”

“Don’t just live your life doing absolutely nothing, and you have nothing to show for it,” she said

Sony Morton, a real estate agent with Southfield-based Bowers Realty, said renters should consider purchasing a home, especially if they can get help with their down payment through an aid program.

“These types of things change the community’s financial well-being,” he said. “It’s a difference in paying $1,000 in rent or you own for $600. … You’re just paying out less.”

Terance Bowers, real estate agent with Bowers Realty in Southfield, said he’s seen a range of buyers taking advantage of down payment aid programs.

“It’s older folks, it’s middle-aged folks, it’s younger folks,” he said. “Younger people most definitely have been the bigger pool where they’re able to use these down payment programs because they’re younger.”

Education about these programs is badly needed, Bowers said.

“They should be promoting it so they can write more (loans),” he said.

Agents say they see a mix of clients already aware of down payment assistance programs, while others don’t have any idea where to start.

Gaston Munoz, principal broker at Munoz Realty in Detroit, said that sometimes clients approach asking about various programs. Otherwise, he’ll inform them.

“Sometimes they hear something that a friend told them,” he said. “We try to put it on the table for every client. Many times, the lenders, they’re doing a great job, too. Because when we send a client to a lender, the lender … when they’re pulling credit and they start asking the questions, and they go, ‘Oh you know what? I can also put you on this program and you can get this money for free.’ So it is teamwork between lender and Realtor.”