More of an impact than a low credit score, lack of affordable inventory or hot seller’s market, saving for a down payment is the number one barrier many first-time homebuyers face. Although there are numerous down payment assistance programs (DPA) available in the U.S., first-time homebuyers often have little understanding about where to find one or how to use it. Yet these often-overlooked resources can be an integral piece of the financial puzzle for potential homeowners. That's why Freddie Mac developed DPA One®, a free online solution that effectively and efficiently helps lenders match home purchase borrowers to DPA programs.

A Growing Need for Down Payment Assistance

Recent statistics related to down payment challenges underscore the importance of educating borrowers about this type of funding:

DPA can take the form of grants, deferred loans, forgivable loans, Individual Development Accounts (IDAs), job- or military-specific assistance, tax credits from Housing Finance Agencies (HFAs), and monetary gifts from family members. There are more than 2,000 DPA programs across the country, with agencies offering funds at the local, state, and national levels. However, these programs can be difficult for both borrowers and lenders to locate and navigate.

DPA One’s unique, user-friendly interface helps lenders and loan officers seamlessly identify and compare up to three DPA programs that best match a borrower’s needs. It also offers DPA providers a centralized location to manage their programs and share information about how funds are received, matched and used. In short, the initiative is a one-stop shop for DPA assistance.

DPA Sources Come in Different Forms, and Eligibility Requirements Drive Access

Before encouraging potential homeowners to seek out DPA, there are challenges to overcome, including misinformation about down payment requirements and a lack of homebuyer education.  Research shows that 41% of those who have never owned a home believe that 20% of the purchase price is necessary for a down payment. In fact, borrowers can obtain a conventional loan, including a Freddie Mac HomePossible® or HomeOne® loan, with a minimum of 3% down, opening up homeownership to a larger number of potential borrowers.

To qualify for DPA programs, a borrower usually must be a first-time homebuyer as defined by the U.S. Department of Housing and Urban Development (HUD). This means someone who has not owned a home in three years, a single parent who has only owned a home with their former spouse while married, a displaced homemaker who has only owned a primary residence with their spouse, or someone whose former home was not affixed to a permanent foundation, like some mobile homes.

Other stipulations for DPA may include reserving the funds for a primary residence and adhering to restrictions on the maximum number of household residents and the maximum threshold purchase price. In addition, borrowers may be required to undergo a homebuyer education program and earn less than 80% of the area median income (AMI)—though in some cases they are permitted to earn up to 140% of the AMI. Borrowers who fit these criteria are in a prime position to take advantage of the benefits of funds available through DPA programs.

DPA One Moves the Needle

DPA One reduces friction in the housing ecosystem by providing centralized access to DPA programs and reducing questions from lenders and submission errors by program providers, increasing the number of borrowers qualified and accelerating originations. It’s another way Freddie Mac continues to advance affordable homeownership and help more low- to moderate-income borrowers achieve their homeownership goals.

If you have questions or know of colleagues who would be interested in setting up a live demo, please visit the DPA One website and one of our team members will contact you.