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New DC Program Offers Down Payment Assistance To Higher Income Buyers

by Shilpi Paul

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A new program from the DC Housing Finance Agency (HFA) seeks to help potential homeowners who have good salaries and the intention to live in DC, but not enough savings for a significant down payment on a home. By targeting higher income earners, it’s a departure from existing home buyer programs that are typically designed for low or middle income households.

DC Open Doors is a essentially mortgage program that can provide down payment assistance for those with an income of up to $123,395. First-time homeowners and existing homeowners are both eligible.

Through participating lenders, HFA will offer a loan of either 3.5 or 3 percent of the home price (for either an FHA-backed loan or a standard loan through Fannie Mae).

To encourage homeowners to stick around, the city is making the deal even sweeter: every year, 20 percent of the loan is forgiven. If the homeowner stays in their home for 5 years, the loan will never have to be repaid and essentially converts into equity. The program is aimed at young professionals with good jobs who haven’t yet amassed any savings.

With the new program, HFA made a strategic decision to widen the pool of eligible home buyers from previous programs like DC Bond, HFA’s Director of Single Family Programs Carisa Stanley told UrbanTurf. The household income cap is significantly higher than in previous programs, and the participant can buy a home in any ward in the District. (For most of the loan products offered, a minimum credit score of 640 is required and the borrower must have a maximum debt-to-income ratio of 45%.)

“At $107,000, the Area Median Income (AMI) in DC has risen over the last few years, and the average purchase price for a home now exceeds $450,000,” said Stanley. “We wanted to tie our program directly to what is happening in the city.”

This article originally published at http://dc.urbanturf.com/articles/blog/new_program_offers_down_payment_assistance_to_those_making_up_to_123000/7321

38 Comments

  1. T said at 2:14 pm on Wednesday July 17, 2013:

    AMI is the “Area Median Income” not the “Average Median Income”

  1. Shilpi Paul said at 2:16 pm on Wednesday July 17, 2013:

    T,

    Thanks! We made the correction.

    Shilpi

  1. AC said at 2:50 pm on Wednesday July 17, 2013:

    Can you use the 3.5% in addition to your own money for a downpayemnt or only the 3.5%?

  1. Sam Khosh said at 3:23 pm on Wednesday July 17, 2013:

    Yes, You can use the Down Payment Assistance in addition to your own down payment.

  1. duponter said at 3:58 pm on Wednesday July 17, 2013:

    Bummer.  I got pretty excited about this until I saw the max $123K figure.  Max income for me is higher, but frankly I put a pretty large percentage into paying off student loans, rent, etc.  I feel like it’ll take me years to get enough saved up for a decent down payment, even at a higher income than $123K.  Even though I could definitely afford the mortgage payments for what I’m paying in rent.

  1. Reone Brown, GRI said at 5:08 pm on Wednesday July 17, 2013:

    I have signed up four clients for this program, and they are very excited because they know that the Seller can pay the difference in the closing cost.  Let me know if you need any assistance.

    Reone Brown, GRI
    http://www.Reonebrown.com
    202-374-2817

  1. slightlydisappointed said at 5:51 pm on Wednesday July 17, 2013:

    borrower must have a maximum debt-to-income ratio of 45%.)

    so maximum debt is 273K?  Thats kind of limiting in terms of what one can get in DC.  I mean its good if you are looking at a studio I guess

  1. D as in DC said at 7:24 pm on Wednesday July 17, 2013:

    to slightlydisappointed. 
    borrower must have a maximum debt-to-income ratio of 45%....so maximum debt is 273K?

    Not sure how you calculate the max debt of $273K, but an annual income of $123,395 equates to a monthly income of $10,280, 45% of which is $4627.  Assuming no other household debt, this would equate to a maximum mortgage (PITI) debt of about $870,000.

  1. D as in DC said at 7:28 pm on Wednesday July 17, 2013:

    Oh, at that $870K mortgage amount assumes a 5% interest rate.  A lower rate (say 4%) would boost the maximum loan amount another $100K

  1. Francisco said at 8:31 pm on Wednesday July 17, 2013:

    Does anybody have any insight as to how long this program will run?

  1. Barak Sky said at 8:45 am on Thursday July 18, 2013:

    I wish the min income was higher!  I feel like $123k is not high enough for DC.  Do they average the last 2 years of your income to get $123k?

  1. slightlydisappointed said at 9:07 am on Thursday July 18, 2013:

    to D as in DC

    It says debt to income ratio (which I treated as income to debt ratio) there is nothing about a payment to income ratio.

  1. C said at 9:38 am on Thursday July 18, 2013:

    I don’t know - sounds too good to be true.  You make a maximum annual income of slightly more than 123,000 and if you live in the district for at least 5 years, you never have to pay the loan back?  Sounds too good to be true.

  1. RN said at 9:43 am on Thursday July 18, 2013:

    I don’t understand these people who make more than $123k and have issue saving money for a down payment.  2 years ago I bought a house in DC for $450k with a combined income of $80k with my partner.  I was only making $43k at the time.  I now make $80k and saving about $40k a year and I own my own home.  If you make $123k+ a year and can’t save moeny, then you need to look at your finances and figure something out.

  1. Suze O. said at 10:15 am on Thursday July 18, 2013:

    I don’t understand these people who make more than $123k and have issue saving money for a down payment.

    Yeah, me either.  If you don’t have the discipline to save money, then how will you have the discipline to be a homeowner?  And please, no whining about student loans.  If you are already committing a large part of your income to paying off debt, the last thing you need is yet more debt.

  1. Ryan said at 11:07 am on Thursday July 18, 2013:

    Is this program only open to first time homebuyers?

  1. Eric Simms said at 11:40 am on Thursday July 18, 2013:

    A friend sent this to me today, and it couldn’t be better timed! I was talking about moving into the city just this past weekend, and this program could make it possible.

  1. David said at 12:00 pm on Thursday July 18, 2013:

    duponter,

    Judging by your handle, I think it’s safe to say you live in the Dupont Circle area. Your CHOICE to live in such a high-rent area is why you feel like it will take years to save up for a down-payment. I bet you could cut your rent in HALF by moving somewhere where you might have to actually (gasp!) take the Metro to get to the nightlife.

  1. heycondescenders said at 2:14 pm on Thursday July 18, 2013:

    people have all kinds of different life experiences. some have kids with special needs, some have had spells of UE that ate into savings, some have debts they are rapidly and responsibly paying off, etc.  Not everyone with an income from 90k to 123k who has trouble saving is living in a $2000 efficieny or spending it all on nightlife.  There are lots of costs to live, and if you want room for a family of 3 or 4 in a place where you arent afraid to walk at night, rents are high (even in the suburbs).  “Let me not judge my neighbor till I have walked a mile in his moccasins”  Now, I am not saying DC owes a program like this to anyone.  But if the DC govt IS doing it, for its own reasons, then there is no shame in someone taking it advantage of it to lower their cost of housing, begin to save, and to build equity.

  1. Reone Brown said at 10:36 am on Friday July 19, 2013:

    Ryan,

    This program is open to First Time and Repeat Homebuyers.  Contact me directly if you have any questions.

    Thanks!

    Reone Brown, GRI
    Ivan Brown Realty, Inc.
    202-374-2817

  1. C said at 10:43 am on Friday July 19, 2013:

    Is this an undisclosed sponsored post?  I see Reone Brown comes to respond and seems to work for or somehow be connected to the program?  Anyway, why would sellers agree to pay the closing costs for someone who earns about 123,000/year?

  1. H St said at 11:19 am on Friday July 19, 2013:

    Is this household income or just individual? I could see people buying a new place with this program and renting their existing home..

  1. Matt M said at 11:56 am on Friday July 19, 2013:

    Does anyone know if you can use this program to reach the 20% down threshold?

  1. Reone Brown said at 12:50 pm on Friday July 19, 2013:

    The maximum borrower income is $123,395, not household income and you can use yor funds in addition to usig the program to reach the 20% threshold.  A Seller can also pay up to 6% closing cost assistance rgardless of the Buyer income since income is not DISCLOSED in most transactions.

    Please contact me directly if you have any questions.

    Reone Brown, GRI
    Chair, WREBA
    Ivan Brown Realty. Inc.
    202-374-2817
    http://www.Reonebrown.com

  1. T said at 3:25 pm on Friday July 19, 2013:

    An few courses in economics would do our fair city’s representatives some good. There is a housing shortage in the city. This grant will all be capitalized into home values, rendering net additional affordability exactly zero.

    Also, 45 percent debt-to-income is SUPER high, especially combined with zero down payment. Industry standard is around 31 percent, with around a 20 percent downpayment. That’s a lot of risk for the city to take on, IMHO.

  1. Shaw Resident said at 3:37 pm on Friday July 19, 2013:

    Is there a cap on the amount of assets you can have to qualify?

    Also, does your income have to fall below $123k all five years, or just three first year?

  1. C said at 4:13 pm on Friday July 19, 2013:

    For Reone Brown:

    Someone above (H St) wondered about people using this option to buy investment property or buy a second place and “rent” out their first property, making one of the properties an “investment” property.  Since this program is open to first-time homebuyers and repeat homebuyers, is there something in place in this program that prevents someone from using this program to buy “investment” properties or to enhance their primary home as an “investment” property? 

    Thanks

  1. Reone Brown, GRI said at 9:36 am on Sunday July 21, 2013:

    There is no cap on the amount of assets you can have to qualify.  Your income must be at $123,395 or below when you are applying for the program.  Your income can exceed $123,395 after you get into the program

    If you are an existing homeowner, you can use the program.  It is not an investment program.  Remember, the Lender is the gate keeper, and they have their internal investment guidlines in place.  The property must be owner occupied.

    You can contact me anytime since I am not on this site daily.

    Reone Brown, GRI
    Ivan Brown Realty, Inc.
    202-74-2817
    http://www.Reonebrown.com

  1. looking 2buyindc said at 1:11 pm on Sunday July 21, 2013:

    HUGE CAVEAT: what i learned from a wells fargo lender is that if you participate then the rate is 5.35% on 30 year fixed. much higher than the market lending rate.

  1. cowboy up said at 6:34 pm on Monday July 22, 2013:

    C said at 9:38 am on Thursday July 18, 2013:
    I don’t know - sounds too good to be true.  You make a maximum annual income of slightly more than 123,000 and if you live in the district for at least 5 years, you never have to pay the loan back?


    The loan for the DOWN PAYMENT does not need to be repaid.  the remaining 96.5% or 97% from your statnadard lender would still need to be repaid, at least that’s how I read it

  1. C said at 6:41 pm on Monday July 22, 2013:

    cowboy up, I appreciate your response to my comment.  I do understand that the loan for the down payment doesn’t need to be repaid if the borrower lives in the District for at least 5 years.  The title of this post indicates that it is a loan for the down payment, not for the home.  This probably came to be because people complain about the cost of living versus being unable to save for a downpayment, even at the level of income of a little more than $123,000 annual salary.  I still think it’s hard to believe (aka, too good to be true) because rarely is something “free” in life, unless there are serious strings attached.  I read it as the loan for the downpayment does not need to be paid back if borrower lives in District for 5 years but a downpayment is still a substantial amount of money, so I find it hard to believe that it’s “free” money without some sort of attached strings.

  1. 8th Grade Math said at 11:15 am on Friday July 26, 2013:

    You know how sales in department stores let you use coupons to take 15% off an item already marked down 30%? You’re not getting a full 45% off the original listed price—your extra 15% discount comes off the 30% discounted price.

    In terms of this housing offer, the same principle applies.
    Say my debt is $100. I earn 20% debt forgiven by staying in DC a full year. Now my debt is $80.
    The following year I receive the 20% discount again. This is applied to my new debt amount ($80), when means I get $16 knocked off my debt. After year 2, my new debt is $64.
    And so on and so forth.

    The post’s assertion that you’ll essentially never have to pay for the house is TOTALLY false. It’s exponential, not straight line, savings.

    Please revise!

  1. Shilpi said at 11:26 am on Friday July 26, 2013:

    8th Grade Math,

    Our “forgiven after five years” information came straight from the HFA. I’ve emailed the organization to ask if 1) 20 percent of the total loan amount is forgiven every year or if (as you are wondering) 2) 20 percent of what *remains* on the loan amount is forgiven. Look for the answer in the comment section.

    Shilpi

  1. Reone Brown, GRI said at 3:41 pm on Tuesday July 30, 2013:

    This is a forgivable down payment loan.  For example.  If you borrow $10,000 for you down payment 20% ($2,000) is forgiven the first year.

    Then another 20% ($2,000) the second year (totaling $4,000 forgivable).

    20% forgiven the 3rd year totaling $6,000.

    20% forgiven the 4th year totaling $8,000.

    20% forgiven the 5th year totaling $10,000.

    Your $10K loan is forgiven after the 5th year.

    I hope this clear-up your question about the the forgivable loan.  It’s a great program.

    Reone

  1. Calvin H. Gurley said at 3:45 pm on Friday August 9, 2013:

    @RN 9:43 o’clock post Thursday

    RN something needs clearing up. 

    Two years ago you purchased a $450k home on a two person combined income of $80k.  Where is the property? Who is the lender?

    Secondly, two years ago you made $43k and now (two years later) you make $80 k?  What federal Government agency do you work for?  Or, what Defense Contractor has given you a 90% increase in salary in two years?

    The numbers just don’t add up.

  1. Tax Advisor said at 6:10 pm on Tuesday November 26, 2013:

    My main critique of this program is that, under the way this new program is currently structured, participants should expect that 20% of this loan amount (20% of the loan is forgiven annually) will be treated as taxable income on an annual basis for five years (the IRS will treat this “forgiveness” as discharge of indebtedness income) pursuant to IRC Section 61(a)(12).  This is an important consideration to any individual considering use of this program, which has unfortunately gone unmentioned in the Program’s marketing materials and most promotions by realtors.

  1. Tia M. said at 8:14 pm on Wednesday February 26, 2014:

    DC Open Doors covered our down payment, and I with me being a DC Government employee, I was able to use it in conjunction with funds received through the Employer-Assisted Housing Program (EAHP) and the Negotiated Employee Affordable Housing Program (NEAHP). We went to closing with our down payment and closing costs paid in full by these programs. We brought $0 to settlement.

    This program really does help those with decent incomes (individual and combined) who can afford a mortgage, but don’t have any, or enough for down payment.

    Ms. Reone Brown, GRI, is very knowledgeable about this and other DC first-time homebuyer programs. We worked with her to get signed up for DC Open Doors. I highly recommend contacting her (202.374.2817; http://www.reonebrown.com) if you’re interested in learning more about this great program.

  1. David Toaff, Loan Officer said at 5:06 pm on Saturday February 14, 2015:

    An important comment about Open Doors - when folks buy in areas where property values go up significantly, they can refinance (assuming rates at the same make sense for it) in a relatively short period of time, pay off both their first and second (down payment assistance loan) and then have both taken advantage of the program and no longer have this 5-year rule they once had.  I currently having a client doing so.  Of course, there is an if or two in regards to this..but it’s something folks should be aware of as a possibility.

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