The average down payment assistance user gained $25K in wealth
Homeownership is one of the fastest ways for people to build wealth and giving down payment assistance provides creditworthy borrowers an opportunity to buy a house they otherwise wouldn't have, according to the CBC Mortgage Agency.
Homebuyers who went through the CBCMA down payment assistance program built an average of $25,000 in equity since their purchase. CBCMA helped finance nearly 20,000 down payments since closing its first transaction in November 2014. Its yearly volume has grown to around 6,000 transactions per year.
"Many individuals are unaware that they can achieve homeownership even though they are unable to save for a down payment," CBC Mortgage Agency President Richard Ferguson said in a statement to NMN. "This includes many who diligently make large student loan payments each month which leave them with little money to save toward a down payment for a home. Down payment assistance is the solution for these individuals. By creating liquidity for down payment assistance loans, we are able to bring down costs to the borrower, both in terms of the first mortgage interest paid and overall monthly payments."
DPA gets being painted in a bad light, primarily by government regulators, because of past issues with the seller-funded iteration that led to high delinquency rates. While the seller-funded version is no longer available, the Department of Housing and Urban Development still wants to restrict DPA's use.
However, studies refute that as a misconception. Homebuyers receive familial financial assistance in a third of FHA loan transactions and rarely does that come from minority families, according to CBCMA. DPA helps to bridge that racial wealth gap.
"It's clear that without DPA, millions of Americans would be shut out of the home buying market. With it, creditworthy buyers and their families can reap the many benefits of homeownership, which creates healthier communities and other positive outcomes for our nation," Ferguson said.
Broken down by race, CBCMA's portfolio is 48% white, 27.2% Hispanic, 22.1% African-American and 1.5% Asian.
The latest homeownership rates from the fourth quarter of 2019 show white at 73.7%, Hispanic at 48.1%, African-American at 44%, and Asian at 57.6%, according data released by the Census Bureau.
Overall homeownership rates are at the highest since 2013, with the rate among African-Americans the most since 2012. The homeownership rate for Hispanics also continues to climb, but for all other groups (which includes Asian-Americans as a subset), the rate declined from the third quarter.
Cedar City, Utah-based CBCMA provides down payment assistance — primarily for first-time homebuyers — through traditional and forgivable second mortgages. It's a wholly owned subsidiary of the Cedar Band of Paiute Indians through a federally chartered tribal corporation of the Chenoa Fund and Simply Home Down Payment Programs.