Black History Month Spotlight: Building Black Homeownership with Down Payment Assistance

Black History Month, observed each February, gives our industry and nation the opportunity to reflect on the historical challenges faced by Black homebuyers on the path to homeownership. While progress has been made, the homeownership gap remains: Black households have a 45.7% homeownership rate, compared to 74.3% for white households, even 56 years after the passage of the Fair Housing Act.

Debt-to-Income Ratio: A Major Barrier to Homeownership

Homebuyers faced an uphill battle in 2023, with interest rates hovering in the 7% range and the average price of an existing home at $410,000. 

In terms of Black buyers, female-headed households (applying without a co-borrower) made up the majority, and millennials were the largest application age group. Denial rates were high for Black applicants, 17% as compared to the rate for White applicants at 7%. The leading cause for denial for both groups was their debt-to-income ratio (DTI). Among Black applicants, 42% of denials were attributed to high DTI, an increase from 39% in 2022. 

This is where down payment assistance (DPA) can make a difference. In many cases, DPA can improve the borrower’s DTI ratio by reducing the amount of the mortgage principal, making it easier for them to qualify for a mortgage and increasing pull-through for lenders. 

Qualifying More Minority Buyers

Down Payment Resource maintains a database of more than 2,400 DPA programs nationwide and has identified several that provide special incentives for Black and other minority homebuyers. These programs provide them with tens of thousands in assistance that can be used to lower the home’s purchase price, pay closing costs, or for other purposes. Many of these are Special Purpose Credit Programs (SPCPs), which allow lenders to establish programs that address special social needs and increase access to the credit markets based on a written plan. 

The programs described here are just a sampling of what can be found on DPR’s website. We invite lenders, real estate agents and other parties interested in boosting Black homeownership to visit our website for more.

• The Dearfield Fund for Black Wealth Down Payment Assistance Program – Provides up to $40,000 in DPA to first-time Black homebuyers in Denver. When homeowners sell or refinance they repay the down payment amount plus 5% of their home’s appreciation. (More information)
• Homeownership Council of America Equity DPA Program – Equity DPA hosts targeted funds nationwide for LMI, BIPOC, and other targeted geographies, along with the Building Diverse Communities New-Home fund recently launched with donor partners. (More information)
• Twin Cities Habitat for Humanity Advancing Black Homeownership Program – Provides up to $50,000 in the form of a 5-year forgivable loan used to purchase a home in the Twin Cities metro. Forgiveness begins at 20% each year until fully forgiven or a repayment trigger occurs. Requires homebuyer education. (More information)
• State of New York Mortgage Agency Credit is Due – eDPAL – Credit is Due is an initiative to address racial disparities and increase access to financing for minority households. Its Enhanced Down Payment Assistance Loan (eDPAL) can be used to pay down payment and closing costs until purchase money mortgage amount is 80% LTV, up to $30,000. eDPAL also can be used to pay single premium mortgage insurance (MI) for transactions over 80% LTV. (More information)
• Washington State Housing Finance Commission – Covenant Homeownership Program DPA – Provides downpayment and closing cost assistance for first-time Black Hispanic, Native American and other minority homebuyers in the form of a zero percent loan, secondary to the primary mortgage loan. The loan is repaid when the home is sold or refinanced. The maximum DPA amount is 20% of the cost of the home or $150,000, plus closing costs if paid by the buyer. (More information)

Building a More Equitable Housing Market

Down payment assistance programs provide vital support in closing the homeownership gap for Black Americans. As the data shows, DPA plays a crucial role in reducing mortgage denials and creating homeownership opportunities for underserved communities.

If you’re a lender, real estate agent, or homebuyer looking to learn more about DPA programs, visit Down Payment Resource to explore options that can help Black homebuyers achieve homeownership.