What Data Actually Reveal on DPA Loan Quality

For lenders and agents, National Affordable Housing Month is a good time to revisit what the numbers actually show

May is National Affordable Housing Month, a time dedicated to raising awareness about the critical need for safe, stable and affordable homes across the country. The federal standard is familiar to most housing professionals: housing is considered affordable only when it consumes no more than 30% of a household’s gross income. For millions of Americans, that benchmark remains out of reach because they cannot clear the upfront hurdle of the down payment.

That is precisely where down payment programs enter the picture. And yet, despite the scale of need and the volume of available programs, they remain one of the most underutilized tools in housing finance. The reason is not always lack of awareness; in some cases, it’s a lingering perception that loans involving down payment assistance (DPA) carry higher risk, lower quality or more complexity than they are worth.

The data tells a different story.

Eligible, qualified and overlooked

One of the most persistent misconceptions about down payment programs is that a buyer who needs help with a down payment is a riskier bet. But loan performance data does not support that conclusion.

In partnership with the Urban Institute, Down Payment Resource examined HMDA data across the top 10 metropolitan statistical areas in the United States. The study found that 43.6% of originated purchase mortgages were already eligible for down payment programs. These were not marginal borrowers. They were buyers who closed loans and, in many cases, qualified for programs they never knew existed.

Across channels, the study found that 79.9% of FHA loans likely could have qualified for a down payment program. Yet according to HUD data, only about 15% of borrowers with FHA mortgages actually used down payment assistance from a government source. That gap, 64.8 percentage points, represents a significant portion of low- to moderate-income and minority applicants who may have qualified for an FHA loan with additional funds but navigated the process without them. In practical terms, five times as many homebuyers who relied on FHA financing could have benefited from a down payment program than actually did.

The picture for conventional loans is similar. Almost 44% of borrowers using conventional first mortgage products were eligible for down payment programs, yet fewer than 10% used them. 

The gap between eligibility and utilization is not a data anomaly. It is a systemic missed opportunity playing out across thousands of transactions every year. The financial impact is concrete: down payment programs can lower a buyer’s loan-to-value ratio by an average of 8.8%, meaningfully improving mortgage eligibility and strengthening the borrower’s overall position at closing.

What critics get wrong about DPA and FHA quality

Critics sometimes point to FHA credit quality concerns as evidence that down payment programs introduce risk into the market. That argument, however, collapses an important distinction that the data makes clear.

In FY2025, HUD reported that 42.31% of FHA purchase borrowers used some form of down payment assistance. But more than half of that figure had nothing to do with government or HFA programs. Of that total, 23.16% came from eligible family-member gifts, while only 17.74% came from government sources, the segment most closely aligned with the programs tracked by Down Payment Resource. HUD also notes that although the FY2025 mix reached a 16-year high, usage has been relatively stable over the past 10 years.

The FHA credit data also point in the opposite direction of the claim that down payment programs are bringing weaker borrowers into the market. HUD’s FY2025 report states that credit scores are the most predictive factor for FHA losses and that FHA borrower credit scores have increased for four consecutive years, reaching a 10-year high average of 679. Higher-score borrowers are less likely to default, lowering the MMI Fund’s overall risk exposure. Down Payment Resource’s HFA Advisory Group members report average borrower credit scores exceeding 700 in recent production.

On DTI, HUD’s own data show that average FHA DTIs have remained stable over the past three years and decreased slightly in the most recent fiscal year. And while affordability pressure is real, HUD attributes it to home prices growing more than twice as fast as wages over the past decade, not to down payment programs.

DPA belongs in every client conversation

The affordability gap is structural and persistent. Home prices remain elevated, rates have kept monthly payments out of reach for many buyers and entry-level inventory has not kept pace with demand. In that environment, down payment programs are not a niche product for a narrow slice of borrowers. They are a mainstream affordability strategy that belongs in every client conversation.

Questions about resubordination are valid and worth addressing. Borrowers should understand whether a program’s second mortgage can be subordinated in a future refinance, and many program providers are already evaluating or implementing solutions to address this more clearly. But resubordination is a program-disclosure and policy-design issue, not evidence that down payment programs are structurally unsafe.

Properly structured down payment programs help qualified borrowers bridge the cash-to-close gap, preserve liquidity and access homeownership in a constrained market. The right response to lingering skepticism is better transparency and borrower education. For lenders, that means building program eligibility checks into the origination workflow early. For real estate agents, it means understanding what programs are available in your market and raising the conversation before a buyer assumes they cannot move forward.

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Down Payment Resource builds tools that help mortgage lenders, real estate agents, multiple listing services and consumer listing sites build relationships with homebuyers by connecting them with the down payment help they need.

To learn how Down Payment Resource can help you support homebuyers, contact us.