New Software Matches Down-Payment Assistance Programs

Down-payment assistance (DPA) is certainly harder to find these days than it was during the boom, but it’s not extinct. DPA programs earned a bad name during the housing bust as foreclosures and large numbers of distressed properties were linked to shady seller-funded DPA practices. But Atlanta-based Workforce Resource is confident that things are different now in the world of DPA—since FHA will no longer insure any mortgage linked to seller-funded DPA—and the company is working to get the word out on where to find it with a new software program, titled Down Payment Resource. The software pairs potential buyers with down-payment assistance programs available to them, based on the buyer’s circumstances and the individual home. One difference in down-payment assistance these days, says Tracey Shell, a Workforce Resource spokesperson, is that the programs now available are usually specialized to target certain demographics—teachers, emergency responders—or neighborhoods that a city or town is trying to revitalize, although there are also some broader programs. And unlike the seller-funded down-payment assistance programs that helped people to buy homes they couldn’t afford during the boom, Shell says that most of the programs today are government run, or funded by grants or donations. According to HUD data on FHA-insured mortgages, home loans procured with government-sponsored DPA have a higher rate of default (5.7%) than loans obtained with down-payment money that came from the borrower (4.13%) or a family member (5.26%). But the average default rate of those three categories is just half of the 9.9% default rate among loans purchased with seller-funded DPA.

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