Government down payment assistance (DPA) has become more important over the past decade. Its use among Federal Housing Administration (FHA) borrowers has tripled since 2010 from just 5 percent of borrowers to 15 percent this year, according to the recently released FHA annual report (PDF). In 2023, 39.5 percent of these borrowers received DPA, with 23.4 percent receiving assistance from a family member, a figure that has remained relatively static since 2010.

For first-time homebuyers without family wealth, DPA from government sources is critical. Between September 2010 and September 2023, home prices rose 114 percent, while the consumer price index rose about 41 percent and wages rose 50 percent. In 2010, $10,400 would have covered a 5 percent down payment on the median home purchase, whereas now, a borrower would need $22,240 for the same 5 percent down payment.

Given the increasing importance of government DPA for achieving homeownership, particularly for borrowers of color, who are less likely to have family wealth to draw on, we partnered with Down Payment Resource to better understand the availability and effectiveness of these programs. Down Payment Resource creates tools that help the housing industry connect homebuyers with DPA and maintains a comprehensive database of the nation’s 2,200 homebuyer assistance programs, which includes primarily DPA programs.

Ultimately, more can be done to get DPA to those who need it most. Down Payment Resource and Freddie Mac, through their recently released DPA One program, can help connect borrowers and their lenders with organizations providing DPA. Additionally, DPA programs could target first-generation homebuyers, who are less likely to be able to rely on assistance from family, and Fannie Mae and Freddie Mac could automate mortgage underwriting tools to recommend DPA to borrowers who qualify for it and would otherwise be denied.

In a world with severe affordability challenges, DPA is more important than ever. The more knowledge potential homebuyers and real estate professionals have about these programs and how to access them, the more new homeowners there will be.

Read the full article about down payment assistance by Katie Visalli, Laurie Goodman, and Michael Neal at Urban Institute.