HMDA analysis shows wide gap in down payment assistance use

Down payment assistance eligibility is common among mortgage applicants, but actual usage is far lower. Data from the nation’s 10 largest metropolitan statistical areas shows 43.6% of originated purchase mortgages were eligible for down payment assistance programs. Nearly 80% of FHA loan applicants likely could have qualified, yet only about 15% of FHA borrowers used government-sourced down payment assistance. A similar pattern appears for conventional borrowers, with about 44% eligible but fewer than 10% using these programs. The gap suggests many qualified homebuyers are unaware of assistance or do not access it during the mortgage process. Elevated home prices, higher mortgage rates, and limited entry-level inventory increase the importance of upfront cash support for first-time buyers.

"DPR and Urban Institute used HMDA data from the nation's 10 largest metropolitan statistical areas and found that 43.6% of originated purchase mortgages were eligible for DPA programs. Nearly 80% of Federal Housing Administration (FHA) loan applicants likely could have qualified for a down payment program, but Department of Housing and Urban Development (HUD) data shows only about 15% of FHA borrowers used government-sourced down payment assistance."

"That leaves a gap of nearly 65 percentage points between eligible borrowers and actual program participation, suggesting that many qualified homebuyers were either unaware of available assistance or did not access it during the mortgage process. The gap between borrowers who are eligible for down payment assistance and those who actually use it is striking."

"This suggests the mortgage industry still has work to do when it comes to raising awareness about these programs and integrating into the early stages of the homebuying process, said Miki Adams, president of CBC Mortgage Agency, a federally chartered housing finance agency. A similar pattern was found among conventional borrowers. About 44% of borrowers using conventional mortgage products were eligible for down payment assistance, but fewer than 10% used these programs."

"Advocates say the disconnect represents a missed opportunity in a housing market still strained by elevated home prices, higher mortgage rates and limited entry-level inventory. The report makes clear that many borrowers who qualify for down payment assistance are already successfully qualifying for mortgages, Adams said. For first-time buyers, the issue is often not about credit quality or the ability to make payments, but access to the upfront cash needed to buy a home in a market where prices are outpacing wages."

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