2. DOWN PAYMENT ASSISTANCE The barriers to homeownership are many, but one reigns supreme—the down payment. A 2018 Zillow Housing Aspirations Survey conducted with the Urban Institute found that down payment is the leading barrier consumers cite in their path to homeownership.45 While the fate of the current Build Back Better bill remains uncertain at the time of this writing, it includes DPA to firstgeneration home buyers, a testament to the momentum behind the use of DPA to expand homeownership.46 Even modest assistance can increase the number of low-income and minority households able to purchase homes.47 Down payment subsidies increase the number of qualified mortgage loan applicants without increasing the overall size of the loan.48 Programs that take the form of grants, rather than loans, transfer equity to the homeowner if conditions of the grant are met. After the Great Recession, most state HFAs added some form of DPA product to their loan portfolio. While DPA loan specifications vary widely by HFA, DPA is a central HFA product. NJHMFA offers a DPA program that provides a flat $10,000 to qualified first-time home buyers. The assistance is an interest-free loan, forgivable after five years if the homeowner stays in the residence. The DPA must be paired with an NJHMFA first-time mortgage loan. The following are simple yet effective recommendations to enhance the DPA loan program. Throughout the course of this research, the team investigated many of the county- and city-level DPA opportunities throughout the state of New Jersey. There are many 18
different opportunities that require extensive research by the potential home buyer and bear significant bureaucratic hurdles, including lengthy application review timelines and cumbersome application processes. Due to the barriers and administrative challenges associated with accessing these resources, we do not recommend pursuing a formal strategy of layering DPA with these local resources. This may, however, remain a point of consideration for the future if NJHMFA chooses to allocate staff bandwidth to this coordination challenge.
2.1 Increase the base DPA amount to $14,000, and fix DPA to the maximum home purchase price NJHMFA should increase the base DPA from $10,000 to $14,000 so home buyers can be more competitive in purchasing homes across a broader range of New Jersey counties. The loans should scale alongside the maximum purchase price limits and maximum income limits already set by NJHMFA.
DPA DESIGN AND GEOGRAPHIC CONCENTRATION
Over 75 percent of DPA loans originate in Camden, Gloucester, Burlington, and Atlantic Counties, where median home values are among the lowest in the state. This is not surprising—$10,000 goes further, as a percentage of home value, in counties with lower housing costs. Homes in these counties do not appreciate at the same rate as other higher-value counties in
