Foot in the door: Those who struggle coming up with the dough for a first home can get a hand

Down-payment assistance plans in Tri-State help
Foot in the door: Those who struggle coming up with the dough for a first home can get a hand
Posted at 7:00 AM, Jul 25, 2017
and last updated 2017-07-25 07:00:00-04

CINCINNATI -- Alaysyah Yahyisrael, 24, spent nearly a year and a half searching for her perfect home. When she closed on that property in Cincinnati last May, she brought less than $200 to the table.

And she's not alone.

Down-payment assistance programs, which help cover closing and other costs, are increasingly targeting millennials -- a segment of the population now squeezed by rising home prices and a shortage of available housing.

Last July, Fifth Third rolled out an exclusive Down Payment Assistance Program, which offers 3 percent of the purchase price in down payment assistance for low-income borrowers or those who buy in certain census tracts. To date, the Cincinnati-based bank has provided $1 million in grants and counting. Quicken Loans and Guild Mortgage also have 1 percent down programs that specifically target the millennial homebuyer. Those require a FICO score of 680 or higher.

Ed Robinson, head of mortgage at Fifth Third

One year in, Fifth Third's Ed Robinson, head of mortgage, says DPAs will continue to pick up steam. The bank's goal is offer $15 million in down payment assistance by 2020.

Why? Let's take a deeper dive:

1. Millennials represent the largest group of homebuyers today. That's sheer math -- millennials have already surpassed Baby Boomers as the nation's largest living generation.

In January, millennials represented 45 percent of all purchase loans, up from 42 percent the same month in 2016.

2. However, most millennials have less than $1,000 in savings for a down payment.

And a shortage of available homes has driven up prices – particularly those in the starter category, which tend to fall within first-time buyers' budgets.

"I think there's always been a bit of that (struggle to save for a down payment), but it's become more of a disproportionate problem. A lot of millennials have graduated from college with enormous student debt, and the job market isn't what they anticipated," Robinson said. "It's overwhelming for them, so we started there and identified that opportunity in the marketplace."

3. Fifth Third is working with 145 communities and community organizations across its 10-state footprint to spread the word about DPA. These include, regionally, Collective Empowerment Group of Cincinnati, the African-American Chamber of Commerce, Working In Neighborhoods and the city of Dayton.

That's key.

Seventy-three percent of millennials are unaware low-down-payment programs even exist, Robinson said. There are, in fact, more than 200 on the federal, state and local level.

"Millennials want a guide to walk them through the home-buying process," Robinson added.

Specifically, Fifth Third grants 3 percent of the purchase price in down-payment assistance, up to $3,600, for loans financed through the bank.

Neighborhood partners are crucial, because the grants are meant for low-income borrowers or those purchasing in designated low-income tracts. Earnings vary by market but have to be 49.99 percent or less of median income. A mortgage loan officer can look up an address and see if it qualifies.

All programs vary. Under the Quicken Loans program, for example, a buyer can put 1 percent down, and gain an additional 2 percent equity through a grant. Besides the FICO marks, you can't make more than 100 percent of the area median income.

"Millennials think there's only one 30-year option, in which a 20 percent down payment is required. But that's not the case," Robinson said. "With our product, we're also able to combine with other programs -- like Freddie Mac's Home Possible, and Fannie Mae's HomeReady later this year -- to help consumers take advantage of other grants and money available.

"Literally, there have been instances where customers have had to bring zero to the table," he added.

Although Yahyisrael, the aforementioned Fifth Third borrower, had $3,000 in the bank for her deposit, she brought less than $200 to closing -- "$197 and some change," she said, thanks to the DPA grant and others. She purchased her first home through WIN, Working In Neighborhoods, in South Cumminsville for $60,000.

"I couldn't believe it," she said.

4. Homeownership is still important to millennials, despite the stereotype that they'll either live with their parents forever or are yupping it up in their downtown apartments.

Per a Fifth Third survey, the top three financial goals of those aged 18-34 are, in order:

  • Saving for an emergency (37 percent)
  • Paying off all debt (33 percent)
  • Buying a new home (23 percent)

"Pretty much one in four millennials are saying, 'I really want to buy a home,' but they don't have any savings, and they aren't aware of down-payment programs," Robinson said.

So far, the average grant per loan in Fifth Third's program has been about $2,999, Robinson said, and the program has attracted more than just millennials. It works for a "broad swath" of customers, he added, including Gen-Xers and seniors on fixed incomes.

Overall, the Down Payment Assistance Program is part of Fifth Third's $30 billion commitment to provide lending, investments and community development in low- and moderate-income communities.

"Literally, it's now starting to ramp up and get a lot more speed and traction behind it," Robinson said. "Over the next couple years, it will be incrementally larger (amounts) that we'll be providing."

Yahyisrael is now settled into her new home; it was important, she said, to be close to her son's daycare -- Julian is 3 -- and within close proximity to FedEx, where she works. "Plus, I wanted (Julian) to have a backyard," she said, "and a house with room to grow."

Besides choosing the right real estate agent, she urged buyers to see the process through.

"It is a waiting process, and there are so many resources that it can be overwhelming, but never think you can't do it," she said. "I have a great house that I love."