While it appears that Trump’s funding freeze won’t affect home buyers who use a government-backed mortgage, there’s now another concern.
It came to my attention that homebuyer assistance programs could actually be affected by the federal funding pause.
I received an email from Johnna Szegda at Down Payment Resource regarding a possible disruption to hundreds of federally-funded programs.
This too is up in the air, as the FHA/VA loan programs were yesterday, but it is a major concern at the moment given the uncertainty.
DPR estimates that if the freeze is enforced, it could impact funding for roughly one-third of available homebuyer assistance programs nationwide.
Nearly 750 Homebuyer Assistance Programs at Risk of Losing Funding
While a judge has temporarily blocked the president’s Office of Management and Budget (OMB) pause on federal funding until Monday, DPA programs hang in the balance.
As noted, the impact is unknown at this time, but it has the potential to affect hundreds of programs home buyers rely on to purchase properties.
Not all DPA programs are federally-funded, but a good chunk of them are. An estimated 734 of the nation’s 2,466 homebuyer assistance programs rely upon the federal government.
Assuming they are subject to the memo, they could be put on hold or even scrapped entirely.
That total includes 469 programs supported by HUD’s HOME initiative and 265 that rely on Community Development Block Grant (CDBG) funds.
Down Payment Resource founder and CEO Rob Chrane said it “is working closely with program administrators” to update its DPA information.
“Right now, the full impact this will have on the availability of federally-funded homebuyer assistance programs is unclear, and some administrators who accept federal funding have paused associated assistance programs and educational workshops.”
So it appears some of the programs are already in limbo as more details emerge about what is and isn’t affected.
This has the potential to disrupt home loans in process if they require federal aid to get to the finish line.
State and Local Homebuyer Assistance Programs Aren’t Affected
Now the good news. This is a federal issue, meaning it won’t affect the many state and local homebuyer assistance programs out there.
This means if you are working with say the California Housing Finance Agency (CalHFA), it will be business as usual.
Same goes for any local or city agencies, such as The City of Los Angeles Housing Department (LAHD).
For example, they offer two programs to prospective home buyers, including the Low Income Purchase Assistance (LIPA) and a Mortgage Credit Certificate (MCC).
Each state has its own HFA, and many cities do as well. If you’re in need of down payment assistance and/or closing cost assistance, these programs can be super helpful.
They can make it easier to qualify for a home purchase, even if you lack the necessary funds to close on your own via grants and silent second mortgages (which don’t require monthly payments).
These programs are typically reserved for first-time home buyers (FTHBs) and/or those with low-to-moderate incomes.
Some assistance might even be forgivable, meaning you won’t even have to pay it back as long as you stay in the home for a certain period of time and meet all other requirements.
This illustrates just how important it is to have programs like this in place for the many Americans who rely upon them.
Before creating this site, I worked as an account executive for a wholesale mortgage lender in Los Angeles. My hands-on experience in the early 2000s inspired me to begin writing about mortgages 18 years ago to help prospective (and existing) home buyers better navigate the home loan process. Follow me on Twitter for hot takes.
