The Home Purchase Assistance Program (HPAP) is for DC residents who are first time home buyers seeking assistance with down payment and closing costs. The down payment assistance can range from $70,000 - $202,000 and is determined by a) household size and b) household income while the closing cost assistance is up to $4,000.
The HPAP program is meant to be "gap financing" in order to make housing payments within DC more affordable. Unlike traditional down payment assistance programs, HPAP loans don't have an interest rate and aren't dictate by the home's price.
Getting up to the maximum loan assistance
Buyer A has a 2-person household with an annual income of $60,000, or $5,000 monthly. Using the chart above, Buyer A would qualify for up to the maximum of $202,000 down payment assistance loan + $4,000 closing cost assistance.
Purchase Price: $500,000
HPAP Loan: $202,000 (0% interest)
1st Lien Mortgage: $298,000 (market interest rate)
Another loan assistance scenario
Buyer B has a 1-person household with an annual income of $84,000, or $7,000 monthly. Using the chart above, Buyer B would qualify for up to $101,000 down payment assistance loan + $4,000 closing cost assistance.
Purchase Price: $500,000
HPAP Loan: $101,000 (0% interest)
1st Lien Mortgage: $399,000 (market interest rate)
Since HPAP is 0% interest rate deferred loan, it does not add on to your monthly debt cost...therefore, it allows buyers to purchase "more" home than a buyer would usually be qualified for!
Let's say Buyer A (above example) can only qualify for up to $298,000 mortgage using a traditional loan program without HPAP. But, since they qualify up to $202,000 in HPAP loan, they now qualify to purchase a $500,000 home. This open doors for more housing options at a more affordable price throughout The District!
The HPAP loan is deferred and repaid without interest. For households with income below 80% of the area median income (see chart below), there are no monthly payments on the HPAP assistance loan. For households with income above the 80% area median income, the repayment is deferred for the first five years and then the HPAP assistance loan is repaid over a forty year period with no interest. The remaining sum is due in full upon moving out, selling or converting the property to a rental.
Maximum Debt-to-Income is capped at 45% DTI meaning that all of your monthly debt payments + new mortgage payment cannot exceed 45% of your gross monthly income. HPAP will allow exceptions on a case-by-case basis for DTI to exceed 45% so long as the buyer meets certain additional requirements.
Minimum Monthly Payment Ratio must be a least 28% of your gross monthly income. Otherwise, your total HPAP loan will be reduced to increase your mortgage payment to 28% of your gross monthly income. This is because it is HPAP's opinion that in order to better serve more and provide better access to first time home buyers, those that are well qualified will have a reduced HPAP loan.
If Buyer A (above example) makes $5,000 per month their minimum monthly mortgage payment must be $1,400 (28% of $5,000). If Buyer A finds a home that has a mortgage below $1,400 then the HPAP loan will be reduced to increase the required monthly mortgage payment.
Maximum HPAP Loan cannot be more than the 1st Lien Mortgage the buyer is obtaining with their purchase. Buyers cannot have a $100,000 1st Lien Mortgage with a $202,000 HPAP Loan.
Minimum cash contribution from a buyer is either $500 or half of their savings above $3,000. Any gifted funds are added to the minimum contribution. For very low- and low-income buyers, any contribution in excess of $500 may be waived by the DHCD Director if there is a demonstrated need, the applicant is elderly, disable or displaced.
The HPAP process can be tedious but buyers can streamline the steps when they know how to prepare.
1. Buyers must apply through a Community Based Organization (CBOs) - https://dhcd.dc.gov/node/702332
2a. Buyer attend a 2-hour orientation session where they submit documentation to their CBO sponsor in order to receive your Notice of Eligibility. Currently, this takes roughly 4 - 8 weeks for CBOs to complete the process.
2b. Get pre-approved with a lender who specializes in affordable-housing mortgages...like us!
3. While waiting for the Notice of Eligibility, buyer must also attend a first time home buyer course. This online or in-person course is roughly 6 - 8 hours. You will receive a separate FTHB Certificate once completed.
4. Once steps #1 - #3 are completed, buyers are official pre-approved to purchasing using an HPAP Loan!
5. Submitting offers on homes should come with expectations that it typically takes 45 - 60 days for settlement due to the processing time that DHCD has for HPAP Loans.
6. Celebrate your new home!
