Combining Grants, Loans, and Down Payment Assistance 

Challenge

For low-income borrowers, there is frequently a gap between the amount of financing an individual qualifies for and the cost to construct a home. These gaps can often be closed by combining or otherwise leveraging multiple sources of additional funding and/or subsidy. However, this type of “stacking” requires a significant amount of knowledge and savvy on the part of a housing provider, which is often lacking in underserved rural markets.

Opportunity & Response

Many lenders and nonprofit organizations offer assistance in the forms of programs such as downpayment assistance which help low-income borrowers purchase homes. There are also potential opportunities to leverage multiple funding sources from organizations. For example, USDA Housing Preservation Grant (HPG) funds are typically used for repairing homes of very-low income homeowners through small grants up to $15,000. However, these funds can also be used for replacement housing. When used for replacement housing, there may be a possibility to combine the HPG funds with other types of grants or subsidies, offering greater flexibility to housing providers. Additionally, it is important for providers to work across boundaries to best maximize and leverage all existing opportunities. Rural Studio is working with our partners to provide technical assistance and capacity building opportunities to our housing providers to do just that. For instance, by utilizing Fannie Mae’s sweat equity provisions in the Home Ready program to provide a necessary down payment, a lending partner can then shift their down payment assistance resources to cover other costs related to loan origination and closing.

Implementation

Chipola Street

Unaka