Lenders and Realtors

Minnesota’s First-Generation Homebuyers Community Down Payment Assistance Fund defines a first-generation homebuyer as someone who has never owned a home in any country, or who owned a home at one point and lost it due to foreclosure AND whose parent or prior legal guardian never owned a home in any country, or owned a home and lost it due to foreclosure.

Here are two scenarios where the buyer would NOT qualify as a First-Generation Homebuyer:

• If the buyer or any of the buyer’s parents/legal guardians owned a home at any time, they are not a first-generation homebuyer, regardless of whether their parents/legal guardians are living or not.
• If the buyer or any of the buyer’s parents/legal guardians married someone who owned a home, they are not a first-generation homebuyer. Marrying someone who owns a home means that you have ownership interest, even if you are not listed on the mortgage.

The only exceptions to the two scenarios above are if the buyer or their parents/legal guardians previously owned a home that was lost due to foreclosure, and they/their parents/guardians have not owned a home since the foreclosure.

When an individual applies for the First-Generation Homebuyers Community Down Payment Assistance Fund, they will be required to a sign a First-Generation Homebuyer Affidavit, which is a legal document confirming they meet the qualifications laid out above. If someone knowingly misrepresents their eligibility, they are committing mortgage fraud.

Simply due to current homeownership demographics, it is anticipated that the majority of buyers participating in this program will be Black, Indigenous, and people of color (BIPOC).

Existing down payment assistance (DPA) programs are not designed with the needs of first-generation homebuyers in mind, and create barriers for those buyers:

• Often, the amounts of DPA available are too low to be impactful.
• Most DPA programs don’t allow funds to be reserved, and thus the funds may no longer be available when the buyer reaches the closing table.
• To support the feature of reserving funds, buyers must have an underwritten preapproval for a mortgage loan at the time of application. This ensures funds are not reserved by buyers that may not attain approval, and it greatly increases the likelihood of approved buyers successfully reaching closing.
• Application and origination requirements and processes are inflexible and inefficient.
• Existing DPA resources are often limited to a specific geography, are tied to specific mortgage products, or are only available in small pools that are highly competitive which severely limits access for homebuyers.
• This new DPA program will be administered and originated by local organizations experienced in serving their communities.

Community Development Financial Institutions (CDFIs), which include institutions such as some banks and credit unions, loan and venture capital funds, are adept at providing financial services specifically to those who lack access to traditional financing. Minnesota’s CDFIs are mission focused, with the experience, capacity, and flexibility to originate and close DPA loans. They have the relationships, connections, and trust in their communities to more effectively deploy funds. Similarly, Minnesota’s tribal entities are uniquely situated and prepared to support tribal members. Community based nonprofits with DPA experience may also participate. Importantly, from a consumer standpoint, access to these funds will be available through all normal real estate transaction channels.

In 2020, Minnesota Realtors® and the Minnesota Homeownership Center launched a down payment assistance research project with the goals of identifying ways to remove barriers facing homebuyers with limited savings, and reducing the racial homeownership gap. The proposal also builds upon the work of the Homeownership Opportunity Alliance – a 100+ organization strong coalition.

An advisory group of nonprofits, down payment assistance providers, lenders, and governments provided input and leadership, including: City of Lakes Community Land Trust; City of Minneapolis; Midwest Minnesota CDC; NeighborWorks Home Partners; Summit Mortgage Corporation; Three Rivers Community Action Partnership; Twin Cities Habitat for Humanity; and many others.

When it comes to working with lower-income buyers, there are some persistent myths that can cause unfounded concerns for industry professionals.

Here are the facts around five of the most common industry myths out there as gathered by the Homeownership Opportunity Alliance.