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First-Generation Homebuyers Downpayment Assistance Fund could receive as much as $150 million from omnibus housing finance bill
Although the roots of Minnesota’s racial homeownership gap run deep, the problem was exacerbated by the Great Recession, which began in late 2007 and ran roughly to 2009. Severely impacting the banking and mortgage industries, new home construction across the nation virtually ground to a halt. In the decade that followed, fewer new homes were built than at any time since the 1960s, according to Fannie Mae, the nation’s leading provider of mortgage financing. When demand for homes surged from 2020 to 2022 during the pandemic, first-time homebuyers with limited resources were locked out by furious bidding wars that spiked home prices. In much of the United States, the phrase “affordable home” became a bitter oxymoron. Minnesota also earned the dubious distinction of having the fifth largest racial homeownership gap in the nation.

Recognizing the extent of the problem, in 2020 Minnesota Realtors® (MNR) and the Minnesota Homeownership Center (MNHOC) began exploring solutions. After extensive conversations, the two groups commissioned a study that identified lack of sufficient capital for a downpayment as a key roadblock to homeownership for low- and moderate-income households and households of color. After completing this study, MNR and MNHOC added Twin Cities Habitat for Humanity as a partner and began building a diverse coalition of groups to advance this work.

“For thousands of Minnesota families—particularly those from communities of color—the single greatest barrier to homeownership is the downpayment,” said Paul Eger, MNR senior vice president of Governmental Affairs. “Working with our coalition partners we developed a proposal for a state-funded pilot program: the First-Generation Homebuyers Down Payment Assistance Fund.”

Work on the legislative proposal began in 2021 and legislation was brought forward by the coalition in 2022. The proposal continued picking up supporters and the House omnibus housing finance bill included $50 million. However, like most budget bills in 2022, it did not become law. Then in 2023, the coalition’s hard work paid off when the First-Generation Homebuyers Downpayment Assistance Fund was included in omnibus housing finance bills in both chambers. The House bill (HF 2335) would appropriate $150 million for the program, and the Senate bill (HF 2335-1^st UE) includes $100 million.

Designed to help first-generation homebuyers who don’t have enough savings for a downpayment, the three-year pilot program would provide eligible buyers with 10% of the purchase price, up to $32,000. The loan would be completely forgiven for those who stay in their homes at least five years.

“The generous appropriations included in both House and Senate versions of the bill marks a huge step forward in achieving the goal of helping thousands of first-generation homebuyers realize the dream of homeownership and reduce Minnesota’s racial homeownership gap,” Eger said. “We urge MNR members to contact their state legislators and fully support it.”

Who Will Qualify for Down Payment Assistance Through the Program?  

To be eligible for down payment assistance under the pilot program, applicants would need to meet these criteria: 

• Income at or below 100% of the area median income at the time of the purchase
  
• Either never owned a home or owned a home but lost it due to foreclosure or
  
• Have a parent or prior legal guardian who:
  
  • Never owned a home
    
  • Or owned a home but lost it due to foreclosure

• Pre-approved for a first mortgage loan 

All potential buyers who meet these qualifications must also complete a homebuyer education course and occupy the home as their primary residence. NOTE: Assistance is limited to 10% of the purchase price, not to exceed $32,000, and is provided through a loan that is forgivable at a rate of 20% per year.