Charlotte may increase down payment help as home prices continue to climb
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Housing in Charlotte
A closer look at the real estate market, affordability and advice for buyers.
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The cost of becoming a homeowner in Charlotte has risen so much lately, it can be a challenge for those who need a little extra help to find their place in the market.
Saving for a down payment is a major obstacle to home ownership, according to the Urban Institute, which found 68% of surveyed renters identified it as a barrier. Programs like House Charlotte aim to remove that barrier for low- to moderate-income families through forgivable loans that can be used toward a down payment and closing costs.
But in a real estate market like Charlotte’s, where the median home sale price for the metro area exceeds $300,000 and available homes are scarce, finding a home to actually use that assistance toward can be more challenging.
In response, city officials are considering raising the maximum home purchase price through the program — currently $245,000 for an existing home and $300,000 for new construction — as well as the amount of money available for down payments.
Forgivable down payment loan
The House Charlotte program, and a similar city program specifically for teachers, firefighters and other “community heroes,” offer down payment assistance in the form of forgivable loans.
Depending on a household’s income, the neighborhood where they’re buying and other eligibility criteria, buyers can receive up $17,000 to use toward a down payment, closing costs, or buying down the interest rate. That goes up to $30,000 for the heroes program, which also currently has a higher maximum home purchase price: $300,000 for existing homes or new construction.
Buyers must live in the home as their primary residence and stay at least five, 10 or 15 years, depending on the loan amount.
The programs are administered by the nonprofit DreamKey Partners, an affordable housing developer that also runs the COVID-19 rent and mortgage relief program in Mecklenburg.
While the number of loans administered has hovered around 300 annually between 2018 and 2020, the recipients of those loans are skewing toward the upper end of the income limits.
Most of the program’s funding is geared toward households earning up to 80% of the area median income, or $67,350 for a family of four, though there are some funds available for higher-income families, including the community heroes program.
Julie Porter, president of DreamKey Partners, attributes that in part to the rising home prices in recent years.
The program’s data reflect that trend, too: The average home sales price for loan recipients has also increased, from nearly $170,000 in 2019 to just over $190,000 in 2020.
Assistance to buy a house
City officials last year raised the maximum home price eligible for down payment assistance, from $200,000 to $245,000, a “significant increase,” Porter said.
“Things change so quickly that you know, we have to be right on top of what’s happening in the market, to make sure the program remains available to the most people,” she said.
Porter said that struggle is common for any loan that includes more contingencies, including loans through the Veterans Administration or Federal Housing Administration, which require additional inspections and other regulations meant to protect buyers from taking on more than they can afford.
But that also means it can be tough to compete against hedge fund investors or other wealthier buyers who are able to close on properties fast.
Charlotte-area real estate agent Kristena Johnson said she hears sellers agents all the time recommend their clients take offers that appear the least complicated, whether those be all-cash, offering above list price or expedited closing.
“In this housing market with down payment programs, people do need them. They need assistance with getting homes,” Johnson said. “The issue that the competition is fierce.”
That can sway sellers against from considering an offer that uses the program. Porter said her organization regularly meets with real estate agents to educate them on the program so they can discuss it with their clients.
“It’s a blessing and a curse of being in a thriving city,” said Pam Wideman, the city’s housing and neighborhood services director of the current market. “Our overall supply of housing, whether it be affordable or market rate or luxury, it is limited.”
She said raising the amount of down payment help available for buyers is also under consideration. But that comes with a trade-off: more money available to each buyer means fewer households overall could receive loans.
Wideman said she expects program changes to be decided later this year.
For more information about House Charlotte or Community Heroes Homeownership Program, visit the DreamKey Partners website for program eligibility or to sign up for a homeowner education class.
This story was originally published July 19, 2021 at 10:43 AM.
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