CDBG Entitlement FAQ
Q

The terms homeownership assistance and down payment assistance seem to be used interchangeably. Is there a difference and where is it in the list of eligible CDBG activities?

Date Published: May 2015

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A

The following sections will address both activities, which are different. As an overview, down payment assistance is exactly what it sounds like: paying part of the required down payment. Except when done as a public service, the assistance is limited to 50% of the required down payment. There are numerous other ways of supporting homeownership for low and moderate income households, including reducing mortgage principal and interest, and paying closing costs. These activities do not have absolute cost limits, but underwriting should be done to determine the right level of assistance (not too little or too much.) The more general term for these activities is homeownership assistance. The following section of the Housing and Community Development Act of 1974 describes these in greater detail. Currently this list of specific activities appears only in the HCD Act, but is noted by title at 570.201(n) in the regulations.

§5305. Activities eligible for assistance
(a) Enumeration of eligible activities

(24) Provision of direct assistance to facilitate and expand homeownership among persons of low and moderate income (except that such assistance shall not be considered a public service for purposes of paragraph (8)) by using such assistance to–

(A) subsidize interest rates and mortgage principal amounts for low- and moderate-income homebuyers;

(B) finance the acquisition by low- and moderate-income homebuyers of housing that is occupied by the homebuyers;

(C) acquire guarantees for mortgage financing obtained by low- and moderate-income homebuyers from private lenders (except that amounts received under this chapter may not be used under this subparagraph to directly guarantee such mortgage financing and grantees under this chapter may not directly provide such guarantees);

(D) provide up to 50 percent of any down payment required from low- or moderate-income homebuyer; or

(E) pay reasonable closing costs (normally associated with the purchase of a home) incurred by a low- or moderate-income homebuyer.

[Note that there are two paragraph 24’s in the legislation.]


Tags: CDBG Entitlement Program Homebuyer Assistance

FAQ ID:

2245