It should come as no surprise that homeowners have a higher net worth than renters. Fact two, home prices in the Washington DC area are increasing. And if you live in DC proper than you know that paying rent at or under $1,500 is becoming more of a fantasy. And living arrangements like this one are usually associated with renting a private residence. Fact three, we are living in a time of historically low interest rates and it’s a perfect opportunity to make the decision and purchase a home. But with all of these facts, buying a home is still a deeply personal decision and my job isn’t to persuade you, rather it’s to give you the information you need to make that decision for yourself.
Recently, I performed an analysis for a client where I took all of the zip codes in DC and identified the median sales price, along with the percent increase year-over-year. There are 22 zip codes included in the analysis. The analysis includes all home types sold condo and single family/semi-detached properties. It should be of note that the median sale price across each type of home will create more specificity for each individuals’ situation. With that, I advise caution on applying this to your home specifically, as there are a host of other factors that go into determining value and price – figures represent the median. Notice I said value and price because there’s a difference between the two, value being based on material information and price subjected to market and other extrinsic variables.
For each quarter – Q3 2020 to Q2 2019 – the data showed that 20036 saw the sharpest increase year-over-year across the last three quarters. In Q3 2020, the median sale price in 20036 was $575,000. Prices in that zip code spiked in Q1 2020, after a 4th quarter dip in 2019, to $420,000.
But, if you read the above paragraph and said that this also means there’s a significant demand to move into the area, you’d be partially right. This is where my disclaimer about home types is more valuable, when considering the status quo. Right now, more and more people are looking to have outdoor space. The trend, as I have seen it, in DC, is for the property to have some type of outdoor space. As fewer of those options make themselves available in the 20036 zip code, buyer dispersion – buyers looking in other or surrounding areas – will occur more and more.
Layer that with the analysis performed by Business Insider who looked at the average mortgage rates since 2010 for DC, further supporting the notice that we’re living in an age of historically low rates for DC. The image below shows the average 30-year fixed rates for Washington, DC.
Down Payment Assistance – DC Open Doors
It should come as no surprise that the median sale price in DC is higher than the nation. In DC, the median sale price, in Q3 2020, was $645,000 with the average sale price nearly $760,000, or an 8.6 percent increase over last years’ average sale price. And, frankly, these number scare the tar-nation out of many first-time home buyers. The first thought is probably, ‘20 percent of $600,000 is a lot of money. I’ll never save that amount of money.’
Well, let me challenge that mode of thinking. First, the government provides first-time home buyers the options to obtain a loan, with an approved lender for 3.5 percent down.
Step two, getting the 3.5 percent down. And that’s where the DC Open Doors Programs comes in.
First, let’s take a trip down memory lane. Many people that used the program prior to 2019 will realize one significant benefit that current program users will not, their down payment and closing cost will be forgiven after staying in the property for five (5) years. DC has changed the program and the down payment and closing cost assistance they offer has to be repaid when the first loan is paid off, and this occurs for a host of reasons – for example, you’ve been there 30-years or you refinanced the loan.
The DC Open Doors program is pretty straight forward, in that it offers a repayable down payment assistance loan. The beauty of this program is that it’s available to first-time and repeat homebuyers, in all neighborhoods and wards of DC. This flexibility of this programs goes just a little further because it’s open to residents and non-residents. This means that if you’re considering moving to DC, you can leverage this down payment assistance program, but you cannot own any property at the time of settlement.
To qualify for the assistance, you have to still be eligible for a loan through a lender. In fact, the programs partners with a select lenders to underwrite the funds, and a list of participating lenders is here.
Once you’ve qualified for a loan the lender does all of the work – the application that is. You would need to tell your realtor and the lender that you plan to use this down payment assistance program. Of course, if I am your realtor, we’ve already talked and put a plan together, so you know information.
But, before you get to the money, let’s talk about the requirements for the program. In the list below, you’ll see a minimum credit score, but you should assume that if you qualify for a loan, especially in these tougher credit underwriting times, then you’ll meet DC’s minimum credit score.
· Minimum credit score of 640
· Maximum income of $151,200 and is based only on the borrower’s income and not the household
· Maximum debt-to-income (DTI) ratio is 50%.
Note that this is the max for this program, your lender will certainly have a different, and lower requirement. In fact, FHA max DTI 45%.
· Maximum 1st trust loan is $484,350 with no maximum sales price limit.
This means that they’ll provide down payment assistance up to $484,350 and anything above that would need to be covered by you, the buyer, a closing.
Additionally, the assistance covers various property type and income producing properties but excludes coops. A single family detached, attached, condominium and a 2-4 unit building would all be permissible purchases using this program. For those that are interested in house hacking and realized the power of an income producing property but need the down payment assistance, this is a great program to consider.
Every time I’ve gone through a spill about DC Open Doors, there’s always one person that feels like this is all too good to be true. I have felt the same way when I learned about the program. Imagine how wide-eyed I was when the money was forgivable. Plus, the program allows a buyer to use other down payment programs and assistance to help you maximize your chances of affording a home in DC. I say this often to clients, DC does a lot, with passing out tickets and high costs but, she’s always delivered on appreciation in values.
Brandon Scott is a licensed real estate agent in Washington, DC, Maryland and Virginia. His license hangs with Coldwell Banker Dupont-Logan, DC. He’s been involved in the mortgage finance industry for the last 16 years in various fields. You can reach him by email at [email protected] Subscribe to his YouTube Channel at RealTeaDMV