Some first-generation homebuyers will be eligible for up to $25,000 for a down payment and closing costs under a new pilot program Governor Dan McKee and RIHousing announced Wednesday.
The program, FirstGenHomeRI, is currently only available to people in a few select communities – but McKee hopes the General Assembly will agree to set aside $50 million in next year’s budget so it can be expanded and extended to rest of the state.
Rhode Island has one of the lowest homeownership rates in the country, “largely because families and individuals can’t afford a down payment,” McKee said Wednesday. “We are here today to close this wealth gap and break down barriers and inequalities.”
Who is eligible?
Currently, eligibility is limited to people who live in urban areas considered to be in socioeconomic distress, including Central Falls, East Providence, Pawtucket, Woonsocket, parts of Providence other than the East Side, and one census tract in the north end of Newport.
Carol Ventura, executive director of RIHousing, said the agency administers the program with $1 million of its own money to start, but is “looking forward” to the $50 million McKee requested in its budget proposal.
RIHousing already offers down payment assistance for first-time buyers in the form of an “additional aid” loan, which provides up to $15,000, or 6% of the purchase price of a home, whichever is less.
However, this loan works like a second mortgage, while the new pilot program for first-generation buyers is a grant. Buyers take out a zero interest loan, which is repayable after five years of owning the house and making it their principal residence. There are no monthly payments.
Obstacles to buying a first home
“Many young people are benefiting from assistance provided by families to buy their first home,” Ventura said, noting that she was among them. “But for many first-generation owners, support isn’t an option. That’s why this program is so essential.”
Finding the money for a down payment, she added, is “usually the biggest obstacle to buying your first home.”
McKee and other officials have acknowledged that providing assistance with a down payment is only part of the picture – there also needs to be more inventory of homes available for people to buy.
“Too few units have been built over too many years,” McKee said.
Wednesday’s announcement took place at a newly built home on Middle Street in Pawtucket, where Pawtucket Central Falls Development has built five two-family units for first-time home buyers who meet certain income restrictions.
Executive Director Linda Weisinger said while the median price for a single-family home in Rhode Island was around $375,000 in January, one of the two-family units sells for $269,000.
“If we don’t have homes for families to buy, then people are shut out of the market,” she said.
She also noted that Rhode Island has significant racial disparities when it comes to homeownership.
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More details on the deposit program
Additional details on the pilot program for Down payment assistance is available at rihousing.com/FirstGenHomeRI.
The website notes that a first-generation homebuyer is defined as “anyone whose parents or guardian never owned a home during the buyer’s lifetime or who lost the home to a foreclosure or short sale and do not currently own a home”.
Anyone raised in foster care would also be considered a first-generation homebuyer.
In order to receive funds, buyers must be approved for a mortgage by RIHousing and complete a homebuyer education course.