Mortgage professionals are turning to creative financing options – including layering down payment assistance programs – to help buyers
Washington, D.C, is often viewed as one of the more affordable major metro areas, but with median home prices reaching $650,000 in some areas and mortga
ge payments averaging over $3,900 per month, many buyers are struggling to find a way in.
And with mortgage rates hovering around 7%, pressure is mounting, making affordability one of the city’s biggest housing challenges in 2025. Mortgage professionals are addressing these issues by exploring creative financing solutions, including layering multiple down payment assistance programs to bridge the affordability gap.
“The biggest obstacle that most buyers have is down payment assistance,” said Dawn Mosby (pictured), a branch manager with Direct Mortgage Loans.
Some buyers are opting for buy-downs, seller assistance and various grant programs to make homeownership more accessible. One approach that has gained traction is rate buy-downs, which allow buyers to temporarily lower their interest rates.
“Probably about 15% of buyers now opt for a buy-down,” Mosby told MPA. “If they settle at 6.75%, their first-year interest rate could be 4.75%, the next year 5.75%, and then they move to the regular rate. It helps ease them into their payments. Seller assistance, down payment assistance – [it’s about] combining all of that together. I’m actually one of the largest lenders in DC that uses all of the programs in the DC, Maryland and Virginia area. And we also offer the Federal Home Loan Bank Grant, which is getting ready to pop at the end of February 2025.”
As Mosby explained, Washington, D.C., offers a variety of down payment assistance programs aimed at supporting buyers with moderate incomes. Programs like the Home Purchase Assistance Program (HPAP) and Employer-Assisted Housing Program (EPAP) provide significant financial support.
“If you’re a single person making $54,000, you can get up to $206,000 in down payment assistance at 0% interest, which you only repay if you sell your house,” Mosby said.
However, these funds are often limited. Many buyers have to plan ahead, waiting for funding cycles or applying to multiple programs to increase their chances of securing assistance. Programs like DC Open Doors, the Federal Home Loan Bank grant, and small grants from organizations such as GEICO and Target also play a role in helping potential homeowners – something that can’t go amiss in the increase in available homes on the market.
“Right now, we have a six-month supply of inventory. We haven’t had that since the 2008 recession when Obama went into office.” Mosby said. “And it’s sitting because of the affordability issue. People just can’t afford to pay a $3,000 mortgage payment.”
This increase in supply has led to a transition from a seller’s market to one where buyers have more negotiating power. Many sellers are now offering closing cost assistance to attract buyers, a trend that had been rare in previous years.
In some cases, property owners who renovated homes using high-interest hard money loans are particularly motivated to close deals quickly to avoid extra costs. What’s more, data from MarketMinute found that pending sales in the DC area increased by 13% with 502 contracts in January 2025 compared to 438 the previous year. And, for buyers who aren’t ready to purchase immediately, Mosby emphasized the importance of having a financial roadmap.
“It’s okay to sit on the sidelines, but it’s not okay to sit on the sidelines without a plan,” Mosby said. “If your objective is to become a homeowner, it doesn't matter if it's tomorrow or if it's a year from now or even two years; you need to have a road map into homeownership.”
First-time homebuyers, especially those without generational wealth, are encouraged to view homeownership as a long-term investment – something that’s growing in interest lately. Research from Lenvi found that 29% of 18-27-year-olds are planning to buy a property in the next three years. However, a lack of understanding around the mortgage process (23%) and anxieties over financial wellbeing in the long term (22%) are holding first-time buyers back.
However, while affordability challenges in DC are significant, careful planning and strategic use of assistance programs can still make homeownership possible. As the market continues to shift, buyers who prepare in advance and explore available resources may find themselves in a stronger position to secure a home.
“[Buyers] need to understand their price point, and what’s the payment they’re most comfortable with. You have to be an advocate for yourself as well as the lender. Have your [documents] ready so that when you decide to take that step into home ownership, you're ready. Because the more ready you are, the better you're going to be in negotiating a good contract. [After all], we've moved from a seller's market to a negotiating market now,” she said.
