MISSOULA — Those shopping for a home in Missoula County could receive a boost from a new state program that provides down-payment assistance based in part on the value of the home and the buyer's income.
Missoula County on Tuesday agreed to allow NeighborWorks Montana to serve as its official community reinvestment representative, positioning the organization to accept funding from the state to launch the program.
The state will release $6 million to NeighborWorks to provide down-payment assistance. The organization must raise an additional $6 million match, bringing the program's total funding to more than $12 million.
“The program will provide down-payment assistance for households earning between 60% and 140% of the area median income,” said John Wilke, director of the county's Development District. “It can provide up to 30% of the total purchase price for a home. It caps the monthly payment of the home at 30% of gross income.”
The program was created through House Bill 819, which established the Montana Community Reinvestment Plan. The program serves as a public-private partnership fueled in part by investors to create pathways toward affordable home ownership for middle-income households.
As of Dec. 1, the median price of all for-sale housing types in Missoula County was $565,000. When single-family homes are considered alone, the median price stands at $612,000.
The current prices make it difficult for many buyers to provide a down payment that's large enough to make the property affordable through monthly payments. But the new program could help by providing a down payment of up 30%. A buyer wouldn't have to repay the loan until the home is sold.
“It's not added to the debt service you pay every month on the mortgage,” said Commissioner Josh Slotnick. “But by agreeing to do this, you also cap your appreciation. You trade the ability to cash in on the market for the opportunity to enjoy the stability of home ownership.”
While the program could be beneficial to buyers looking to enter the Missoula housing market, it does come with some restrictions, primarily the ability to reap large sums of equity as the market appreciates.
Slotnick said the program caps the equity one can gain to 1% of the home's new value when sold.
“This gets you into a house you can probably afford the payment on, but you're sacrificing future equity,” he said. “You're signing on to an appreciation cap. You get 1% of the total appreciation. That difference goes to an investor at the state that has bankrolled this thing. But it can really be a win-win for everyone.”
Other new programs in Missoula also cap the equity one can gain in a property. A new housing project on Scott Street will include several dozen for-sale homes reserved for certain incomes. The homes are held under a community land trust which prevents owners from reselling the home at a much higher value.
The new down-payment program has similar restrictions, but it could help meet some of the region's housing needs. The latest action plan adopted by the county suggests a shortage of 2,400 homes in the local market, which will continue to drive up prices.
“It's real money, but it's not money you had,” Slotncik said of the down-payment assistance program. “It's embedded in the home.”
NeighborWorks on Tuesday said the program should be up and running by the middle of January. Buyers will still work with first-mortgage lenders, the organization said.
