Washington State Housing Finance Commission
The self-supporting state agency, created in 1983, that finances affordable homeownership through participating private lenders — it runs Home Advantage, House Key Opportunity, down-payment assistance, and the Covenant Homeownership Program, and does not lend directly.
Key Takeaways
- The Legislature created the Washington State Housing Finance Commission in 1983 as a public body corporate and politic and an instrumentality of the state.
- The Commission is a financial conduit that issues nonrecourse revenue bonds without using public funds or lending the credit of the state or local government.
- Buyers do not apply to the Commission. They apply through a participating lender, and the lender reserves the loan under a Commission program.
- A Commission-sponsored homebuyer education class is required for anyone using Commission home loans and downpayment assistance.
What It Means
The Washington State Housing Finance Commission is the state's housing finance conduit. The Legislature created it in 1983 to make affordable home financing reachable for buyers the ordinary market prices out, and it has done that work through private lenders ever since.
Its structure is what makes it unusual. The Commission is not a bank, and it is not funded out of the state budget. It raises money by issuing revenue bonds, uses the proceeds to support loans made by approved lenders, and covers its own costs from program fees. The statute is explicit that it does this without putting state tax dollars or state credit at risk.
On the homeownership side the Commission runs Home Advantage and House Key Opportunity as first mortgage programs, attaches Down Payment Assistance second mortgages to them, and administers the Covenant Homeownership Program aimed at closing racial gaps in homeownership. It also sponsors free homebuyer education and requires it of the buyers who use its loans, which is where a great many Washington first-time buyers first hear the vocabulary of the transaction.
How It Works in Washington
RCW 43.180.040 establishes the Commission as a public body corporate and politic, an instrumentality of the state exercising essential government functions. RCW 43.180.010 spells out the design: a financial conduit that, without using public funds or lending the credit of the state or local government, can issue nonrecourse revenue bonds and participate in federal, state, and local housing programs, and thereby make additional funds available at affordable rates. That is the reason to stop describing it as a grant source. It is a lending platform.
The programs reach buyers through lenders. Home Advantage is a mortgage loan program offered by the Commission through participating lenders across the state, with a range of downpayment assistance options and a Commission rate the lender qualifies the buyer on. House Key Opportunity is the Commission's other first mortgage program, also carrying downpayment assistance. The Covenant Homeownership Program sits on a different footing: RCW 43.181.040 directs the Department of Commerce to contract with the Commission to design and run one or more special purpose credit programs providing down payment and closing cost assistance, repayable when the home is sold, with forgiveness allowed after five years for participants at or below 80 percent of area median income for the county. There is no separate application for it. The buyer works with a Commission-trained lender. Our guide to navigating downpayment assistance programs covers how these stack with seller concessions.
Example
Andre and Kim are buying their first home, a $430,000 condo in Tacoma. They have $9,000 saved, which does not cover the $15,050 they would need for a 3.5 percent down payment, let alone closing costs on top of it. Their broker points them to a lender on the Commission's participating list rather than to a bank that does not offer the programs.
The lender qualifies them for a Home Advantage first mortgage at the Commission's rate and pairs it with a downpayment assistance second mortgage that covers the gap. Before the loan can be reserved, Andre and Kim each complete the free five hour Commission-sponsored homebuyer education class, because that class is required for anyone using Commission home loans and downpayment assistance. They close with their $9,000 intact for reserves and moving costs, and the assistance second mortgage comes due when they sell.
Common Mistakes and Exam Traps
- The Commission does not originate first mortgages for buyers. Participating lenders make the loans, and the buyer applies to the lender.
- Downpayment assistance from the Commission is a loan secured by a second mortgage, not a gift. Most of it is repaid when the home is sold.
- The Commission's bond programs operate without public funds or the credit of the state, which RCW 43.180.010 states directly. It is not a line item in the state operating budget.
- The Covenant Homeownership Program is run by the Commission under a contract with the Department of Commerce, which RCW 43.181.040 sets up. The Commission did not create it on its own.
Where you'll learn this
Frequently Asked Questions
How does a buyer get a Commission loan?
Through a participating lender. Home Advantage is a mortgage loan program offered by the Commission through participating lenders across the state, so the buyer applies to the lender and the lender reserves the loan under the program.
Does the downpayment assistance have to be paid back?
Usually yes, because it comes as a second mortgage. Under the Covenant Homeownership Program, RCW 43.181.040 requires repayment when the home is sold, and allows forgiveness after five years for participants whose household income is at or below 80 percent of area median income for the county.
Is the homebuyer education class optional for a strong borrower?
No. The Commission requires its sponsored homebuyer education class of anyone using its home loans and downpayment assistance, regardless of credit strength. The class is free and runs about five hours.