Covenant Homeownership Program

Loan forgiveness does not require any additional state investment in the Covenant program. The Covenant program continues to be funded by the document recording fee established by the Covenant Homeownership Act in 2023.

When a loan is forgiven, it means that the amount of the loan will not eventually go back into the Covenant account to be loaned again, as happens when a loan is repaid. (In any case, loan repayments may take some time to return to the Covenant account, because many homebuyers intend to stay in their homes and build equity.)

Yes. Loan forgiveness will be offered to all homebuyers who earned no more than the loan forgiveness income threshold at the time they bought their home, provided they still own their home five years after purchase and meet the other criteria at that time.

If you are under the loan forgiveness income threshold when you buy your home, your Covenant downpayment loan will be automatically forgiven after five years of owning your home (assuming all criteria are met). Only your income at the time you purchased your home is relevant. You will be notified in writing within a year of purchasing your home if you are eligible for loan forgiveness.

The forgiveness applies only to the downpayment assistance loan, not to the main mortgage on the property.

Within one year of loan purchase, the Commission and our loan servicer will notify the borrower that their loan may be potentially forgiven if they meet the criteria after five years. No letter will be sent to the borrower if their income does not meet the criteria.

Annual notifications will be sent out to the borrower if the Commission still owns the borrower’s loan. At the point of five years plus one month after the loan closing date, the loan will be automatically forgiven if all criteria are met. The borrower will be notified by the loan servicer.

You can find the Covenant loan forgiveness income thresholds here. Be sure to use the correct chart based on the closing date of the loan, and select the county where the home is located.

All the following criteria must be met in order for a forgiveness-eligible borrower to have their Covenant loan forgiven at the point when they have owned their home for five years.

• The borrower(s) income must have been at or below the loan forgiveness income threshold, at the time of loan purchase (per the signed underwriter’s loan approval as submitted to the loan servicer for loan pooling). Each year’s loan forgiveness income thresholds will be posted on the Commission’s website.
• The Commission and its loan servicer must retain the loan for a minimum of 5 years and one month after loan closing. If the loan is not in the Commission’s portfolio for any reason at that point, then loan forgiveness is null and void.
• The borrower who met Covenant program eligibility requirements (for race and family history in Washington prior to 1968) must owner occupy the property as their principal residence at the time of loan forgiveness.
• The first mortgage loan needs to be in good standing at the time of forgiveness. If the first mortgage is delinquent, the Commission will not forgive the subordinate Covenant DPA mortgage until a future time when the first mortgage is current as applicable.
• To be forgiven on the loan, the homeowner needs to be:
  • A borrower on the original loan; OR
  • Inherit the home through the original borrower’s passing AND be a descendant or immediate family member (including spouse).
  • Documents will need to be submitted to the Commission verifying death and proof of inheritance, as applicable.

Loan forgiveness simply means that when you (if an eligible homeowner) refinance, sell or pay off your home, the Covenant downpayment assistance loan does not need to be repaid, as it would otherwise. The forgiveness would apply only to the downpayment assistance loan, not to the main mortgage on the property.

In April 2025, the state legislature passed H.B. 1696, amending the Covenant Homeownership Act in two significant ways:

• Increasing the eligibility income limit from 100% to 120% of Area Median Income
• Allowing the forgiveness of Covenant DPA loans for homebuyers earning under 80% Area Median Income who stay in their homes for at least five years.

 The new law is effective Sunday, July 27, 2025.
• New Income Limit: On Monday, July 28, 2025, the program will be open to eligible homebuyers earning up to 120% of area median income.
• Loan forgiveness: Loan forgiveness will apply to all eligible Covenant homebuyers even if they purchase(d) their home before July 27, 2025.

The new law offers forgiveness of the Covenant downpayment assistance loan to homebuyers who at minimum:

• Earned no more than the loan forgiveness income threshold at the time they bought their home;
• Still own their home five years after purchase;
• Are current with payments on their first-mortgage loan (the main home loan).
• Meet other criteria five years after purchase (see criteria FAQ or talk with your lender).

Regardless of income level, everyone who uses the Covenant program can afford to repay their mortgage and their downpayment assistance loan. But, for lower-income households, adding the option of loan forgiveness can help them sustain homeownership if their circumstances change after they buy their homes – for example, a change in employment that requires them to move to a different area.

Loan forgiveness or downpayment assistance grants were also recommended by the Covenant Homeownership Study as a significant path to both wealth-building for families and narrowing our state’s racial homeownership gap. You can find the loan forgiveness income thresholds for each year on our website.

In our state’s high-cost real-estate market, steady low-to-moderate wage-earners with good credit struggle to buy their first home. Those earning above 100% of area median income still have a substantial need for downpayment assistance to afford a modest-cost home in the county where they live.

Also, as shown in the Covenant Homeownership Study, this group of homebuyers includes many households within the racial and ethnic groups impacted by housing discrimination.

Yes, if the adopting parents were harmed by housing discrimination in Washington state prior to 1968, there is clear documentation showing their link to the homebuyer, and the homebuyer meets all other eligibility criteria.

Call the Washington State Homeownership Hotline at 1-877-894-4663 to be connected to free support, guidance and financial help through the Covenant Homeownership Program and beyond.

There is no separate application process for the program. Rather, you work with a Commission-trained lender to prequalify for a mortgage loan and establish your eligibility. The hotline will connect you with a lender based on your situation, goals and preferences. If you are not quite ready for a mortgage, the hotline will connect you with free support and guidance to get on the path to your goal, no matter where you are today.

The Covenant Homeownership Program provides downpayment and closing cost assistance for first-time homebuyers in the form of a loan, secondary to the primary.

The Housing Finance Commission is required to submit an annual report to the legislature on the progress of the Covenant Homeownership Program by December 31, 2025, and by each following December 31. The Commission will complete an update to the Covenant Homeownership Program Study at least every five years to evaluate the program’s effectiveness and recommend Covenant Homeownership Program improvements.

Yes! Downpayment assistance and other supports are available to low- and moderate-income homebuyers throughout the state.

Call the Washington State Homeownership Hotline at 1-877-894-4663 or visit www.homeownership-wa.org for information and resources tailored to your location, income, and specific needs.

Most homebuyers who earn under $180,000 a year can access financial assistance through the Housing Finance Commission’s range of downpayment assistance programs. You can also find a free homebuyer education class here to get started on your homebuying journey.

The researchers based their recommendations on evidence of two factors: not only racial discrimination by the state in the past, but also disparities in homeownership rates today. The study examined available data for each of the marginalized groups affected by past housing discrimination. While many groups of Washingtonians, such as those named in racist homeowner covenants, have suffered significant harms from housing discrimination, not all these groups continue to show significantly lower homeownership rates than white residents. Those that do are recommended for program eligibility.

Homebuyers in any of these recommended groups must also meet individual eligibility requirements (under the income limit, a resident of Washington before 1968 or descendant of such a resident, first-time homebuyer, etc.).

If you are not quite ready for a mortgage, you can start on the path to homeownership with free, individual guidance from a housing counselor. Get connected through the Washington State Homeownership Hotline by calling 1-877-894-4663 or visiting www.homeownership-wa.org.

As with all Commission home loans, homebuyers must meet lender underwriting requirements, i.e. qualify for a home loan from a lending institution. You must also take a free homebuyer education class, either virtually or in person. Dozens of classes are taught each week by lenders and real-estate professionals across the state. Find one here.

Further, Covenant homebuyers must provide documentation of the residency and race/ethnicity of the person (whether the homebuyer themselves or their parent/grandparent/great-grandparent) who lived in Washington state before April 1968. The Housing counselors, Commission staff and other program partners are committed to helping homebuyers gather this documentation.

The hotline is a free service of the nonprofit Washington Homeownership Resource Center (WHRC).

Call the Washington State Homeownership Hotline at 1-877-894-4663 to be connected to free support, guidance and financial help through the Covenant Homeownership Program and beyond.

The hotline can also share a wide range of other information and resources tailored to your location, income, and specific needs.

There is no separate application process for the Covenant Homeownership Program. Rather, you work with a Commission-trained lender to prequalify for a mortgage loan and establish your eligibility. The hotline will connect you with a lender based on your situation, goals and preferences. If you are not quite ready for a mortgage, the hotline will connect you with free support and guidance to get on the path to your goal, no matter where you are today.

Until July 27, 2025, this program’s income limits are as follows. Use the limit for the county in which you are buying the home. (Further income restrictions may apply depending on the first-mortgage program.)

The Commission intends to be as flexible as possible in accepting documentation of race and pre-1968 residency in Washington. Again, the homebuyer must submit this documentation for the person who lived in Washington before 1968 — whether that person is the homebuyer themselves or their parent/grandparent/great-grandparent.

Some examples of acceptable documents include:

Your lender and/or housing counselor will help you gather the documents. Some good sources include the following:

• Vital Records Department of the state Department of Health

• Legacy Washington

• FamilySearch.org: Create a free account to search family records.

• Ancestry.com: This is a paid service, but you can often access Ancestry.com for free from your local library.

Public libraries:
o Find your local library here.

• 1. Seattle Public Library
  2. King County Library Research
  3. Tacoma Public Library
  4.  Spokane Public Library Research

• Newspapers.com
• MyHeritage.com

The Commission will continue to add resources to this section.

Starting in January 2024, the state collects a $100 document recording assessment on each real-estate transaction. The fee is projected to generate between $75 million and $100 million each year to be used for the Covenant Homeownership Program.

The Covenant Homeownership Program Oversight Committee, formed by the Department of Financial Institutions (DFI), oversees and reviews the Commission’s activities and performance related to the Covenant Homeownership Program Study and the Covenant Homeownership Program. The oversight committee may also make recommendations to the legislature regarding the program.

The Washington State Housing Finance Commission designed, developed, and implemented the Covenant Homeownership Program and is responsible for its ongoing operations. The Commission was also responsible for overseeing the Covenant Homeownership Program Study that determined the details of the program.

The Covenant Homeownership Act defines “first-time homebuyer” broadly. You may be eligible if:

• You have not owned a home within the past three years
• You are a single parent who has only owned a home while married to a former spouse.
• You are a displaced homemaker and have only owned a home with a spouse.
• You have only owned a residence that had no permanent foundation (such as a manufactured home)
• You only owned a property that was determined to be uninhabitable.

The Covenant program’s initial eligibility criteria are intentionally narrowly tailored. While many racial, ethnic and religious groups in Washington were subject to unjust and egregious housing discrimination, the Covenant program considers not only this history but also its current impacts.

Some of the groups discriminated against continue to show much lower homeownership rates compared with the general white population. These are named in the initial eligibility criteria. However, for other groups (such as Jewish residents), the data is limited when it comes to documenting the lasting impacts of historical discrimination. Please see page 93 of the Covenant Homeownership Study for further information.

In April 1968, the passage of the Fair Housing Act made racial discrimination in housing illegal. Discrimination persisted despite the new law; however, the state no longer had an official or legal role in enforcing and upholding it.

As the study recommends, we are currently exploring how to expand eligibility. We intend to open a second phase of the program later this year as we uncover more data and information. This Phase II could allow participation by applicants outside the currently approved racial groups who are able to show past and ongoing impact by state-supported discrimination, as documented in Chapters 1 and 2 of the study.

People would still have to meet the program’s statutory requirements, including being a first-time homebuyer, earning no more than 100% of Area Median Income, and being either a pre-1968 resident of Washington state or a descendant of one.

NFHA and its local fair housing partners incorporated numerous points of active community engagement with stakeholders, from webinars and presentations to key informant interviews, focus groups, and surveys. Many Washington residents shared their personal and family experiences with housing discrimination. Summaries of these stories can be found in Chapters 1 and 2 of the study and in the appendices for these chapters.

The study recommends a Special Purpose Credit Program with a customized approach to downpayment assistance that allows people who have been impacted by discrimination to buy a home in their county.

Such a program has the flexibility to support homeownership in a way that a normal downpayment assistance program would not, in two ways. First, it could offer a large enough loan to make a home attainable in the county where they live for anyone who qualifies; and second, it would be exclusively available to groups who both suffered housing discrimination by state institutions in the past and continue to show the effects in disparities today. (The Covenant Homeownership Act includes additional specific eligibility requirements for individuals.)

First of all, the study confirmed that state institutions played both active and passive roles in perpetuating housing discrimination against a range of marginalized groups. Secondly, it found that impacts of that discrimination are still felt today in the lower homeownership rates and net worth of many of those groups. Third, the research showed that without specifically aiming to help these groups that were excluded for so long, a program would be ineffective in remedying the disparities.

As the result of a competitive Request for Proposals process in 2023, National Fair Housing Alliance (NFHA) and its research partners were selected to conduct the study, overseen by the Washington State Housing Finance Commission (Commission).

• The National Fair Housing Alliance, the lead consultant, has a 33-year history of documenting historical and current discrimination to identify, eliminate and remedy the harms that have resulted. They also bring significant expertise with special-purpose credit programs.
• Abt Associates, the key research partner in the study, is a mission-driven research and consulting firm with deep expertise in publicly administered homeownership programs, data analysis, and fair housing.
• NFHA and Abt will also be joined by two Washington state groups with years of knowledge and expertise in fighting housing discrimination in our state. The Northwest Fair Housing Alliance (NWFHA), serving central and eastern Washington, and the Fair Housing Center of Washington (FHCW), based in western Washington, will subcontract with NFHA to assist in documenting specific historical discrimination against marginalized groups in Washington.

The study is the first, crucial step in the development of Covenant Homeownership Act assistance programs. This evidence-based research study will investigate housing discrimination against marginalized communities in Washington State, what role government institutions have had in the discrimination, the impacts of the discrimination, and what specific assistance would be likely to remedy these impacts.

The Covenant Homeownership Act is a state law passed in the spring of 2023 to support homeownership for those affected by generations of systematic discriminatory housing policies and practices by Washington State. The act establishes an assistance program (Covenant Homeownership Program) based on an evidence-based study (Covenant Homeownership Program Study). A newly created account in the state treasury (Covenant Homeownership Account), funded by document recording assessments, is used for the purposes of the program and study.

Covenants are clauses that prevent, prohibit, restrict, or limit the actions of a person or entity named in a contract. As part of home deeds and required neighborhood agreements (like HOAs), covenants were commonly used between the 1920’s and 1960’s throughout Washington state to restrict housing based on race, religion, and ethnicity. A typical covenant required the signer to agree they would never allow a non-white or non-Christian person to buy or live in their home.

Black people were excluded in every racially restrictive covenant. Asian American Pacific Islanders, Latino/a/x, Jewish people, and other marginalized groups were also excluded. To date, nearly 50,000 racially restrictive covenants have been documented throughout Washington state by the Racial Restrictive Covenants Project of the University of Washington and Eastern Washington University. Learn more and read these covenants at the project website.

For many years, Washington state mandated that county auditors record racially restrictive real-estate covenants. Legislators found it fitting that this same document-recording process should help remedy the harm created by these actions.

Homeownership is the cornerstone of the American dream. It is the primary way households build wealth, stability, and community and pass wealth down to future generations.

Yet in Washington, only 49% of BIPOC households in Washington are homeowners, compared with 68% of non-Hispanic white households. As is common where disparities exist, Black households fare even worse than other households of color: the homeownership rate for Black households is only 31%. Despite the Fair Housing Act and the end of “legal” discrimination, the national homeownership rate for Black households has not improved since 1960.

Research shows that these inequities did not arise by chance or because of individual choices. They are the result of policies and practices that favored white Washingtonians. Previous research has also shown that existing state and federal programs and other race-neutral approaches are insufficient to remedy this discrimination and its impacts. That is why the Covenant Homeownership Act proposes the first-in-the-nation use of a Special Purpose Credit Program by a government agency.

The Covenant Homeownership Program Study provided the foundation for a Special Purpose Credit Program that can benefit homebuyers affected by racial discrimination.