What is a Special Purpose Credit Program?

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Mike Romano

May 10, 2023

Mike Romano is a mortgage industry veteran with over 20 years of experience. His expertise spans mortgage technology, credit risk, and loan origination, and he has spoken at many mortgage and fintech conferences. He has a Bachelor's and MBA from the University of California, Berkeley and currently resides in Austin, TX. NMLS # 2515901

If you’ve never heard of a special purpose credit program (SPCP), you’re not alone. SPCPs are a relatively new option for first-time homebuyers, so most people don’t know about them yet. On that note: what is a special purpose credit program? And how can it help you get into your first home? 

This article answers your questions about special purpose credit programs, which are an exciting option for first-time homebuyers who come from economically disadvantaged backgrounds. We tell you the benefits of SPCPs and help you learn how to qualify.

Find out if you qualify for a special purpose credit program

Stairs Financial helps you learn which special purpose credit programs you might qualify for, plus find out about any other down payment assistance available to you. 

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    Disclaimer: This article is for informational purposes only and should not be considered as legal or financial advice. Please consult an attorney, mortgage lender, or CPA for guidance on your specific situation.

    What is a special purpose credit program?

    Special purpose credit programs are intended to increase access to mortgage loans for historically underserved communities who may have previously been denied or overlooked. These programs come in a variety of formats and may include features like lower interest, flexible repayment terms, and down payment assistance.

    Why SPCPs exist

    Although special purpose credit programs are relatively new, they have their roots in the Equal Credit Opportunity Act of 1974. This act was put in place to stop unethical practices like redlining that prevented people of color from getting mortgage loans. 

    Created by the Federal Reserve Board of Governors and administered by mortgage lenders, special purpose credit programs apply to anyone typically denied consumer credit because of their race, gender, or ethnicity. 

    SPCPs are another way to bridge the economic gap and remove barriers to homeownership that exist after centuries of unfair laws and practices. But, until recently, many mortgage lenders have been hesitant to make good use of these programs. 

    Two recent developments opened the door for lenders to expand their use of special purpose credit programs:

    2021 HUD guidance 

    In December of 2021, the US Department of Housing and Urban Development (HUD) issued new guidance clarifying that SPCPs generally do not violate fair housing laws as long as they comply with other regulations (namely the Equal Credit Opportunity Act and Regulation B).

    2022 Joint statement

    Shortly after the new HUD guidance was issued, eight federal agencies issued a joint statement encouraging lenders to “explore opportunities available to them to increase credit access through special purpose credit programs (SPCPs) to better serve historically disadvantaged individuals and communities.”

    With this encouragement and guidance, more lenders have announced special purpose credit programs, and we expect to see even more in the future.

    How a special purpose credit program can benefit you

    There are several benefits to special purpose credit programs, including: 

    • Lower interest rates 
    • Flexible repayment terms
    • Waived collateral requirements
    • Financial hardship contingencies
    • Closing cost assistance
    • Down payment assistance

    Special purpose credit program examples 

    It’s difficult to pin down just one example of a special purpose credit program, because they vary so widely. Mortgage lenders are the ones creating these programs, and as any google search will tell you, there are a lot of lenders out there in the world. 

    Each mortgage lender has a good deal of leeway in how they design their special purpose credit programs, so the programs themselves vary in terms of what they offer. 

    Most programs offer consumers at least one of the following: lower interest rates, flexible repayment terms, financial relief during times of hardship, or assistance with closing costs and down payments. 

    How to qualify for a special purpose credit program

    The specific jargon that the CFPB uses to explain who can qualify for a special purpose credit program is: “[an] economically disadvantaged class of persons.” 

    Traditionally, this means people who have been historically disadvantaged due to their race, gender, or ethnicity. 

    But lenders can broaden this scope to also include anyone who probably would not receive a mortgage loan under the lender’s customary standards of creditworthiness, or who would receive a loan with less favorable terms compared to other applicants.

    We know this is sort of vague and frustratingly unspecific. The best way to find out whether your household qualifies for a special purpose credit program based on your specific circumstances is to head over to Stairs Financial

    Stairs is your go-to resource for the most up-to-date information on specific special purpose credit programs and whether or not you qualify.

    Applying for a special purpose credit program 

    Finding and qualifying for special purpose programs might seem daunting. They certainly don’t make it easy to find them, and the process of applying can be long and frustrating, fraught with lots of paperwork and qualification criteria (what a mouthful!). 

    But these programs continue to get more funding as more people use them. And wherever the money goes, the process becomes more popular and can then be made smoother and more easily accessible for everyone in need. 

    Being an “early adopter” isn’t always easy. But the benefits of applying for a special purpose credit program are huge, and it can be well worth the small headache. 

    On the bright side, the process is a whole lot easier with the help of Stairs Financial.

    Stairs connects you to qualified lenders who work with all the special purpose credit and DPA programs you might qualify for, then lets you compare your options side-by-side so you can make the most informed decision.

    Learn more about your options for special purpose credit programs and down payment assistance.

    Find up to $15,000 towards a home 🏠

    Compare local down payment assistance and find a mortgage, fast.

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