What Just Changed with the WSHFC Covenant Program?

If you have clients who may qualify for Washington State's Covenant Homeownership Program, there's an important update you need to know about right now.

Starting April 20, 2026, the Washington State Housing Finance Commission (WSHFC) implemented a brand new pre-reservation process for all Covenant DPA loans. This is a significant shift in how the program works — and it affects every borrower, even those who already have documentation submitted and accepted.

Why Did WSHFC Make This Change?

The short answer: the program is a victim of its own success. Monthly demand for Covenant loans has now outpaced the monthly supply of available funds. To make the process fair and orderly, WSHFC created a system that puts fully prepared homebuyers "in line" for funds before they start house hunting.

The program itself is not going away. Funding continues to come in monthly through the $100 document recording fee on every real estate transaction in Washington. The change is purely about process — making sure every buyer is ready to close when funds become available.

What Does the New Pre-Reservation Process Mean?

Here's the key change: most of the steps that used to happen during the home search now need to happen before house hunting begins.

Practically speaking, this means:

• Borrowers must be fully underwritten and file-ready before reserving a loan
• Family history documentation must be submitted and accepted before going under contract
• All documents must be uploaded into WSHFC's new pre-reservation system
• Borrowers are placed on a pre-reservation list and can begin home shopping once they're confirmed

Importantly, this applies to everyone — even buyers who already had documents accepted under the old process. If the loan is reserved after April 17, 2026, it must go through the new system.

What About the Rate Buydown Fees?

This is a separate but related update that took effect January 2, 2025. For Covenant and Home Advantage first mortgage programs:

• Permanent rate buydown requests made within 2 business days of reservation: standard buydown costs apply
• Permanent buydowns requested after 2 business days: an additional 1% fee applies on top of buydown costs
• Temporary rate buydowns: a 0.50% fee applies regardless of timing

The bottom line: work the file completely before making a reservation to avoid any additional fees.

What About the Lawsuit?

You may have heard that a lawsuit was filed against the Covenant program. WSHFC has stated they are well prepared to meet the challenge and will continue to operate the program as normal unless a court orders otherwise. They're encouraging lenders to keep reserving loans and supporting eligible homebuyers.

Big Picture: More Changes Coming in July 2026

In April 2025, the Washington State Legislature passed H.B. 1696, which expands the Covenant program. Effective July 28, 2026:

• Income limits will increase to 120% of area median income
• Loan forgiveness will apply to all eligible Covenant homebuyers, even those who purchased before July 27, 2025

This is a major expansion that will open the program to more buyers in Washington's high-cost markets.

What Should You Do Right Now?

If you have buyers who may qualify for the Covenant DPA program, here's the move:

1. Start gathering family history documentation early — this is the longest lead-time item
2. Send documentation to WSHFC before your buyer goes under contract
3. Fully underwrite the file before making the reservation
4. Upload all documents into the new pre-reservation system and get your buyer on the list

The program is strong, funded, and here to stay. The new process just means we do more of the prep work upfront — which is actually better for your buyers because they can shop with confidence knowing their Covenant funds are ready when they find the right home.

Questions? Let's Talk.

If you have a client who might qualify for the WSHFC Covenant Homeownership Program, reach out to the Bennett Team at Canopy Mortgage. We're trained and active on this program and can walk you through every step of the new process.

📞 Give us a call or send us a message — we're here to help your buyers get to the closing table.