Caitlin Warner comes from a family of renters. As a child, that was “normal” to her. Her friends’ parents were all renters, too.

But when Warner landed a steady job as a tax accountant five years ago, she decided it was time to buy her own home. By sharing a two-bedroom apartment with her mother, she was able to save almost $9,000.

“It was the most money I ever had,” Warner, 30, recalled last week. “But I was still a little short.”

That’s when Warner heard about NeighborhoodLIFT, a Wells Fargo program designed to expand homeownership by providing coaching to first-time buyers and thousands of dollars in down payment assistance. In Warner’s case, she qualified for a $7,500 loan that was forgiven after she lived in the house for three years.

Last week, Wells Fargo announced it was putting another $7 million into the program to help reduce racial disparities in Minneapolis and St. Paul. The announcement was such a rare piece of good economic news that it drew the mayors of both cities, who told attendees they hadn’t shared a stage in months.

“We know that white families in the Twin Cities make about twice as much as Black families,” Minneapolis Mayor Jacob Frey said. “We know that a white family is three times more likely to own a home than a Black family is. ... That is something we need to move forward with correcting right now. I want to thank Wells Fargo for stepping up in a really big way to help with this funding.”

St. Paul Mayor Melvin Carter said the Twin Cities are suffering through multiple crises that are hurting Black families and other people of color disproportionately, dramatically increasing homelessness. He said the NeighborhoodLIFT program could provide a lifeline to hundreds of struggling families.

“It is incumbent upon us to do everything we can to help families find stability,” Carter said.

The program comes at an especially challenging time for first-time home buyers, especially for those with low incomes and limited cash. Though there are an estimated 60,000 renters in Minnesota who earn enough to buy a house, listings are at near-record lows and prices are increasing at an unusually rapid clip in part because of record low mortgage rates.

This week Freddie Mac said the average 30-year fixed-rate mortgage fell to 2.81%. While those low rates boost buying power, they also motivate buyers, increasing competition at a time when the ability to refinance means many homeowners are choosing to stay put rather than trade up to a more expensive house.

By the end of August there were just 1,165 houses priced from $190,000 to $250,000 in the Twin Cities metro — about half as many as the same time last year, according to the Minneapolis Area Association of Realtors. At the current sales pace there were only enough houses on the market in that price range to last a month, half as long as for properties priced from $350,000 to $500,000.

To be eligible for the Wells Fargo program, buyers must earn 80% or less of median income in Minneapolis and St. Paul, which is about $77,840 for a family of four. Buyers also must complete an eight-hour homeownership workshop with a HUD-approved provider, such as Wells Fargo’s partner in the program, NeighborWorks Home Partners. Wells Fargo is providing $250,000 to cover those counseling expenses.

Though Wells Fargo hopes the program reduces racial disparities, race is not part of the eligibility requirements, and applications from Black residents or other people of color will not be given preferential treatment, said Laurie Nordquist, Wells Fargo lead region president, who heads up community banking efforts in the Upper Midwest and Mountain Midwest regions.

“Homeownership is a key pathway to housing stability, wellness and wealth accumulation, but far too many people — including people of color — aren’t able to overcome the barrier of coming up with a down payment,” Nordquist said.

A recent Redfin analysis of metros with more than 1 million people from 2014 to 2018 shows that only a quarter of all Black families in the Twin Cities own their own home. By comparison, 76% of white families own their own, creating a 51% ownership gap.

Chris Prescott, Redfin’s market manager for Minneapolis, said several factors put the Twin Cities at the bottom of the list.

“Minneapolis has a long history of segregation and housing inequality, and the homeownership gap between Black and white families can be traced back partly to discriminatory housing covenants that blocked Black families and other minorities from buying homes,” Prescott said in a statement. “Those policies were then exacerbated by redlining. Though the policies have been outlawed for over 50 years, the impact persists.”

Wells Fargo has been accused of being part of the problem. In 2012, the banking giant agreed to pay $184 million to resolve allegations that it discriminated against Black and Hispanic borrowers in its mortgage-lending business from 2004 to 2009. In 2019, Wells Fargo paid $10 million to the city of Philadelphia to settle a federal lawsuit involving similar allegations. The bank denied wrongdoing in both cases.

Since Wells Fargo started the NeighborhoodLIFT program in 2002, the bank has invested $504 million in down payment assistance, helping nearly 25,000 families purchase homes in 1,000 communities. Altogether, 33.6% of recipients were white, 31.4% were Hispanic and 27.7% were Black, according to Wells Fargo.

So far, $13.9 million of those funds have flowed to the Twin Cities, jump-starting 875 home purchases. The current round is expected to lead to 425 purchases, with participants receiving $15,000 in down payment assistance. Buyers must live in their homes for five years in order for the loan to be forgiven. Applications will be accepted beginning Jan. 11, 2021.

Once buyers are accepted into the program, they will have 90 days to find a home within the city limits of Minneapolis or St. Paul and complete a purchase contract. Extensions are available. Wells Fargo said participants are allowed to receive help through other programs, including the Minnesota Housing Finance Agency’s “Community Keys” program, which offers eligible buyers up to $20,000 in down payment assistance.

The Wells Fargo money could go fast.

“When I first put in my application, about half of the loans were available,” Warner said. “But by the time I was through buying a house, I was one of the last 10 people or so who got funded before the money was all used up.”

With the $7,500 she received through the program, Warner said she was even able to cover some of the seller’s costs, reducing the amount of money she had to finance on the purchase.

“I was able to get into the perfect little dream house,” said Warner, who bought a cottage in south Minneapolis for $146,000. “It was a really good fit for me.”

Staff writer Jim Buchta contributed to this report.