During our most recent economic woes, two market factors have kept the economy from sinking further than expected: real estate and consumer spending. Strong consumer spending in the face of declining stock values was surprising, yet a relatively new, but often unnoticed program gave a boost to the market. The boost came from changes to federal housing laws implemented more than a decade ago. However, mortgage lenders and realtors are unaware of how this program can increase their closings, improve their community lending and help deserving families obtain their first homes. Referred to as “down payment assistance” or “gifting,” these programs target families with a good employment history who are unable to save for a down payment. Under current law, down payment assistance programs allow the seller, lender, realtor and buyer to all work together with non-profit, affordable housing organizations so families can obtain their down payment as a gift. Since its initiation, non-profits like Neighborhood Gold, The AmeriDream Charity and Family Home Providers have helped thousand of families realize their dream of home ownership. Amazingly enough, most of these non-profits still have unused money. This is due to the fact that mortgage originators and lenders fear these mortgages carry higher default rates. Thus far, research shows that most default concerns are unwarranted. A study by the University of Georgia Family and Consumer Services College found that many families with incomes as low as $30,000.00 can become successful homeowners when they have access to down payment assistance. Nevertheless, to ease the lending industry’s concerns over defaults, some of these groups are setting up mortgage protection and counseling programs to coach down payment recipients through the critical first months of homeownership. While each non-profit has different procedures, the program is simple. After a buyer is approved, the charity donates the down payment with no requirements to pay it back. The typical gift is between two and five percent of the home’s contract price. These programs are essential in assisting working individuals and families with good credit and steady employment, but little or no up-front money to take that first step. The fact that the economy has benefited is a happy result. Back |
