IRVINE, CA—At least one down-payment program is available in all US counties, and 87% of single-family homes and condos would qualify for one available in the county where they are located, according to a report from RealtyTrac based on a joint analysis with Down Payment Resource. For the report, RealtyTrac looked at 2,290 down-payment programs from DPR's homeownership program.
The report shows that more than 68 million US single-family homes and condos would qualify for a program in their own county based on the maximum price requirements for those programs and the estimated value of the properties. More than 2,000 counties have more than 10 down-payment programs available to prospective homebuyers, and the average amount of DPA across all counties is $11,565.
More than half of programs are community seconds, a second mortgage issued by an HFA or non-profit organization with a very low- or no-interest rate, the report also reveals. The payment on the second mortgage may be deferred or forgiven incrementally for each year the buyer remains in the home. In a typical scenario, this could reduce the amount of cash needed to close from $20,000 to $200.
So, why haven't more potential homebuyers taken advantage of these programs? According to Rob Chrane, president and CEO of DPR, “Many homebuyers—especially Millennials—haven't fully investigated their home-financing options because they are pessimistic about qualifying for a mortgage. Our homeownership program index highlights the wide range and availability of down-payment programs available to today's homebuyers. In fact, 91% of the 2,290 programs in our registry have funds available to lend to eligible buyers. Plus, income limits vary depending on the market and programs extend beyond just first-time homebuyers.”
Daren Blomquist, VP of RealtyTrac, adds, “Historically low homeownership rates across nearly every age demographic have led a public policy to push to lower the barrier to homeownership through down payments as low as 3%, but the fact is that the barrier to homeownership is often much lower than even that 3% for borrowers who take advantage of one of the myriad down-payment help programs available across the country. Prospective buyers—or their agents—willing to put in a few minutes of time to find out what programs are available to them will put themselves in a much better position to successfully purchase a home.”
According to Mark Hughes, COO of First Team Real Estate, which covers the Southern California market, “Post-downturn generations are typically more frugal, and today's homebuyers accordingly have lower back-end debt-to-income ratios and subsequently more buying power than the last generation, but most have little money for down payments. More than half the interested buyers in our agents' pipelines are more concerned with pulling together today's required down payment than meeting the income-to-debt ratio requirements.”
He adds that down-payment assistance tends to suffer from lack of awareness. “Guidelines and specifics tend to change with economic swings. Agents typically don't keep up with the changing requirements, and many buyers who depend on their guidance may be unaware of the opportunities.”
Lackluster home sales are a concern for the industry. As GlobeSt.com reported last week, while up from a year ago, sales of existing homes are not expected to rise much in 2015, similar to 2014, as demand from homebuyers continues to be tepid, according to
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