One of the biggest hurdles many people face when buying a new home is the down payment. If you are buying your first home, saving money can be a challenge. One of the many programs that have been used for years is a down payment assistance program from a nonprofit agency. Some of the common ones are Nehemiah Corporation, Futures and Sovereign Grant.
These programs have helped nearly 79,000 people buy homes using government-insured loans last year and they would be eliminated as part of a broader housing package that Congress expects to pass this week. Under these programs, nonprofit groups provide buyers with money for down payments. Home sellers then reimburse the organizations and pay an administrative fee. More than half a million people have bought homes this way in the past decade using loans insured by the Federal Housing Administration.
FHA has said that seller-funded down payments present the biggest challenge to it’s solvency. The fate of these seller-funded programs have been in limbo for weeks. The Senate version would eliminate them, the House version would not. The negotiators crafting a compromise bill have agreed with the Senate’s position and that is also now supported by the Bush adminstration.
Supporters of this kind of assistance said it meshes with the FHA’s mission to serve low- to moderate-income people. While the system may have it’s problems, it should be fixed not abandoned. Without this program many potential homebuyers will be shut out of the market. FHA estimates that nearly 40% of their loans include down payment assistance. That means more than 300,000 working class families will be locked out of homeownership in the next year alone. Communities across America will take the brunt of the $50 billion in lost real estate sales, not to mention the indirect impact on the real estate, mortgage and building sectors that will be forced to shed thousands of jobs due to this legislation.
We believe the state funded programs through Minnesota Housing Finance Agency and some county programs will still be allowed to use their down payment assistance programs. However, those programs require you to be a first time homebuyer and also have income limits.
We will know soon the fate of these seller-funded programs and hopefully this section of the bill will be eliminated. If not, then Nehemiah and the other programs will work with the next administration to change this part of the legislation. In the past few months, these programs have been more important than ever with all the current mortgage programs changes.