I’ll admit that I’m disappointed that the infrastructure bill that passed doesn’t include money for housing. It originally included down payment assistance and money to build affordable housing, but apparently, that isn’t part of our infrastructure.
There is an affordable housing crisis that is getting worse by the minute. We could build our way out of the crisis, but that isn’t going to happen until someone finds a way to get rich by building and selling affordable housing.
Down payment assistance doesn’t help much in a housing market with multiple offers. The offer with assistance is considered weaker than the offer without assistance — even though the seller doesn’t know exactly where the money is coming from or if it exists at all.
If my husband and I had to buy our house again using a down payment assistance program like the one we used many years ago, it would be difficult, if not impossible. When we bought our house, it was a buyer’s market, and interest rates were near double-digit, but mortgage payments were usually about the same or less than rent.
With two kids and two jobs, we were barely scraping by. Once the recession that drove unemployment up to around 13 percent ended, we were both able to find jobs that paid well enough so that we could save up for a down payment on a house.
We bought the house using FHA financing with an extra-low interest rate of around 8.5 percent and a down payment assistance program. The down payment assistance came in the form of a second mortgage that was interest-free with no payments until we sold the house of re-financed.
The idea behind the program was to help people who were renting in the city become property owners.
The house we bought had been purchased by the city for $1, moved and rehabbed using federal and local dollars. It was priced at least 10 percent lower than it would have appraised for at the time.
We were thrilled to have a home of our own and for the first time, and the kids had a yard with grass instead of blacktop that they could play in.
As I mentioned, today, it would be very difficult to buy a house using FHA financing and a down payment assistance program, especially if there are multiple offers. We are often told that sellers reject such offers.
I have found that homeowners know little about how home loans are financed and take the advice of their agent. Usually, that advice is to reject the FHA offer because it is too much of a hassle.
When buyers use gift funds for the down payment, it’s usually kept between them and their lender, and it doesn’t put their offer in jeopardy. The seller may never even find out about it. If that same buyer is using an assistance program, there is a box that needs to be checked on our purchase agreements.
People will tell you that homeowners don’t like offers that include down payment assistance. I have found that down payment assistance is as good as cash, but it’s probably easier to just reject the offer than it is to learn about the programs.
When I talk with homeowners about financing and down payment assistance and explain the programs, they can relate. Some have taken advantage of various programs to become homeowners just like I did. The FHA loan can be a wonderful thing for cash-strapped buyers.
Homeowners are often open to taking offers that include down payment assistance. It might be because I discuss it with them ahead of time, and I send them links to various websites that explain it all.
It is the same with FHA financing. There is a lot of mythology about what kind of repairs the FHA appraiser might ask for. I once worked with an agent who claimed that the seller would have to re-glaze all the windows to get FHA approval. The FHA inspection for the property did not even mention windows.
NAR wants to help close the racial wealth gap. One thing that might help is to educate agents and consumers about down payment assistance and loan programs.
NAR might also work to change FHA financing guidelines. Perhaps tax dollars could be used to pay for lead-based paint abatement or for testing so that if there is some chipped paint on the garage, but the paint is lead-free, the homeowner doesn’t have to have it scraped and painted.
Affordable housing and capitalism do not play well together. Building houses, selling housing and renting housing are revenue-generating activities. It is easy to lose sight of the fact that housing is a necessity — and we need to start treating it accordingly.
Teresa Boardman is a Realtor and broker/owner of Boardman Realty in St. Paul. She is also the founder of StPaulRealEstateBlog.com.
