According to the latest Campbell/Inside Mortgage Finance HousingPulse Tracking Survey results, the percentage of first-time homebuyer purchase transactions are increasing in recent months, after hitting an all-time low at the end of 2012. And, market indicators of future home purchases hit a four-year survey high in February. However, access to a down payment still remains the number one obstacle for homebuyers.
We review six key reasons why down payment assistance matters to today’s homebuyers:
1. Helps homebuyers purchase a home sooner: Instead of waiting on the sidelines, down payment assistance can help a buyer get into a home faster. It immediately builds their buying power and can help them take action on a purchase more quickly. Many buyers have remained on the sidelines, saving money, watching interest rates and seeking desirable inventory. Down payment assistance can be a valuable tool to help move those buyers off the sidelines and get them into a home.
2. Makes the purchase as affordable as possible: Homebuyers of all income levels have seen the housing crisis up close and want to ensure their purchase is an affordable and sustainable one. However, since the downturn, down payments for fixed rate mortgages have significantly increased. Even with lower interest rates and home prices, the cost of buying a home was out of reach for many moderate-income families. Homebuyer programs can help more families take advantage of these record low interest rates.
3. Helps offset increases in FHA premiums: First-time homebuyers are dependent on low-down payment financing. Over the years, FHA has been the primary place for many first-time homebuyers to get a low-cost, low down payment loan. In fact, FHA sustained housing markets nationwide during the economic and housing downturn. However, FHA recently took steps to stabilize the fund, including increases to premiums, increased down payments for some borrowers, and greater risk controls. Many don’t know that FHA loans can be combined with a down payment assistance program, helping offset increases in the down payment requirement and premiums.
4. Makes it possible for working families to live close to their work: All communities need public service employees. These are the police officers, firefighters and teachers who, especially in high-cost areas, often live far from the community where they work. There are several targeted down payment assistance programs for these employees to help keep them in the community, in turn helping reduce their commuter costs.
5. Gives homebuyers an important cash cushion: In the National Association of REALTORS® 2012 Profile of Homebuyers, 76 percent of buyers used savings to fund their down payment. And, only one percent used any type of program or assistance, even with billions of dollars available in programs across the country. Many buyers don’t take into consideration the need to keep some savings and reserve funds available for home maintenance and other unexpected emergencies. Down payment assistance allows buyers to do just that.
6. Provides valuable homeownership education: In order to qualify for an assistance program, most require homebuyers to complete homeownership education. It typically covers the logistics and steps of buying a home as well as financing basics, homeownership responsibilities and contract obligations. This valuable, upfront education helps prepare buyers for the home buying process and sets them up for long-term homeownership success.Image courtesy of Elwood W. McKay III at FreeDigitalPhotos.net