New Affordable Housing Initiatives Are Proposed to Equalize Access to Home Ownership
The Biden administration is seeking to leverage the Federal Housing Finance Agency (FHFA) to enact new affordable housing initiatives. This can be an effective tactic that will make home ownership a reality for a more diverse group of individuals and families. Private companies are also getting involved to drive greater home purchase equity while mortgage bankers are examining ways to propel the concept of sustainable mortgages for lower income borrowers.
New Federal Housing Goals
The proposed initiatives aim to ensure that FannieMae and FreddieMac increase mortgage purchases in minority, rural, and low-income communities as well as other underserved areas. A mortgage will now qualify if the borrower has an income that is below the area’s median income and the property is in a census tract where minorities are at least 30% of the area’s population.
This means a new benchmark has been proposed to achieve low-income home purchase goals even in the face of rising home prices. Previously, the goal was 24%. The proposed rate is 28%, which would be increased between 2022 and 2024. Also, for minority census tract home purchases, the new goal would be 10% with low-income census tract home purchases at 4% and low-income refinance rising to 26% from 21%.
Companies Join the Cause
Recognizing that it’s not just up to federal and state governments to address affordable housing, companies are joining the cause to deliver solutions. For example, Apple has delivered $1 billion – part of a $2.5 billion package — to assist 25 California counties and ensure that homeownership becomes a reality for more first-time buyers.
They are working with Destination: Home, the California Housing Finance Agency (CalHFA), and Housing Trust Silicon Valley, to support new housing development and construction, assisted first-time buyers purchase homes, and programs aimed at reducing homelessness.
In other parts of the country, states and cities are getting creative to spur more affordable housing choices. For example, in Iowa, government and private companies are pooling resources and collaborating to deliver more housing options.
Access to Sustainable Mortgages for Low-Income Borrowers
There is a new type of mortgage, also known as a green mortgage, combines the goal of affordable housing with environmental initiatives that not only help the environment, but they also help the prospective homeowner minimize energy-related living costs. As affordable housing becomes a priority, more unique borrowing programs will develop to help low-income buyers.
Available Low-Income Home Loans
There are numerous low-income home loan programs now available:
- The VA home loan is made for military home buyers, with no minimum credit score or down payment required;
- The FHA home loan is ideal for buyers who have lower credit scores or higher levels of debt.
- The Good Neighbor Next Door program delivers savings for nurses, first responders, teachers, and other public servants.
- HFA loans are offered in partnership with state and local housing authorities.
- There is down payment assistance through local grants or loans for home buyers with lower income and/or those who live in ‘underserved’ areas.
- Mortgage Credit Certificates can offer a tax credit equal to some percentage of mortgage interest payments.
Many of these mortgage programs are only available those with low or moderate income. The loans typically com with below-market interest rates, mortgage insurance discounts, low down payment requirements, and down payment and closing cost assistance in the form of grants and loans.
With these affordable home options, there are some requirements. These may include
an approved homebuyer education programs for first-time buyers, full-time residence in the home so no investment property usage, and income restrictions.
Contact us today to find out how we can help you find the ideal place to call home through our first-time homebuyer loan programs and our extensive experience with VA loans.