Now Is The Time For Us To Swing This Pendulum Back To The Middle! (Part 2 of 3 – Low-to-Moderate Income, Workforce Buyers)

In the almost 25 years I've been in the real estate and finance world, I've come across many programs that effectively contribute to sustainable homeownership for owner occupants. These programs may work for buyers qualifying for Conventional, FHA, VA, even Jumbo loan programs, but most require buyers take fixed rate loans, not adjustable or interest only loans. Most require the buyer not to have owned a home in the past three years, have low-to-moderate income for their area, and attend an approved Homeownership Education Program. I think it is time the lending institutions and housing agencies take another look at a few of them:

• Mandatory Homeownership Education - HUD approved homebuyer education courses covering the many issues home buyers face, including credit worthiness, budgeting, loan program selection, home selection, and ongoing maintenance put on by local housing resource centers in a non-pressure, education only environment.
• Mortgage Credit Certificate - a dollar for dollar tax credit that may be used to help offset housing costs that will typically be slightly higher than rent expense for most first time home buyers; program is administered by participating cities and counties.   
• Community Reinvestment Act Incentives - banks get CRA credits to meet their regulatory requirements by lending to low-to-moderate income buyers and/or those buying in areas with heavy minority populations, passing along a credit to qualifying first time home buyers. This program may be used in conjunction with the Mortgage Credit Certificate program.
• Down Payment Assistance - zero interest "silent" loans that require no monthly payments and are repaid upon sale or refinance of the property; program ideally funded from a different funding source than the Mortgage Credit Certificate program so they may be used in conjunction with each other.
• Seller Funded Down Payment Assistance - a program run by non-profit companies, paid for by participating Sellers who pay a fee and agree to credit the buyers all or part of their down payment; strong appraisal review process must take place to insure against inflated sales prices to cover seller payments to the program and buyer.

 I have seen many first time home buyers reap the benefits these programs gave them to help them get in to their first home. NONE of them defaulted on their loans or lost their homes, and I believe this was a result of the homeownership education they received in classroom or given by me.

In spite of spending a LOT of time and effort educating these buyers, a few did go on and sell their first home, moving up to their next home, at that time choosing loan programs that did not lead to sustainable homeownership, such as Option ARMS, interest only adjustable rate loans after hearing so many of their co-workers, family & friends were using them. A few got caught up in the spend then refinance trend, using their homes as an ATM. Those that came to me when refinancing then received credit counseling and budgeting refreshers! Educational efforts kept these percentages very low, though.

Together we CAN make a difference!

Karen Cooper - OR/CA Mortgage Consultant - www.Quality4Loans.com

Part 1 http://activerain.com/blogsview/453104/Now-Is-The-Time

Part 3 http://activerain.com/blogsview/453188/Now-Is-The-Time