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At the market for new homes? Here’s what you need to know about the affordability and cost of a home:
The cost of housing in America is so high that many Americans are despairing that they own a home.
There is an almost extraordinary agreement among housing observers that for most people the main barrier to ownership is down payments. And in recent years, rental costs have become so cumbersome that nearly two-thirds of tenants live with negative cash flow, making it nearly impossible to save money by buying a home.
That’s why many of the real estate space is disappointed with the decision by Washington regulators to end support for several programs that have helped many Americans get into the position of buying a home through that hurdle.
A “Special Purpose Credit Program” is a targeted loan product designed specifically to benefit some groups of Americans who have historically been denied credit due to discrimination. On March 25th, Bill Prute, the new director of the federal housing finance institutions regulating Fannie Mae and Freddie Mac, ended the involvement of two government-sponsored companies in such programs.
“This is a real blow to some of the progress we’ve seen in efforts to improve homeownership, especially for those who have been historically ruled out,” said John Walsh, a researcher at the Urban Institute’s Center for Housing Finance Policy.
“During the harshness of the mortgage market and the lack of housing supply, first-time home buyers are struggling overall,” Walsh said. “There’s a real need for push to go beyond the hump and get homeownership.”
FHFA did not respond to multiple requests for comments from USA Today.
Fannie, Freddie, and SPCPS
Fannie and Freddie don’t take loans. They support the housing market by purchasing mortgages from banks and other financial institutions, and remove them from their books so that lenders can make additional loans.
SPCP is a program developed by such lenders and encourages ownership between communities as mentioned by Walsh. Fannie and Freddie began purchasing loans in 2023, resulting in nearly 15,000 households achieving homeownership.
An April letter from 18 members of Congress urged regulators to reverse the March decision. “In 2023 alone, Fannie Mae has acquired 921 loans through the Homele Dee First SPCP program, offering a down payment of over $5 million, or closed cost assistance, and earning an additional 4,747 loans through Lender Spondy’s SPCPS.
For example, lenders, previously known as security interest rates, had programs that offered up to $8,000 in support to potential home buyers who are underserved. This was intended to cover barriers such as deposit minimums and intrusion repair and maintenance costs. The company did not respond to a USA Today question about whether the program would continue without support from Fannie and Freddie.
Anniemac Home Mortgage, a national lender headquartered in New Jersey, has two programs: Start Home and Smart Access for Borrowers, working in partnership with the city’s housing finance institutions, with agents contributing a certain amount of down payments and lenders contributing to another part.
Anniemac COO Craig Ungaro said the company felt the “landscape change” that occurred in November as a result of the election and decided to suspend the program when it expired in April. The program was designed to help borrowers who otherwise struggle to create down payments and cover closure costs, he said.
“The population segment definitely doesn’t get too much of it or knowing access to it, so it gave us a way to get into those markets and reach consumers.”
The value of homeownership
Neighbourworks America is a national nonprofit that creates opportunities for people to live in affordable homes.
“It’s been very tough right now,” said Marietta Rodriguez, president and CEO of the group, in an interview with USA Today in March. “Insurance costs are rising, taxes are rising, and there’s general inflation and the economy. You feel like you’re swimming upstream, so you fully understand that people are just opting out, like, “Homeownership is not achievable for me.” ”
Still, Rodriguez said that owning a home connects Americans to the community in ways that Americans don’t rent. “So it’s our responsibility to all of us to make sure those opportunities are open to those who want to achieve that,” she said.
She noted that many Americans can “get out of the market” without realizing that many programs and systems are in place to help them.
In fact, there are over 2,500 down payment assistance programs nationwide, which have been rising since the second half of last year, according to a first quarter report from Atlanta-based down payment resources.
There are programs that support the purchase of manufactured homes, multi-family homes, first-generation home buyers, and more. Surviving military spouses also have special funds. As previously reported, the counseling services provided by NeighborWorks support Americans on every corner of the country, from Texas to Connecticut.
However, many residential observers consider the SPCP program special. The borrower who used them may otherwise have used an FHA mortgage. FHA mortgages have several drawbacks, including stricter mortgage insurance requirements for borrowers paying down peoms of less than 20%.
They also often take time to process. As a result, home sellers can be considered less favorable than bids with other types of mortgages, such as those supported by Fannie and Freddie. “It’s a better offer in the eyes of sellers, sales agents and people in the real estate community (non-FHA loans),” Ungaro says.
“The FHA is a good backup,” said Walsh of the Urban Research Institute. “But for many of these borrowers, I think what the SPCP program offers has helped them get through that hump in a way that the FHA can’t.”
