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Home Buying Low Income Families

In addition to all the programs, HUD funds approved housing counseling agencies throughout the country that can provide advice on many housing-related topics, including buying a home. Use this map to find one in your state.

home buying low income families

To qualify, the buyer must obtain a fixed-rate first trust deed loan; have adequate income, a good credit rating; and provide a minimum down payment of 3 percent. Applicants also must attend a homebuyer education class and pre-purchase counseling.

CalHFA understands that buying a home is a huge responsibility; it is also a huge opportunity. Owning your home means you can paint the walls with your favorite color, plant flowers and vegetables if you choose and plant the seed for an investment in your future.

Since bottoming out in 2012, house prices in the U.S. have been recovering rapidly. According to Zillow, the median home value has been growing about 6 percent per year. While incomes have also been recovering, they have not quite kept pace with home prices. The median household income grew less than 4 percent per year from 2012 through 2015, the most recent year for which we have American Community Survey (ACS) data. In some parts of the country, house prices have been rising much more rapidly than incomes, putting pressure on affordability. This note uses data reported under the Home Mortgage Disclosure Act (HMDA), along with income data from the ACS, and house price data from Zillow, to explore whether families in such areas, particularly lower-income families, are being priced out of homeownership as a result.

The dispersion in house price growth across the country can be clearly seen in Figure 1. This figure shows growth from 2012 to 2015 in median home values and in median household income for over 600 of the largest counties.2 These data indicate that many counties have experienced house price growth well in excess of income growth (points above the 45-degree line), with the disparity greater than 20 percentage points in many cases. The counties experiencing the most rapid price growth relative to income are scattered across many different states, although there is a high concentration of such counties in California and Florida, states that were hit hard during the housing bust. While it is difficult to pinpoint what is driving the rapid growth in home values, many analysts have pointed to constraints on housing supply in some areas that make it difficult for new construction to meet demand.3

While rising house prices often benefit existing homeowners, some may find that rising prices make it more difficult to trade up to larger or higher-quality housing. In addition, rising prices can hinder first-time buying. As prices rise, lower-income households in particular may find it increasingly difficult to satisfy required down payment and debt payment-to-income (DTI) ratios. HMDA data illustrate that lower-income households are much more likely to have their mortgage applications denied because of a high DTI ratio or insufficient cash to close (Figure 2).4 HMDA data also show that among those who do obtain loans, lower-income households tend to assume more mortgage debt relative to their incomes than higher-income households, indicating that housing costs consume a greater share of their budgets (Figure 3). As home prices rise relative to incomes, lower-income households may be unwilling or unable to take on the greater amount of debt necessary to buy a given home, and could forgo homebuying altogether.5

To assess whether rising prices have restrained homebuying by lower-income families, we compare mortgage borrowing activity across income groups and across areas experiencing different rates of home price appreciation. We draw on annual estimates of the number of families in a county and given income category from the ACS, along with Zillow county-level home value data, and HMDA data. Using these data, in Figure 4 we plot growth rates from 2013 to 2016 in the likelihood of getting a home purchase loan by family income (above and below $50,000), and by county house price growth.

Notes: Each data point represents the change from 2013 to 2016 in the log fraction of families in a given income category and county group that took out a first-lien home purchase loan for a 1-4 family owner-occupied property. Numbers of loans are from the 2013 and 2016 HMDA data; numbers of families are from the 2012 and 2015 ACS.

Notably, many of the borrowers with incomes below $50,000 are likely to be first-time homebuyers. While the HMDA data alone do not indicate whether borrowers are buying a home for the first time, previous research using HMDA data matched to mortgage borrowers' credit histories indicates a strong correlation between borrower income and first-time buyer status (Bhutta and Canner 2013).7 Thus, the patterns in Figure 4 suggest that rising home prices may be starting to impede transitions into homeownership. 8

One caveat to this analysis is the possibility of lower-income families moving out of counties with rapid price growth and buying homes elsewhere. Such migration could help lower-income families find more affordable homes to buy. Nonetheless, the data suggest that rising house prices in some markets have restrained homebuying by lower-income families in those markets.

5. The possibility that rising prices are limiting homeownership opportunities raises concerns because of the benefits that homeownership may provide. For example, owning helps insulate families from unexpected jumps in rental prices (Sinai and Souleles 2005). Additionally, owning may help families save more than they otherwise would as they repay their mortgage (Sodini et al. 2016). Furthermore, owning may be less expensive than renting equivalent quality housing as landlords must charge more to account for the fact that renters have less incentive to maintain properties as well as owner occupiers do (Henderson and Ioannides 1983). For many families, these benefits may outweigh the risks associated with home ownership. Return to text

6. In 2013, the likelihood of getting a home purchase loan ranged from 1.1 percent to 1.3 percent for lower-income families, and from 2.9 percent to 3.6 percent for higher-income families, across these five groups of counties. Return to text

(PROGRAM FUNDS CURRENTLY UNAVAILABLE) The ADFA MCC Program is a dollar-for-dollar tax credit for first time, low-to-moderate income homebuyers. The certificate is issued by ADFA and allows qualifying homebuyers to claim a tax credit of up to 35% of the mortgage interest paid per year.

The Arkansas Dream Down Payment Initiative (ADDI) provides lower income homebuyers in Arkansas, who qualify for an ADFA first mortgage, up to $25,000. It is a second mortgage loan with no monthly payment that is forgivable over five to ten years depending on amount of assistance received.

The New York State Affordable Housing Corporation (AHC) creates homeownership opportunities for low- and moderate-income families by providing grants to governmental, not-for-profit and charitable organizations to help subsidize the cost of newly constructed houses and the renovation of existing housing.

Grants are given to projects servicing individuals or families who generally earn between 100% and 166% of the HUD Low Income Limits. To see the applicable HUD Low Income Limits at 100%, 112%, 137%, and 166% please click here. For full details on grant amounts and tiered income limits, explore the Current Notice of Funding Availability, RFP's and Applications section.

The Georgia Dream program was created to make homeownership possible for eligible low and moderate income Georgians by providing affordable financing options, down payment assistance, and homebuyer education.

The Georgia Department of Community Affairs (DCA) acts as the secondary market for lenders who want to provide an affordable mortgage product to low and moderate income Georgians. Potential home buyers apply with participating lenders for Georgia Dream loans. The loans are secured or guaranteed by FHA, VA, USDA-RD or conventional uninsured loans. Once the lender has completed the process and gives credit approval, the information is forwarded to DCA for compliance review and funding approval. Georgia Dream rates are available from your participating lender.

An eligible applicant is a first time home buyer, or a home buyer who has not owned a home in the past 3 years, or a home buyer who purchases a home in a targeted area (See What is a targeted area?). Applicant must have a minimum middle credit score of 640, must meet income and purchase price limits and must have limited liquid assets. Refer to the brochure or contact a participating lender at for current program guidelines.

An entire county or a census tract in which at least seventy percent (70%) of the families have a Household Annual Income that is eighty percent (80%) or less of the state-wide median family income, or an area designated by the State as an area of chronic economic distress and approved by the Secretary of the U.S. Department of Housing and Urban Development and the Secretary of the U. S. Department of Treasury.

Two ratios are used to qualify applicants for a mortgage loan. The housing ratio is the percentage of your potential new monthly mortgage payment, including monthly cost estimates for property tax and homeowners insurance as compared to your gross monthly income. The total debt ratio includes your prospective new monthly mortgage payment plus your existing debt payments compared to your gross monthly income. Your lender can calculate these for you and discuss if your ratios meet the Georgia Dream program ratio requirements.

If you are looking for assistance in obtaining financing as a first-time homebuyer and you qualify under CDBG, HOME, SHIP or Surtax income guidelines, you may apply for a mortgage loan subsidy through the County's loan program.

In general, individual or families who do not own a home at the time of application can qualify. To be eligible you must: have an income not exceeding the limits; have been employed in the same line of work for at least 24 months; have a good, established credit history and be approved for credit by a participating lender; and be either a U.S. Citizen, or have obtained legal permanent residency immigration status. Must be a Miami-Dade County resident at the time of application. 041b061a72


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