Most renters want to own their own home. It’s the American Dream. Unfortunately, many renters feel that this dream is unrealistic; in a 2018 study by the Urban Institute, renters cited that “affording the down payment” is the main obstacle to homeownership. Here are a few reasons why renters feel this way:
- Two in three consumers felt it was difficult to save for the down payment.
- About 80% of respondents were either unaware of how much lenders require for a down payment or believed that down payments must be above 5% of the purchase price.
- 30% or respondents believed lenders expected a 20% down payment.
This illustrates a serious deficiency in the education of homebuyers. Most renters who want to buy a home have not taken the time to ask a lender about down payment requirements, which prevents them from taking advantage of the current market. Home loans are at historic lows, which, in turn, lowers the monthly cost for owning a home. Today’s rates will not be around forever, and homeowners need to be educated regarding that fact. If they were to learn about down payment assistance, they might learn that they could be a homeowner today.
What do you know about down payment assistance?
Down payment assistance (DPA) has been a catalyst and a blessing for many adults seeking the American Dream of becoming a homeowner.
Many qualify for DPA, but few apply. In the 2018 Urban Institute report Barriers to Accessing Homeownership, between 22% and 51% of people studied in metropolitan statistical areas would be eligible. If we, as an industry, took the time to educate potential homebuyers, they could be taught that six in ten homebuyers finance their home purchase using a down payment of six percent or less.
DPA programs provide cash to low-income homebuyers who can’t make the down payment or pay the closing costs involved in obtaining a mortgage. Typically, DPA programs are offered by federal, state, and local government agencies, as well as by nonprofit organizations or employers.
The benefits of DPA often include 0% interest rates, deferred payments, and forgivable loans. The amounts available to buyers can be as high as tens of thousands of dollars.
What insights do borrowers need to know about DPA?
There are more than 2,500 down payment assistance programs in the United States. In addition to this vast number of programs, there is no set standard for how DPA works. This makes it somewhat difficult for homebuyers to zero in on the program that is right for them. They may qualify for one, but not another. Many borrowers need help to learn the different types of DPA programs available in their community and which ones will help them best. You can best help borrowers by learning all of the options yourself.
Learn about Chenoa Fund DPA programs
One such program is Chenoa Fund, a DPA program available nationwide, in all states except for New York.
At Chenoa Fund,we offer DPA in the form of second mortgages. We offer five different second mortgage options, each with their own individual underwriting requirements and guidelines, in an effort to provide options to borrowers of any income and any DTI. Some of our options include products for both FHA and Conventional loans; some features for our products include zero percent interest rates and no monthly payments. Click here to learn more about Chenoa Fund and how you can offer Chenoa Fund to your borrowers.
Homeownership remains the cornerstone of the American Dream. Don’t let the down payment keep your homebuyers from realizing their dream of owning a home.
The Chenoa Fund is an affordable housing program administered by CBC Mortgage Agency (CBCMA), a federally chartered governmental entity. CBCMA specializes in providing down payment assistance financing under FHA and conventional guidelines.