Many Americans spend years saving up enough money for a down payment on a home. Under normal circumstances, the endeavor is a major struggle that takes hard work, diligence and sacrifice. But over the past year, the struggle has gotten harder than ever.
Thanks to inflation and the lingering impacts of the Covid pandemic, a lot of the cash that potential homebuyers have been trying to tuck away has been slowly disappearing. But there is something that lenders can do to help replace it.
Identifying the Causes
The primary factor behind today’s inflation is the pandemic and the resulting lockdowns and layoffs, which prompted consumers to spend less money. When the lockdowns ended and people got back to work, consumer spending soared, creating supply chain issues that ultimately resulted in companies raising prices.
In fact, according to the Fed’s most recent Beige Book, which measures overall economic activity, inflation is particularly hurting the purchasing power of low- and moderate-income families. The impact can be clearly seen in the U.S. Consumer Price Index, a key economic indicator and measure of the nation’s annual inflation rate. For the first time since 1990, the Consumer Price Index climbed over 6% during 2022, ending the year at 6.5%.
Another factor that’s likely to increase consumer spending is the Biden administration’s plan to end the Covid-19 public health emergency later this year, which is expected to cause vaccine prices and other virus-related healthcare costs to soar.
Where the Money Went
While there are signs that a series of interest rate hikes by the Fed are starting to curb inflation, a growing number of Americans have been dipping into their hard-earned savings just to make ends meet. According to the U.S. Bureau of Economic Analysis, the U.S. personal saving rate stood 3.4% in December, a far cry from the 8.7% savings rate one year prior.
Just as troubling is the fact that many would-be homebuyers are using their savings to pay off rising credit card debt.
According to TransUnion’s most recent Credit Industry Insights Report, credit card balances reached a record $866 billion during the third quarter of last year, an increase of 19% from one year prior.
As their cash disappears, homeownership can feel further out of reach for many Americans, even those who could afford monthly mortgage payments.That’s especially the case for people of color trying to be the first homeowners in their family, as they often have less savings and fewer financial resources to begin with. So, what can lenders do to turn this situation around?
Down Payment Assistance May Save the Day
In terms of helping borrowers avoid draining their savings to buy a home, down payment assistance may be an excellent tool and is widely available to qualified, creditworthy borrowers nationwide. That’s why many lenders rely on CBC Mortgage Agency and its Chenoa Fund down payment assistance program to help their customers overcome their financial hurdles to homeownership.
CBC Mortgage Agency provides the Chenoa Fund down payment assistance program (DPA) independently of any other government agency or entity, which allows us to create a broad range of DPA programs that help many first-time homebuyers. In fact, qualified borrowers can access the Chenoa Fund DPA for up to 5% of their home price.
Over the years, more than 40,000 borrowers—including over 20,000 people of color—have used the Chenoa Fund DPA to overcome their down payment hurdles. Your borrowers may be able to as well. Visit our website to learn more about how your clients may be able to use the Chenoa Fund DPA to unlock the doors of homeownership.
CBC Mortgage Agency – NMLS 1186381
For licensing information, go to www.nmlsconsumeraccess.org.
Illinois Residential Mortgage License #MB.6761292. Illinois Department of Financial and Professional Regulation, Division of Banking, 100 West Randolph, 9th Floor, Chicago, IL 60601 – 1-888-473-4858. This information is provided by CBC Mortgage Agency and intended for real estate and mortgage professionals only. It is not intended for public use or distribution. Terms and conditions of programs and guidelines are subject to change at any time without notice. This is not a commitment to lend. Equal housing opportunity.
