Last Updated on March 11, 2022 by Luke Feldbrugge
With rising interest rates it’s clear that the spigot of refinancing that have buoyed mortgage volumes over the past two years is about to slow to a trickle. With lenders shifting their attention to first-time buyers, now is the time to address the affordable home crisis, where accessing down payment assistance can play a big role.
First-Time Home Buyer Battles
Low Inventory of Affordable Housing
First-time buyers are increasingly competing for a finite amount of affordable housing supply in the current market environment. Housing has become more expensive since the turn of the century relative to earnings. In 2021 dollars, the real median price of houses sold in the US increased from $271,000 to $404,000, or by 49 percent, over the same period. Yet between 2000 and 2021, real median weekly earnings rose by just 10 percent.
Growing Demographic of Minority Homeowners
A lack of housing affordability threatens to keep a growing demographic of minority homeowners from accessing the housing market. Key findings of a recent analysis by Urban.org show that over the next five years, 75 percent of all first-time homebuyers will be women, millennials, or people of color, and all net household growth will be from households of color. Between 2020 and 2040, there will be 16.1 million net new households. Hispanic households will grow by 8.6 million, households of other races (mostly Asian households) will grow by 4.8 million, and Black households will grow by 3.4 million. White households, on the other hand, will decline by 0.6 million.
This demographic shift shows that net growth in the number of homeowners from 2020 to 2040 will be entirely among people of color, especially Hispanic homeowners. Between 2020 and 2040, there will be 6.9 million net new homeowner households, a 9 percent increase. Hispanic homeowners will grow by 4.8 million, homeowners of other races (mostly Asian) will grow by 2.7 million, and Black homeowners will grow by 1.2 million.
Nestled in those figures are scores of everyday heroes – firefighters, EMS, law enforcement, military, healthcare professionals, and teachers – that are struggling to access housing in the communities they serve.
Accessing Down Payment Assistance
Research shows that accessing Down Payment Assistance (DPA) for first-generation buyers could help turn the tide. Through a patchwork of sources, down payment assistance programs nationwide enable renters to become homeowners. The funds can be loans (often with low or no interest rates), grants, or hybrid loans forgiven over time.
In addition to closing the gap between the first mortgage and the cost of buying the home, accessing down payment assistance can leave borrowers with cash reserves for repair needs or other expenses. Because buyers borrow less for the first mortgage, DPA can also lead to lower payments and greater home equity when the DPA is granted or is forgiven over time.
Homebuyer education courses, which are often required for DPA, can help borrowers make sound decisions about financing, the home they buy, and sustaining homeownership.
Coming up with a down payment can be the biggest obstacle to buying your first home. Luckily, there are several programs with down payment assistance for healthcare workers. There are also different types of home mortgage loans that require little or no down payment.
Homes for Heroes Saves First-Time Homebuyers Money
Homes for Heroes offers Hero Rewards to heroes across the country in healthcare, law enforcement, education, firefighting, EMS and military professions. Heroes can save an average of $2,400 when they close on a home using a Homes for Heroes real estate specialist. Simply sign up today to speak with a Homes for Heroes real estate or mortgage specialist in your community to discuss what you want to do and how they can help you do it.