Many middle-class Americans are giving up on buying a home due to tight affordability conditions. More awareness surrounding down payment assistance programs may help.
A 2015 survey of buyers found that 76 percent were unaware that they didn't need 20 percent for a down payment. According to Rob Chrane, chief executive of assistance program tracker Down Payment Resource, there are about 2,500 programs offering grants and low-interest loans for down payments and closing costs, yet, as Seattle-based real estate agent Lindsey Sargent says, “The programs are not well understood, and there aren’t nearly enough to serve all the need." Typically, a credit score over 700 and stable income allows buyers to qualify for conventional loans with just 3 to 5 percent down, PNC Bank head of mortgage distribution Peter Boomer tells Reuters.
It took 52-year-old social worker Nancy Peterson a combination of five different grants and low interest loans to accumulate $80,000 for the downpayment she needed to become a first-time home buyer in Seattle last summer.
Peterson’s modest income was far too low for Seattle’s soaring housing market, where the median home price is now over $700,000. Without the assistance, Peterson would have only qualified for a $100,000 purchase with a loan insured by the Federal Housing Administration (FHA).