Over the past few years, mortgage industry stakeholders have made great strides in efforts to help close the gap for minority homeowners. Nationwide initiatives, such as MBA of America’s CONVERGENCE location-based programs, the NAREB Building Black Wealth Tour and the Hispanic Wealth Project, bring hope to both buyers and lenders. On October 2, 2024, the National Council of State Housing Agencies (NCSHA) recognized the Establishment of Affordable Housing among State Housing Finance Corporations. Financial institutions have expanded their outreach activities and professional collaboration. Even so, America is still dealing with low assets, uncertain interest rates, and stranded homebuyers.
According to the State of the Housing Report 2024 by the Joint Center of Housing Studies (JCHS) of Harvard University, half of all rental households (22.4 million) are struggling, spending more than 30% of their monthly income on rent, and almost half of this group (million 12.1) severe cost burden, where 50% or more of the income is required to pay the rent. Black and Hispanic renters have been hit hardest, and in the past two years, the numbers of Black and Hispanic renters who can’t afford a median-priced home have dropped by 43% and 40%, respectively, according to JCHS.
Hoping to find an affordable home, home buyers will be doing more than just shopping around for competitive prices—they’ll be looking at the whole package. Because of the widespread media coverage that promises down payment assistance and tax credits, the search for compensation will be in full swing. In addition to low home prices and uncertain prices, homebuyers next year are likely to be afraid of “fear of missing out (FOMO).”
Customers will begin to ask questions about how mortgage tax credits work, and what types of payment records are acceptable to prove their two-year rental history. They may need clarification on eligibility criteria noted on forms, such as the First Generation Home Purchase Certificate (Form 1109), currently required by government housing agencies.
Not every applicant will qualify, but lenders can show good faith by searching for other programs and incentives. By encouraging “pre-purchase” conversations, startups can help customers explore home buyer support from any location using tools like Freddie Mac DPA One.
Home buyers can benefit from meeting with a HUD certified home buyer advisor
The fear of missing out—and other uncertainties—can be reduced with the help of an independent consultant. Professional advisors can bring much-needed clarity to a complex process, even when customers are dealing with a highly skilled salesperson or loan officer. Neutral advisers help confirm what has been said to buyers about traditional local practices and areas and the steps to apply for a mortgage.
The US Department of Housing and Urban Development (HUD) manages a network of Housing Counseling Centers (HCAs), which serve approximately one million clients each year. Certified advisors are also involved in providing effective Fannie Mae and Freddie Mac home ownership education requirements, as outlined in the Supplemental Consumer Information Form (Form 1103).
What will $25,000 in home buyer assistance look like?
David M. Dworkin, President and CEO of the National Housing Conference, wrote that the Harris-Walz Housing Plan is detailed, sensitive, and impactful, and calls for a major expansion of President Biden’s down payment assistance proposal. The Biden-Harris administration initially proposed providing $25,000 in down payment assistance to 400,000 first-generation home buyers and a $10,000 tax credit for first-time home buyers.
The Harris-Walz Housing Plan will provide $25,000 to all first-time homebuyers and ensure full participation for first-generation homebuyers. The program extends the reach of assistance to 4 million first-time buyers over the next four years.
There are two pending bills from the Biden-Harris Administration that could serve as building blocks for next year’s programs. The Downpayment Toward Equity Act (HR 4231) is a bill first introduced by Congresswoman Maxine Waters, and has been pending with 118.th Congress (2023-2024).
The Biden First-Time Homebuyer Act of 2021 is a bill that was intended to renew the expired 2008 tax credit. Under the new program, eligible home buyers can receive a tax credit equal to 10% of the purchase price of their home, up to $15,000.
I Low Pay for First Generation The fund is an active program as part of Build Back Better Action, passed by the US House of Representatives in November, 2021. The $10 billion grant program is provided by US states and is available through housing cooperatives and other eligible businesses. This program is available at participating housing finance agencies. Key fitness rules are highlighted below—some of which may be included in the Harris-Walz program:
- First-time home buyers are those who have not owned a home in the past three years.
- First-generation home buyers are people whose parents or guardians did not own a home at the time of the home buyer and whose spouse has not owned a home in the past three years. Anyone who has lived in foster care is eligible as a first-generation home buyer as long as they have not owned a home in the past three years.
- Homebuyers must have an income at or below 120% of the area median income (AMI) in the area where the home is being purchased or the area where the buyer lives. Income limits are increased to 140% of AMI if the home being purchased is in a more expensive area.
Now is the time to develop internal training
I First Generation Fact Sheet from Fannie Mae offers a comprehensive FAQ that can help mortgage service workers understand the new vocabulary. To help meet the needs of next year’s homebuyers, here are key topics to include in employee training:
- Procedures for documenting two years’ worth of rent payments–with acceptable forms, such as the Venmo rental app.
- Acceptable types of non-traditional documents to verify payments for rent, utilities, cable, telephone, health insurance, tuition, child care, labor union, and equipment leases.
- Pre-purchase interviews to determine eligibility based on the housing costs and income of the MSA area where potential homebuyers are looking.
- Understanding exemptions from first-generation eligibility rules, such as inheritance, unimproved land, mobile homes, etc.
- Anticipate problems related to rate locking and/or expiration of mortgage contingencies.
- Handling sub-contract inspections and request for reconsideration of value (ROV).
- offers mortgage consulting services at Housing Research, LLC
Anna DeSimone provides mortgage consulting services at Housing Research, LLC
This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners.
To contact the editor responsible for this piece: [email protected]
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