Homebuyers'
aid
New law offers cash grants to low-income families
By
Andrea Coombes, CBS.MarketWatch.com
Last Update: 8:07 PM ET Dec. 16, 2003
SAN FRANCISCO
(CBS.MW) -- The outlook
for low-income Americans
striving to become homeowners
got brighter Tuesday
as President George
Bush signed into law
the American Dream Downpayment
Act.
The bill
authorizes $200 million
in annual grants to
help low-income homebuyers
with down payments and
closing costs. About
68.4 percent of Americans
own their own homes,
but that number drops
below 50 percent for
many minorities.
"That's
not right, and this
country needs to do
something about it," Bush
said today at the signing
ceremony, reiterating
his goal of adding 5.5
million more minority
Americans to the ranks
of homeowners before
the end of this decade.
The
grants are aimed at
people
who can afford monthly
mortgage payments, but
not the steep upfront
costs of a home purchase.
To qualify, homebuyers
must have incomes below
80 percent of their
area's median.
One caveat:
While the new law authorizes
$200 million, those
dollars must still be
approved in annual budget
bills, said Brian Sullivan,
spokesman with the U.S.
Housing Department.
If the
$200 million holds,
about 40,000 Americans
each year will benefit
from the new law, based
on an average grant
of $5,000. But, because
local agencies will
administer the program,
average amounts will
vary. The maximum grant
per family is $10,000
or 6 percent of the
home's purchase price,
whichever is higher.
Industry
experts lauded the plan. "Every
increase in available
funds to help with down
payment assistance is
helpful in expanding
the doors of prosperity
for working families," said
Scott Syphax, chief
executive of Nehemiah
Corporation of California,
based in Sacramento,
Calif., a nonprofit
provider of down payment
assistance.
"Those
homeowners will hopefully
enjoy some equity appreciation,
their presence as owners
not renters will help
stabilize the communities
they reside in, and
hopefully the appreciation
they enjoy will create
the foundation for them
to maybe one day send
their kids to college
(or) start a small business," Syphax
said.
Nehemiah
has given about $600
million in down-payment
gifts since 1997 to
nearly 200,000 families,
and the private down-payment
assistance industry
has fueled 3 percent
to 5 percent of all
home sales monthly,
he said.
Homeownership:
The definitive savings
vehicle
For low-income
Americans, buying a
home can mean the difference
between a comfortable
existence and its opposite,
according to a separate
report released Tuesday
by the Consumer Federation
of America.
The typical
low-income homeowner
was worth $50,000 in
2001, compared with
the $7,900 in net wealth
of a typical low-income
household, according
to an analysis of the
Federal Reserve Board's
Survey of Consumer Finances
commissioned by the
CFA.
Meanwhile,
for the lowest-income
homeowners, home equity
represented 80 percent
of their net wealth,
compared with 42 percent
for homeowners overall,
and 26 percent for the
highest-income group.
"The
mortgage is the most
effective forced savings
plan that exists," said
Brad Scriber, housing
coordinator with the
Consumer Federation
of America, a consumer
advocacy group.
And
homeowners are enriched
by the
leveraged nature of
their real estate investment. "If
you have a small down
payment and your property
appreciates, you get
the benefit on the total
market value, not just
your down payment," Scriber
said.
While
Scriber, too, praised
passage of the federal
law, he noted that free
money isn't always enough
to propel low-income
Americans into their
own homes. "Pessimism
is one of the largest
obstacles to savings.
People just think that
they can't save and
that wealth is for the
wealthy."
The CFA,
through its America
Saves program, urges
consumers to save whatever
they can, and to start
now. Once saving starts
and compounded interest
starts to kick in, people's
optimism tends to grow.
That's where programs
such as the new homeownership
grants come in, Scriber
said.
"If
you can combine this
optimism and this savings
ethic with other programs
and other tools of wealth
building such as homeownership,
(then) developing substantial
wealth is a real possibility
for people of all incomes."
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