A majority of places in the United States has housing costs that are increasing rapidly. In fact, they are increasing so much that they increase faster than wages. The federal government’s definition of housing affordability states that all housing costs should not exceed 30% of the household’s post-tax income. When housing is not affordable, all other aspects of live end up taking a hit. That is why it is important to understand where to find affordable housing!
Have Your Home FinancedAlmost every homebuyer that is interested in purchasing a home needs to do with money that is borrowed from a mortgage company and/or a bank. This is common practice and important to understand! A mortgage is defined as “a legal agreement by which a bank or other creditor lends money at interest in exchange for taking title of the debtor’s property, with the condition that the conveyance of title becomes void upon the payment of the debt.” according to the Oxford Dictionary. However, before a lender can loan any money for a house, they need to ensure that the homebuyer has enough post-tax monthly income to cover all costs associated with the home like interest, property taxes, principal, and insurance. A majority of mortgage programs make it mandatory that that these payments cannot exceed 30% of the borrower’s post-tax monthly income. Mortgages also typically require a down payment that is worth roughly 20% of the home’s value. If the house is valued at $100,000 then you would need to put down roughly $20,000. This sum of money can be difficult to save up for.
You Have Options for HelpYou may find yourself struggling to find a home in your neighborhood that you can afford when using the traditional mortgage ways of buying a home. This is when you need to look at exclusive programs that are aimed to help first-time homebuyers! There are several programs that offer a wide variety of help to assist people in becoming homeowners. These programs can either be funded federally, through the state, and/or through private funding subsidies.
This assistance is typically centered around helping recipients who are either at or below the median income level of a certain area. However programs vary and some offer low-interest financing, some offer down-payment assistance, some offer a mixture of both low-interest financing and down-payment assistance, and some offer the ability to keep housing affordable by offering shared or limited equity clauses that restrict the ability to resale price of a home in the future. A good rule of thumb is the more assistance, the more restrictions on terms of ownership!
Make Sure You Are PreparedWhen buying your first home, you will realize how much work actually goes into it. The first step is understanding the layout of everything: the home you wish to move into, and the community that it resides in. It is good to start a first-home file that holds basic information of listings, your financial information, as well as your employment information. Fill this file with information about the housing market in the area you’re looking to live in, and speak with real estate agents to make sure your information is up to date! The financial information that you put into your file should contain your budget plan that demonstrates a clear understanding of your financial situation. You should know how much 30% of your post-tax income is and base your criteria around that price range!
Find Resources That Are Close to YouHousing costs can be helped through housing assistance programs that offer affordable housing. There are programs like Section 8, which offers assistance to low-/very low- income applicants with housing costs through vouchers. Section 8 vouchers are generally used for rental housing, but can also be used to purchase a home! This type of assistance is run through either local or state housing authorities and varies depending on the location of where you’re receiving assistance.
Another good resource to utilize are community land trusts (CLTs) that put together packages of funding in order to help offset the cost of housing for moderate-/low- income families and individuals. CLTs develop affordable housing by ensuring the resale price of the home is limited so that cost of housing doesn’t increase faster than rent!
Understand Your LimitationsIt is important to make sure that you understand the limitations of your housing assistance program! Many of these programs have income limitations, so if you’re making too much, you may not qualify! The same goes for if you’re making too little. The program wants to be givent to recipients that make enough post-tax income to afford the mortgage payments. This can be checked through income verification!
Make sure to also understand circumstances where you may need to pay back the subsidy. This varies by program but you want to make sure you understand that portion of whatever program you are eligible for!
A Common Resource: NeighborWorksA popular resource to use is NeighborWorks. TNeighborWorks is a nonprofit agency that Congress created in 1978 in order to help support housing agencies and neighborhood programs in local communities. They create affordable housing by building relationships that result in homeownership for individuals who are low-income! However, there are many other resources so be sure to look everywhere!