Real Estate

In Today’s Market, Does Down Payment Assistance Really Help?

What we really need is more housing — especially affordable housing. Prices are still going up, and soon, there won’t be any houses priced low enough to be affordable for people who are within the income limits that qualify them for financial help.

I don’t know the answer, but it seems as though some of the programs designed to make buying a home more affordable are also making it more expensive.

Some homebuyers were referred to me who were preapproved and eligible for down payment assistance programs. One of the programs offers assistance for homes located in certain neighborhoods. These programs have income restrictions that are pretty generous.

There are no-interest, no-payment loans that don’t have to be repaid if the buyer lives in the home for a number of years without refinancing or going into foreclosure.

The buyers search for homes in the neighborhoods that have the lowest-priced houses because those are the houses they can afford. Home prices in these neighborhoods have gone up more than prices in the neighborhoods with higher-priced homes.

The homebuyers who are taking advantage of the programs are required to take a HUD-approved homebuyers’ class. I don’t think the classes cover the challenges of buying a house during the current market.

Like most homebuyers, these people have visions of housing that fits into their dream of a home but doesn’t match the reality of what can be found in their price range. They want a home with a large formal dining room for entertaining and a home with “old-world charm”.

A larger house with at least three bedrooms but more would be alright, too, because having more space is wonderful. One extra bedroom will become an office, and the other will be for hobbies. The house would have to be move-in ready and not need a lot of work because paying for the house would take every penny the buyers have and leave no money left for repairs.

Some buyers are looking for real estate priced well below the median for the area. The houses in that price range can only be found in one or two parts of the city and are either very small but not cute, like tiny houses, or they’re larger and need repairs.

The houses do not match the vision these buyers have of what their first home should look like. Those images they see on reality TV of the house that doesn’t smell like a cat’s litter box, and that they can picture themselves having friends over for dinner and drinks.

The buyers have a dream, and they believe they’re the only ones who know about the cute house that’s coming on the market soon, and they are sure the sellers will accept their heavily financed low offer that includes down payment assistance. They just need to write the sellers a letter because no one else has ever thought of that.

Some affordable houses were rentals, and the owner painted every surface in every room the same shade of white which removes any hint of old-world charm (or any other kind of charm, really). The windows might be newer, but they are painted shut. There is worn linoleum in the kitchen and worn grayish carpeting on the floors.

I wonder about the lenders who work with these programs and preapprove buyers for amounts that are far less than what a house actually costs. Do they know how much houses cost these days or how many buyers there are who can afford to buy them?

It’s very hard right now to encourage a young person to buy a house that needs a lot of work because we don’t know where they are going to get the funds to fix it up when it’s already at the top of their price range.

To add an extra challenge to the situation, offers that include some kinds of assistance are less likely to be accepted by the sellers, but they have a better chance than FHA or VA loans. The programs might be making them more expensive as buyers try to outbid each other for a chance to buy a house that fits into the program.

It reminds me of the federal tax incentives for homebuyers and sellers in 2010. Both home sales and prices went up from 2009, but in 2011, we hit an all-time low in both home sales and prices.

Wouldn’t it make more sense to find a way to subsidize homeowners who will accept an offer for 5 or 6 percent less than the value of their home? Maybe if cash assistance could be used for repairs instead of going toward the purchase, existing housing could be purchased for less and then improved.

What we really need is more housing — especially affordable housing. Prices are still going up, and soon, there won’t be any houses that are priced low enough to be affordable for people who are within the income limits that qualify them for financial help so they can buy a house.

Teresa Boardman is a Realtor and broker/owner of Boardman Realty in St. Paul. She is also the founder of

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