The hot housing market and rising interest rates have forced homebuyer assistance programs to adapt – Chicago Tribune


Maryia Bahdanovich thought owning a home would be good for her financial future and for her young son. But she wondered if it was possible for a single mother to land this real estate unicorn – an affordable house, in good condition, in the expensive western suburbs.

She decided to at least try. In the 15 years since arriving in the Chicago area from her native Belarus, Bahdanovich, now 39, has married, started a family, divorced, earned a college degree and settled into a good job as a contract administrator for a federal agency.

She started saving. In mid-2020, she was ready to buy, or so she thought.

The obvious starter property, a condo, was put off due to COVID-19 precautions. “Sharing the hallway space was not safe,” Bahdanovich said.

Townhouses and single-family homes were attractive, but out of reach. “I was unlucky because many people offered $10,000 to $40,000 more than the entry price, and I couldn’t do it,” she said.

Last fall, his fortunes turned. A friend told him about a program run by the Kane-Elgin HOME Commission that buys, rehabs and sells a few homes a year, reviving faded properties for the benefit of low-income buyers. She took a home buying course with HOME DuPage, Inc., which helped her gather complementary resources to solidify a home offer through the county program.

Bahdanovich’s $340,000 offer was accepted in January. She and her son moved in at the end of March.

Purchase assistance programs are designed for the long term, not to respond to rapidly changing market conditions. But as interest rates rise and competition intensifies for the few homes on the market, advisory program staff are adjusting the strategies they recommend to buyers. Increasingly, advisors are helping first-time buyers put together “stacks” of complementary resources that can help them cope with rising house prices, rising interest rates and other obstacles.


In the past, homebuyer assistance programs offered a patchwork of services with little coordination between nonprofits, lenders, developers, and homebuyer education programs. Now players are coordinating more closely, with lenders, counseling agencies and government programs collaborating on customized packages for each buyer.

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There is also a growing focus on helping low-income buyers stay on as homeowners after moving in. “If the first home repair is putting you behind on your mortgage, that’s not the point. You want it to create wealth, not deplete it,” said Katie Naftzger, community investment manager at Federal Home Loan Bank of Chicago.

Aspiring home buyers with limited resources need all the help they can get. Record mortgage rates have risen. In the third week of April, the average rate for a 30-year fixed-rate mortgage was 5.063% according to Bankrate, compared to 3.13% in spring 2021.

House prices show no signs of stabilizing either. Nationally, home values ​​have increased by 32% over the past two years. Defying the laws of supply and demand, rising prices do not lead to an increase in homes for sale. Quite the contrary: over the past year, the number of homes on the market has fallen by 22.5%, according to the latest information from Zillow, the real estate data and advertising platform.

All of these factors threaten to bury the hopes of low-income buyers. Homebuyer assistance programs are designed for stable market conditions, in that they set the amount and terms of assistance in conjunction with the government and lenders. The amount the programs can give or lend, as well as the eligible income and financial history of buyers, are key terms that are established each year and are not intended to vary with market trends. Their watch programs, which focus on helping buyers tidy up their credit history, master the basics of budgeting and save down payments, continue to be relevant. But to help buyers land a home, program staff members are getting creative in mixing and matching long-standing programs.

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Habitat for Humanity, the Georgia-based nonprofit developer, is well known for its “sweat equity” program that allows low- and middle-income buyers to earn their homes by helping with construction. The Chicago branch of Habitat for Humanity operates in two neighborhoods on the South Side and is expanding in the West Side, said Jennifer Parks, executive director. Habitat often acquires vacant land at low prices from Cook County and the City of Chicago, which paves the way for reasonable construction costs. In some cases, Habitat lends its own money to buyers, she said.

It took two years for Chicago healthcare worker Lisa Harris, 42, to complete homebuyer education programs, repair her credit and save a down payment, but it paid off when she moved into his Habitat for Humanity home last December.

“I was amazed,” Harris said, of the cumulative effect of the programs on her ability to earn the house, which now has a market value of $179,000. His aid stack included a federal down payment grant and another $6,000 grant to cover closing costs. Harris has also benefited from additional income after honing her job skills through one of her home buying preparation courses.

Habitat has expanded its reach and relevance with homeownership preparation courses that are now open to everyone. Courses help aspiring homeowners get their finances in order, understand the ups and downs of buying, owning and maintaining a home, and learn how to navigate the steeplechase of l buying a home, Parks said.

It’s imperative that potential buyers work with a counseling program approved by the federal Department of Housing and Urban Development, loan program officials say. These advisors are adept at operating the most relevant programs for each buyer. They also know which programs are being phased out.

The rapidly changing market requires advice Programs that might have been relevant over the past three years are working in different ways for today’s buyers, said Jesus Cruz, vice president of community lending for LoanDepot, an online lender. Some programs have expanded upper limits for grants, low-cost bridging loans, and income tests, so buyers today should get information directly from qualified housing counseling agencies and first-timers staff. buyers from lenders, he warned.

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First-time home buyers are increasingly turning to Federal Housing Authority financing products that allow them to fold the cost of a repairman’s rehabilitation into the initial loan for the purchase of the home, a Cruz said.

Even dedicated potential buyers are playing an endless game of catching up with the market, said Maria Luengas, housing counselor at HOME DuPage, Inc. She works with an immigrant family of four whose annual income of $35,000 les squarely qualifies for an array of First Time Home Buyer Assistance Programs. But even as the family worked and saved hard, rising interest rates set them back. A year ago, the family qualified to buy a $165,000 home, but now can only afford a $145,000 home.

The mother is now working, she says, in the hope that the extra income will help weather rising interest rates.

More help could be on the way for potential buyers like the family Luengas works with.

Federal mortgage lending banks are required to set aside 10% of their annual net income to support affordable housing, and for the Chicago bank, this has resulted in the creation of a $43 million fundraising pool. buyer’s aid and similar programs.

Primarily through a Federal Home Loan Bank-backed program called Down Payment Plus, last year 3,300 home buyers received an average grant of $6,000 to add to their personal savings. Almost all Down Payment Plus grant recipients were qualified first-time buyers under the programs’ guidelines — a household income no more than 80% of their area’s median income, which for Cook County last year translated to about $74,000 for a household of four.

The Illinois Housing Development Authority, a state agency that pools government resources in helping moderate-income homebuyers, also revamped some programs to give lenders and coordinating local nonprofits more flexibility. in the mix of resources for potential buyers, said Tara Pavlik, general manager of homeownership. .

An IHDA program allows a buyer to extend a down payment from as little as $1,000 to $10,000. Although the additional funds must be repaid, the interest rate is zero.

“It helps if you’re competing for a house,” Pavlik said. “It helps bridge that gap.”

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