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Tip of the Month

Over the last several years, as home prices continue to decline, many stories have been published documenting the precipitous drop in home values and corresponding decline in home purchases. Given recent news coverage, one could easily conclude that real estate is one of the worst investments anyone could ever make. Of-course, these stories rarely paint the full picture.  In-fact, according to a recent Urban Institute study on income and wealth distribution, over forty percent of middle class wealth is represented by the value of one’s home.  This assumes that owners are not using lines of credit as revolving slush funds to live beyond ones means but suggests that wealth can still be built over time through careful thoughtful homeownership. 

The irony of the current real estate market is that today, and for the foreseeable future, homes and loans both are more affordable than they’ve been for years.  For Example, in the San Francisco Bay Area, starter homes that sold for $400,000 dollars a few years ago can be acquired for about half that amount.  In addition, current five and six percent interest rates make both affording and qualifying for a mortgage more attainable for people with low to moderate incomes.

Conventional economic drivers aside, there are additional financing opportunities that may make buying your first home far more affordable than one ever thought possible. Many people are familiar with the Section 8 rental assistance voucher program. However, it comes as a pleasant surprise to many that in some areas, Section 8 voucher holders can use the same program and voucher to pay a mortgage. The value of the voucher, as with the rental program, depends on the number of bedrooms secured by the voucher. That dollar amount, which also depends on the local market, can be used to pay a monthly mortgage payment, just as if one was paying rent. The big difference is that with the section 8 homeowner voucher, recipients are building equity on their way to building a more secure financial future for themselves and their families.

To register for the program, interested Section 8 participants should contact their housing authorities home ownership coordinator. Be sure to attend all the program's required counseling sessions and classes. Classes will include valuable financial education, and it is also worth noting that the programs mandatory employment requirement is waved for participants with disabilities. The Section 8 Home Ownership Coordinator will refer qualified applicants to a program lender for loan approval and may even be able to refer program participants to a qualified realtor familiar with the program and real estate market.

This program is complicated, but as with most things, patience is rewarded.  According to one local expert, this process can take up to two years from start to finish, but as someone once said, anything worth having is worth waiting for.

Another popular home buying tool is a loan product offered through the Federal Housing Authority. Current FHA loans require as little as a three and one half percent down payment of the total purchase price and also tend to have more flexible underwriting requirements than conventional mortgages. In addition, FHA loans can often be combined with local city or municipality down payment assistants programs which limit borrower’s commitment to 1% of the purchase price of the property. Another unique aspect to these loans is that they allow unlimited gifted funds from relatives and permit non-occupant co-borrower yet have competitive interest rates.

Lastly, the so-called (203) provision of these loans allows for the cost of renovations to be built into the financing: ideal for accessibility renovations such as a ramp or similar modifications. Home ownership, when approached in a deliberate intelligent way, still provides the promise of a more financially secure future. A home with a purchase price of $200,000 dollars over the period of a thirty year mortgage will, according to historical returns, appreciate on average 3% per year.  At the end of that mortgage, the same home, purchased for $200,000, will conservatively be worth $492,000 and be unencumbered by a mortgage obligation. 

Home ownership is not easy. It requires patience, planning and sacrifice over long periods of time, but in the end provides access to one of the best and most time proven asset building strategies for all Americans, including those with disabilities.

Thanks to realtor and WID board member Stephen Beard for his valuable assistance with the financing tools discussed in this article. For more information on Section 8 Housing Voucher and the FHA mortgage, check out his site at
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