Downpayment programs that particularly help first-time homebuyers have been widely underused at a time government officials and housing industry professionals have been trying to find ways to lure these buyers and jump-start the home-purchase market, a new study has found.
More than 87 percent of the nation's 68 million homes and condos would qualify for a downpayment program where they were located,
RealtyTrac and the Down Payment Resource (DPR) reported on Tuesday. DPR monitors roughly 2,290 downpayment programs across the county and runs a clearinghouse of information for consumers. The analysis found that 91 percent of these programs have funding available, but many potential homebuyers don't seem to know about them.
"More homes could be sold, more people could buy homes, if they were aware of these options," said Rob Chrane, DPR's president and chief executive officer, in a phone interview with Scotsman Guide News. "Millennials, in particular, but generally first-time homebuyers, wildly overestimate how much they need for a downpayment."
Chrane said that studies from Harvard's Joint Center for Housing Studies and other industry groups suggests that millions of people between the ages of 24 and 35 could be eligible for a loan, but more than two thirds mistakenly believe they won't qualify.
"Seventy percent believed they needed a downpayment of 11 [percent] to 15 percent, which was higher than [what] was required last year," Chrane said. "They are pessimistic about their ability to qualify for a mortgage."
According to RealtyTrac, residents can find a program in every county in the U.S. The most popular type are second mortgages offered by housing-finance agencies and nonprofits at low or no interest rates. Buyers can get a significant amount of help with a downpayment program. For example, the study said the average amount of downpayment assistance across all counties is $11,565. This assistance could help a homebuyer reduce the amount of cash needed to close from $20,000 to $200, the study claimed.
Getting the word out, however, could continue to be a problem.
Mark Hughes, chief operating officer at First Team Real Estate in Orange County, California, said few Realtors keep up with these programs. "It is up to Realtors to teach this and very few can," he said. "We have found that most of these programs fall on deaf ears until somebody really needs [them] to make a deal happen."