The path to affordable homeownership is longer than it used to be. Interest rates are higher. Coming up with a down payment is harder. And there's less affordable housing stock available, especially for low- and moderate-income residents looking for a safe place to live, according to NeighborWorks America's National Homeownership Programs & Lending staff.
One such staff member, Senior Manager Brooke Linkow, explains, "Because of that, there's a need for deeper housing counseling services. "That means housing counselors may need to conduct more one-on-one sessions with clients to help them build credit and dismantle debt. It means more outreach — trying to meet people earlier in their homeownership journey so they're ready to take advantage of the right homebuying opportunity when it comes along. It also means educating people about financial supports available to them like down payment assistance, grants for closing costs or special purpose credit programs.
"Getting a client mortgage ready takes a more holistic approach in the current housing market," adds David Paul, specialist, National Homeownership Programs & Lending. "It used to be, getting a homebuyer ready was just more straightforward. Today, housing counselors need to focus on engaging
and motivating clients who may feel homeownership is out of reach, help them stay motivated to overcome obstacles like credit or debt issues, and educate them about financial resources to help make home purchase more accessible to those at lower incomes."
NeighborWorks America's homeownership team is well aware of the many challenges homebuyers face, and staff members are working to combat them, providing grants, training and peer learning opportunities to NeighborWorks network organizations who provide pre-purchase counseling services. They are also shining the spotlight on network organizations trying innovative approaches to keep clients in the homeownership pipeline — and to get them in the pipeline earlier, particularly when it comes to homeownership.
Trying new programs in Chicago
At Neighborhood Housing Services of Chicago, staff have definitely seen a shift in how long it takes to buy a home. While certain grants have brought in clients who are mortgage ready, the organization's standard clients are long-term or extremely long-term clients, says Danielle Matthews, director of homeownership services.
Lower housing stock, job changes, higher interest rates — "all of the factors are extending the time to homeownership for our clients," she says. Plus, NHS of Chicago is seeing fewer approvals come in from lenders, and lower preapproval totals, which often top out at $200,000 or $250,000.
Says Karen Woods, director of strategic initiatives and public grants and contracts, "That makes it hard, especially in Chicago. Finding inventory in that price range? It's just a unicorn."
Outreach makes a difference. NHS of Chicago, which has the slogan, "Empowerment through homeownership," has added more homeownership classes, and staff have reached out to renters in neighborhoods where renters are likely to be closer to homeownership ready. They've let residents know it's taking longer to buy a home and urged them to get started.
"We're trying to get them to think about it now, knowing there's a longer outlook," Woods says.
Staff members are working toward partnering with rental managers to help funnel people toward the homeownership courses that will let residents know when and how to begin preparing, Matthews adds. "We're still building the program, finding resources in the community and creating a peer support model. It's all in development."
NHS of Chicago has also hired a rental housing counselor to help stabilize renters, knowing that renting is part of the journey to homeownership, if that's the direction renters choose to go. Staff are also connecting with younger renters, who aren't as sure where to start in the housing process. The goal is to show them that homeownership is, in fact, in reach.
Trying different strategies is key, Matthews says, adding that "people are definitely still buying." The organization helped three clients close on properties in early May, and a homebuyer education class that month brought in 150 people. "That lets you know how many are looking forward to pursuing the opportunity. Getting to closing is a different conversation."
Mind the Gap
At Neighborhood Housing Services of Baltimore, staff created a new program, Mind the Gap, using funding from the Community Development Financial Institutions (CDFI) Fund. Kareema Pinder, director of the Homebuying Center, says Mind the Gap is aimed at assisting families who want to purchase a home but face affordability challenges. By offering additional resources, this program seeks to provide families with a bridge over the affordability gap. The programs allow them to secure their dream home sooner without compromising their financial security.
Through the program, families moving into targeted areas can receive anywhere from $20,000 to $50,000 — depending on the region — to help close the gap to homeownership.
With the stimulus checks and low interest rates early in the pandemic, people were buying houses. "Fast forward to now," she says. "The money's low and runs out faster. So when we looked at some of the barriers to homeownership, we knew closing costs and down payments were important. We had to look at what do we need to do to make homeowners successful."
NHS of Baltimore's multi-pronged approach also included providing first mortgages, Federal Housing Administration loans, Veterans Affairs loans and conventional loans themselves. Clients "were getting turned down by other venders," Pinder says. "They didn't have a good credit score and their savings were not where they needed to be. We wanted to be a one-stop shop where we could provide education, do one-on-one coaching. We could do renovations and build up housing stock. We want to help keep clients motivated and engaged."
Meanwhile, staff continue to emphasize counseling. "It used to be getting a homebuyer ready was easier," she says. "Now, it takes more financial capability services to get everyone ready. This market can be so expensive, and there's a need to go deeper with prepurchase services."
There's a need to go deeper in other places, too, says Noelle Melton, vice president of National Homeownership Programs & Lending at NeighborWorks America. For network organizations, she says, creativity is key.
"Network organizations and their clients are forging strong relationships," she says. "Those relationships are there when the clients buy homes, and it also means the clients have somewhere to turn as they work to maintain and keep them. It's been great to see all of the network's creativity and innovations."
06/27/2023
