A knowledge gap about the home buying process among many consumers contributed to more than half of them feeling unsure they had paid fair value, according to a new poll released this week.
Limited awareness of down payment assistance and other programs that would provide greater affordability also seemed to leave almost one-third out of cost-saving opportunities, KeyBank’s report on the state of fair housing said.
Only 47% of buyers with household incomes of less than $75,000 who purchased homes within the last five years said they felt confident they paid a fair market price, the report showed. Meanwhile, 30% thought their buying experience had been unfair or were not convinced it was. The poll was conducted in February and included over 1,000 participants.
“When it comes to buying a home, there are many factors to consider — the largest being, can I afford it, and will I get a fair chance,” said Victor Alexander, head of Key’s consumer bank. “Both new and experienced homebuyers are understandably anxious about the state of the market.”
Furthermore, the survey determined only 31% of participants had sought out home buyer assistance, such as down payment grants, prior to their purchase, suggesting a good number did not know they existed, KeyBank said. Another one-third approached their realtor or a mortgage professional to take advantage of the programs, while 24% consulted a bank.
raaThese findings come as a greater share of home finance professionals said the housing industry and the federal government needed to place greater emphasis on affordability challenges this year, according to recent research conducted by Arizent, parent company of National Mortgage News.
In a separate report issued last summer, the number of down payment assistance programs looked to be on the rise, with growth on federal and state levels. At the same time, it was also unclear how many consumers were taking advantage of them, in part, due to surging home prices still putting purchases out of reach even with assistance.
Efforts to increase homeownership among those previously underserved continue. Included within President Biden’s proposed 2024 fiscal-year budget is a request for $100 million to help provide down payments to first-generation new home buyers. In a letter addressed to congressional members on Friday, the Mortgage Bankers Association expressed their support for the initiative.
“Homeownership is a proven method of building wealth, but obtaining the resources to meet required down payment and closing costs is the most significant obstacle to homeownership for potential first-time home buyers who could otherwise afford the monthly costs of owning a home,” MBA’s letter said.
Earlier this week, the Federal Home Loan Bank of San Francisco announced it would award $12.5 million in down payment assistance through its 2023 matching grant program, allowing its member institutions in Arizona, California and Nevada to support first-time buyers with up to a maximum of $29,172. The grants are targeted to working families and individuals hoping to make the transition from renting to owning.
Down payment assistance is just one tool housing and mortgage industries are currently trying to bring attention to as they address affordability constraints and disparities in homeownership rates between white and Black populations.
Recent attempts to address fair housing issues have cast a spotlight on special-purpose credit programs in specific neighborhoods, usually within majority-minority communities.
Several lenders and agencies, including Freddie Mac, Rocket Mortgage and Guaranteed Rate rolled out SPCPs in recent months. KeyBank also recently announced it had doubled the available maximum funding to borrowers in its special-purpose credit program to $5,000. The bank introduced the SPCP in September, providing home buyers with funding to be put toward closing costs and other fees.
Along with closing cost assistance, SPCPs also offer down-payment aid to eligible borrowers as well as a cut in interest rates. In KeyBank’s poll, 49% of respondents cited lower rates as one of the most appealing aspects of the programs. Another 37% ranked waivers associated with closing costs and fees as highly important, while 35% mentioned the programs’ ability to help them make down payments.