New and Expanded Housing Programs
First Time Homebuyer Program
ASSOCIATES INC
Reintroduce First Time Homebuyer Program
Issues/Opportunities Addressed:
Timeframe for Action: Short Term
Downpayment and closing cost assistance helps low- and moderate-income
families overcome one of the most common barriers to homeownership—
accumulating sufficient savings to make a downpayment and pay for closing
costs on a mortgage.
Assistance can be offered in a variety of forms, including as a grant, a no- or
low-interest amortizing loan or a deferred loan in which repayment is not due
until the resale of the home. The assistance is often provided by a local
housing agency, a nonprofit organization or a state or local housing finance
agency, sometimes through a participating private lender. Program details
differ across jurisdictions, but in general borrowers must fall within income
and home purchase price limits and must comply with other eligibility
requirements, including being a first-time homebuyer, using the home as a
primary residence, and completing a homebuyer education course and/or
participating in housing counseling.
The City of Nashua did offer a first time homebuyer program using federal
HOME dollars which creates some challenges in housing markets with rapidly
rising purchase prices. HOME funds are limited to properties at or below 95%
of the median area purchase price and there must be resale provisions
established which safeguard the property's continued affordability or
recapture all or part of the HOME subsidy investment. This tends to favor a
forgivable loan structure often treated as a second mortgage which can
require partnership with a bank.
Nashua Housing Study - 73
RKG recommends the City of Nashua revisit the feasibility of offering first time
homebuyer assistance in the form of downpayment assistance and closing cost
assistance. These two barriers to homeownership are becoming more acute as
home prices continue to escalate year over year making it more difficult for
households to purchase homes for the first time and have some ability to move
from rental to ownership housing.
The City will need to evaluate the type of program they would like to offer and the
most effective way to fund that program. There are several approaches to
structuring an assistance program, which include:
A lump sum grant which avoids the longer-term administrative costs of a loan
and tracking and processing repayment. These are most effective for small
assistance amounts of less than $5,000.
A forgivable loan which requires the homeowner to meet milestones such as
living in the home for a period of time before the loan is partially or completely
forgiven.
A low- or no-interest rate loan which could require repayment over a certain
period or at sale or refinance of the home. Establishing some level of repayment
could also help recapitalize the loan fund over time and serve more households.
A shared-appreciation loan which is typically used for high downpayment
assistance amounts ($15,000-$25,000) where when the home is sold the City
would have the loan repaid in full plus a percentage share of the home
appreciation.
