New Home Mortgage Loans for Low and Middle Income Buyers Help More Families Achieve the American Dream
A new 15-year mortgage could help millions of Americans with low to moderate incomes afford homes after the housing bust of 2008 — and build equity twice as fast as a traditional 30-year mortgage.
The Neighborhood Assistance Corp. of America, or NACA, introduced the loan back in September with the help of fellows at the American Enterprise Institute. NACA founder and CEO Bruce Marks is a liberal housing activist known for protesting stockholder meetings, but he joined with the conservative-leaning group after learning that they shared an interest in housing programs that can help buyers build wealth quickly.
The program sets a maximum home price for buyers — in Southern California, where homes are among the priciest in the country, that rate is $400,000 for a single-family home. Getting a loan, however, can be even more affordable than the Federal Housing Administration’s loans.
The NACA loan also doesn’t require a down payment, closing costs, or fees and doesn’t require perfect credit. It also gives buyers a below-market interest rate to make buying even easier for borrowers.
Joe Hendrix, director of marketing and community engagement at Homerate Mortgage, a leading mortgage lender in the Southeast, said the program is a step in the right direction. “Anytime families and even folks who are single have the opportunity to own a home in a responsible way, that’s a big win for them, said Hendrix. “But the lender and the borrower both have a responsibility to each other, in terms of not allowing borrowers to get themselves in over their heads.”
After the recession hit in 2008, millions of Americans lost their homes due to a struggling housing market. Subprime mortgages left many families with foreclosed homes and shattered dreams.
As a result, home mortgage lenders have had to adapt in order to recover after the housing market went bust — and to regain the trust of home buyers.
Grace and Armando Ong, who arrived in the United States from the Philippines in 2004, are one of those families. They bought a home two years later for $680,000 in Pomona, CA, with a monthly payment of $4,400, only to lose it just years later.
Worse yet, the house sold for just $330,000 in a short sale in 2012.
With NACA’s new loan, the Ongs are able to afford a new home for $400,000, with a 4% down payment of just $16,000. The couple plans to pay off the loan in seven years rather than 15, having learned their lesson about mortgage loans the first time around.
Through Citibank, the Ongs’ down payment also allows them to “buy down” their interest rate to just 0.5%, far below market rates.
“The American dream is a reality,” Grace Ong said to LA Times reporters.
Fannie Mae has also introduced a new program in recent months: the My Community Mortgage, which requires only 3% down. FHA loans through the government are still available for any home buyers, requiring just 3.5% down.