CFED Assets & Opportunity Scorecard
First-Time Homebuyer Assistance
Even in today’s challenging housing market, a home remains the primary asset for many American households. It is an integral part of the American dream and provides both physical and financial security. Yet low- and moderate-income families face a number of barriers to achieving homeownership. State support for first-time homebuyers can help overcome these challenges. States can offer competitively-priced mortgage lending products directly to homebuyers. They can also provide downpayment assistance to help lower-income borrowers who may not have a lump sum to put down on a home. States can also help families make a successful transition to homeownership by investing in homebuyer education and by providing other programs designed specifically to assist low-income renters who wish to become homeowners.
CFED evaluated the strength of each state’s policies to assist first-time homeowners against the four criteria described in the Elements of a Strong Policy tab. The table below shows which criteria each state met.
CFED uses the following icons to denote the strength of state policies:
Strength of State Policies: First-Time Homebuyer Assistance 1
|Does the state offer programs to transition low-income renters to homeownership? (states must meet only one to receive credit)|
|State||Downpayment assistance through direct grants, second mortgages 2 or resources financed with premium bonds? 3||Direct lending programs to first-time homebuyers?||Funded homeowner- |
|Lease purchase program?||Section 8 vouchers for homeownership? 4||Rating|
|Alabama||Yes (second mortgages)||No||Yes||No||No|
|Arizona||Yes (direct grants; second mortgages)||Yes||Yes||No||No|
|Arkansas||Yes (direct grants; second mortgages)||No||Yes||No||No|
|California||Yes (direct grants; second mortgages)||No||No||No||No|
|Colorado||Yes (second mortgages)||Yes||Yes||No||Yes|
|Connecticut||Yes (second mortgages)||No||Yes||No||No|
|Delaware||Yes (direct grants; second mortgages; resources financed with premium bonds)||Yes||Yes||No||No|
|District of Columbia||Yes (Second mortgages; resources financed with premium bonds)||Yes||No||No||Yes|
|Florida||Yes (direct grants; second mortgages; resources financed with premium bonds)||Yes||Yes||No||No|
|Georgia||Yes (second mortgages)||No||Yes||No||Yes|
|Idaho||Yes (direct grants; second mortgages)||Yes||Yes||No||Yes|
|Illinois||Yes (direct grants; second mortgages; resources financed with premium bonds)||Yes||Yes||No||No|
|Indiana||Yes (direct grants; second mortgages)||Yes||Yes||No||No 5|
|Iowa||Yes (direct grants; resources financed with premium bonds)||No||Yes||No||No|
|Kansas||Yes (second mortgages)||No||No||No||No|
|Kentucky||Yes (direct grants; second mortgages)||Yes||Yes||No||Yes|
|Louisiana||Yes (direct grants; second mortgages; resources financed with premium bonds)||No||Yes||No||No|
|Maine||Yes (direct grants)||No||Yes||No||Yes|
|Maryland||Yes (second mortgages)||Yes||No||No||Yes|
|Massachusetts||Yes (second mortgages)||No||No 6||No||No|
|Michigan||Yes (second mortgages)||No||Yes||No||Yes|
|Minnesota||Yes (second mortgages)||No||Yes||No||No|
|Mississippi||Yes (direct grants; second mortgages; resources financed with premium bonds)||Yes||Yes||No||No|
|Missouri||Yes (second mortgages)||No||Yes||No||No|
|Montana||Yes (second mortgages; resources financed with premium bonds)||No||Yes||Yes||Yes|
|Nebraska||Yes (second mortgages; resources financed with premium bonds)||No||Yes||Yes||No|
|New Hampshire||Yes (direct grants; second mortgages; resources financed with premium bonds)||Yes||Yes||No||Yes|
|New Jersey||Yes (second mortgages)||No||Yes||Yes||Yes|
|New Mexico||Yes (direct grants; second mortgages; resources financed with premium bonds)||Yes||Yes||No||No|
|New York||Yes (direct grants; second mortgages)||Yes||Yes||No||Yes|
|North Carolina||Yes (direct grants; second mortgages)||No||Yes||No||No|
|Ohio||Yes (direct grants; second mortgages; resources financed with premium bonds)||No||Yes||No||No|
|Oklahoma||Yes (direct grants; second mortgages; resources financed with premium bonds)||Yes||No||No||Yes|
|Oregon||Yes (second mortgages; resources financed with premium bonds)||No||Yes||No||No|
|Pennsylvania||Yes (second mortgages)||Yes||Yes||No||No|
|Rhode Island||Yes (direct grants; second mortgages)||Yes||Yes||No||Yes|
|South Carolina||Yes (direct grants; second mortgages)||Yes||Yes||No||Yes|
|South Dakota||Yes (second mortgages; resources financed with premium bonds)||Yes||Yes||Yes||No|
|Tennessee||Yes (direct grants; second mortgages)||No||Yes||No||Yes|
|Texas||Yes (direct grants; second mortgages; resources financed with premium bonds)||Yes||Yes||No||No|
|Utah||Yes (direct grants; second mortgages)||No||Yes||No||No|
|Virginia||Yes (second mortgages)||Yes||Yes||No||Yes|
|Washington||Yes (second mortgages)||No||Yes||No||No|
|Wisconsin||Yes (second mortgages)||No||Yes||No||No|
|Wyoming||Yes (second mortgages)||No||Yes||No||No|
1. State HFA Factbook: 2010 NCSHA Annual Survey Results, (Washington, DC: National Council of State Housing Agencies), Tables 8 and 9 in Administration and Budget.
2. Second mortgages, which are often subsidized and/or forgivable loans, help to boost a borrower's equity.
3. Premium bonds are an important source of downpayment assistance funds because housing finance authorities can charge a small extra amount, or "premium," when selling bonds to investors.
4. Additional information on states that offer section 8 vouchers for homeownership can be retrieved from: Office of Public and Indian Housing, "List of Public Housing Agencies using Section 8 vouchers for homeownership as of July 23, 2012," U.S. Department of Housing and Urban Development, portal.hud.gov/huddoc/publiclist_vhosites.xls. (Accessed 8/1/2012).
5. Indiana offers Section 8 vouchers for transition to homeownership, but the program is currently on hold.
6. Even though Massachusetts' state housing finance agency does not directly fund homeownership counseling, it is an active participant in the Massachusetts Homeownership Collaborative, which supports and promotes homebuyer education throughout the state.
WHAT STATES CAN DO
States can offer competitively-priced mortgage lending products directly to homebuyers. They can also provide downpayment assistance to help lower-income borrowers who may not have a lump sum to put down on a home. States can also help families make a successful transition to homeownership by investing in homebuyer education and by providing other programs designed specifically to assist low-income renters who wish to become homeowners.
WHAT STATES HAVE DONE
Overall, although nearly every state has taken some action to encourage first-time homeownership, many states still have room for improvement in developing a comprehensive package of products and services for first-time buyers. Nearly all states offer downpayment assistance in one form or another, but fewer than half offer direct lending. Forty states provide funding for homebuyer education, while 21 states target low-income renters with specialized rent-to-own programs.
ELEMENTS OF A STRONG POLICY
Based on the expertise of the National Council of State Housing Agencies, CFED considers a state’s first-time homeownership policy strong if it meets the following criteria:
1. Does the state offer direct lending programs to first-time homebuyers? By offering loans directly to borrowers, states can play a pivotal role in assisting first-time homebuyers in securing mortgage credit at fair rates and terms, which is particularly important in the current credit market.
2. Does the state offer grants or loans for downpayment assistance? Homeownership is often out of reach for low- and moderate-income households because they lack the necessary, often substantial, downpayment. Direct grants and “soft second” mortgages (which are subsidized and/or forgivable loans to help boost a borrower’s equity) can bridge the financing gap for first-time homebuyers.
3. Does the state provide funding for homeownership counseling? Educating first-time homebuyers on the purchase process and helping them make informed decisions about their housing investment is one important way to ensure a successful transaction and decrease the likelihood of foreclosure. Homeownership counseling is correlated with lower mortgage payment default rates, and has a significant impact on first-time and low- and moderate-income homebuyers. States should fund homeownership education and counseling for prospective homebuyers and current homeowners.
4. Does the state offer programs specifically designed to help transition low-income renters to homeownership? Section 8 housing vouchers, traditionally used to subsidize rental housing for low-income families, can also be used for first-time homeownership if a state permits. States should take advantage of this option. States can also implement lease purchase programs, which allow low-income families with poor credit histories to access financing and purchase homes once they have made on-time rent payments for a set period of time. Both of these programs help low-income renters enter the housing market and acquire an appreciating asset.
To see how each state’s policy stacks up against these criteria, see the State Data tab above.
MAKING THE CASE
Three Guidelines for a Successful Campaign
1. Build a coalition of partners. In many states, coalitions of housing or asset-building stakeholders already exist, making partnership much easier. Think creatively about who should be represented, paying particular attention to entities that have a vested interest in first-time homeownership. While it is important to secure the support of partners already active in the housing industry, you should also consider going beyond the obvious candidates and reaching out to nontraditional allies in public, private and nonprofit sectors. For example, VHDA has a close working relationship with the Redevelopment and Housing Authorities and local Housing Authorities. VHDA works closely with these organizations on revitalization efforts in their communities – as well as providing Financial Fitness and Homebuyer Clubs to assist borrowers in transitioning from public housing into homeownership, which have proven to be successful efforts. For MaineHousing, partnering with the Maine Association of Realtors, the Maine Association of Community Banks and the Maine Credit Union League made the most sense in creating their Gift of Green program.
Cultivate your coalition’s profile and engage your partners through creative opportunities for action and information-sharing. For instance, you might consider sponsoring regional hearings, creating new studies, crafting new ways of talking about affordable housing or developing relationships with the media. One excellent way of energizing and attracting attention to your coalition is to tell the stories of individuals and families (in their own words, wherever possible) who would benefit from programs to help first-time homebuyers.
2. Keep the message clear. You will need to develop basic themes and approaches for talking about affordable housing and first-time homeownership, which may include background information, communication themes, talking points and supporting arguments. These arguments include the economic and community-level benefits of homeownership; the positive impact of homeownership on education, health and community engagement; and/or an explanation of the need for affordable homeownership in your state. With the foreclosure crisis still fresh in the minds of policymakers, it is important to formulate a strong argument that defends a home as a significant source of wealth and supports homebuyer education so that potential homeowners take on safe, consumer-friendly loans and that they buy only what they can afford.
Because many different members of your coalition may be meeting with policymakers to educate them about the benefits of promoting first-time homeownership, you may wish to create a set of standard meeting guidelines that includes all the key messaging elements that should be communicated during each interaction. This will help your campaign maintain a unified message and ensure that policymakers are receiving consistent, accurate information.
3. Know your audience, and strategize accordingly. Many first-time homebuyer programs are funded and managed not through the legislature, but by state housing finance agencies, which receive substantial federal funds for housing and homeownership and have significant leeway as to how those dollars are spent. Thus, generating support for first-time homebuyer programs may more frequently occur through policy advocacy within the executive branch than by lobbying elected officials in a purely legislative setting.
Of course, the two approaches both occur in a highly political context, so they have much in common – but there are a few important differences. First, when advocating on the administrative level, it is important to be well-versed in what funding sources are available to a state and who controls them. In addition, advocates need to participate actively in the public input processes that these funding sources may require.
As with any advocacy strategy, advocates must have a compelling message and the support of a broad constituency. However, the traditional public-campaign aspect of a legislative advocacy strategy may be less appropriate or effective when dealing with the executive branch. Instead of rallies and billboards, advocates might opt for a less adversarial, behind-the-scenes approach: developing relationships with both program and policy staff at the agency, and being responsive to the political pressures under which they sometimes must operate; organizing stakeholders (including prospective homebuyers) to attend and speak at public meetings of the housing finance authority; and providing useful research and information resources to help allies within the agency make the case to leaders.
For each edition of the Assets & Opportunity Scorecard since 2007, CFED has worked with experts in the field to capture detailed stories of noteworthy state policy changes—both policy victories and instructive defeats. These case studies appear in the Resource Guides for each policy priority.
Maine Programs Thrive despite Economic Downturn (published October 2011)
The start of 2009 found the nation’s housing and financial industries still reeling from the effects of the subprime lending debacle and in the midst of a severe economic downturn – creating a grim climate for potential homebuyers. However, MaineHousing, which serves as Maine’s Housing Finance Agency, managed to create and run an extremely successful first-time homebuyer program at a time when other state HFAs had either severely reduced or, in some cases, suspended their programs. Click here to read more.
Innovative Outreach Strategies in Virginia (published September 2009)
The Virginia Housing Development Authority recognized early on that “one size does not fit all" for homebuyers, and that a variety of flexible, diverse homebuyer programs was essential. As a result, the agency has responded nimbly to changing conditions; it maintains its core products while also adding and removing programs as the market environment has shifted. Click here to read more.
Related Policy: Housing Trust Fund
Although housing trust funds is not a Policy Priority in the current Scorecard, it was in prior years and relates to first-time homebuyer assistance. In 2007 and 2009, CFED published case studies on housing trust funds.
Oregon’s Campaign (published September 2009)
In spring 2009, the Oregon Housing Alliance celebrated passage of the Housing Opportunity Bill. This victory expanded funding for affordable housing by creating a dedicated funding source for the state’s housing trust fund. This victory had been years in the making – the Housing Alliance was founded in 2004 and launched its legislative effort in 2005. During the 2007 legislative session, a similar bill failed to pass by just three votes. Click here to read more.
Kentucky’s Campaign (published September 2007)
In 1994, after an education campaign on the need for aﬀordable housing, a state Aﬀordable Housing Trust Fund (AHTF) was established in Kentucky with an initial contribution of $400,000 from Kentucky’s then-First Lady, Libby Jones… Thus began a 12-year campaign to ﬁnd a public, dedicated source of signiﬁcant revenue for the Kentucky AHTF. Click here to read more.
For a two-page overview of first-time homebuyer assistance, download CFED’s Policy Brief.
For an in-depth compendium of analysis, research, and resources on first-time homebuyer assistance, download CFED’s Resource Guide.
- American Planning Association
- Fannie Mae
- Federal Housing Administration
- Freddie Mac
- Habitat for Humanity
- Housing Assistance Council
- Mortgage Bankers Association of America
- National Association of Home Builders
- National Association of Housing and Redevelopment Officials
- National Association of Realtors
- National Council of State Housing Agencies
- National Housing Conference
- NeighborWorks America