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Recent articles by MP Dunleavey: • One year of financial sanity, 1/8/2006 • 7 deadly holiday money sins, 12/11/2005 • What your 1040 can teach you, 11/30/2005 More... |
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Don't cry for people with six-figure incomes who nevertheless feel challenged by the prices of upscale homes in rarefied markets. They can get assistance, too. By MP Dunleavey Editor's note: Columnist MP Dunleavey and eight other women have come together online to strip away the myths surrounding money, lay bare their assets and liberate themselves from debt. Follow the quest for financial fabulousness of these "Women in Red" every second Monday in Dunleavey's column on MSN Money. Who would have guessed it would come to this: people with six-figure incomes who need help buying a home -- and can get it. As median home prices have soared to record highs on both coasts and in many places in between, homeownership has slipped out of reach not just for those with lower incomes, but for many people who would otherwise be considered part of the upper-middle class. This has been Carole's dilemma since she joined the Women in Red. Although she earns $130,000 a year -- an amount that puts her comfortably in the top 10% of all U.S. households -- the median home price in New York City last year was a challenging $435,000.
With $35,000 saved for a down payment, Carole doesn't have anywhere near the $80,000 in cash needed to buy a co-op apartment in the city. A strange situation While this may not sound like trouble to you -- and while some people might wish they had Carole's problems or suggest she move to a cheaper city -- many upper-middle class home-shoppers are facing the same dilemma in real-estate markets around the country. Related news and commentary on MSN Money
"Some people have always had affordability problems," says Nicolas Retsinas, director of the Joint Center for Housing Studies at Harvard. "But where it's been striking is for people we don't usually think would be facing these issues -- the middle income -- many of whom can't afford the home they want in the community they want." Luckily, a handful of new programs and subsidies have cropped up to people with middle- and upper-middle incomes become home-buyers -- and Carole is one of a growing number of people to gratefully seize the opportunity. A nonprofit lender grows in Boston Enter NACA, the Neighborhood Assistance Corporation of America, a nonprofit with a long history of housing advocacy. Based in Boston, NACA started lobbying against predatory lending practices back in the 1980s, says CEO Bruce Marks. In an epic battle against Fleet bank in the early 1990s -- which included civil disobedience, several court cases and a Senate Banking Committee hearing -- NACA got Fleet to commit $8 billion to a loan program for low- and moderate-income home-buyers. Then they asked Fleet to give them $140 million to start their own community-based mortgage lending business. Fleet complied while also settling various predatory-lending lawsuits for millions of dollars. Today, NACA is a $10 billion operation with 32 offices nationwide (see them on a map here). Although their primary financial relationships are with Citibank and Bank of America, "we're the only nonprofit mortgage lender in the country," says Marks. As a result, the advantages NACA offers to home-buyers are considerable, as Carole discovered. The program puts buyers in homes they could not otherwise afford by giving them lower-than-market interest rates and either eliminating or reducing their down payments. Program features include:
Sounds too good to be true When Carole told me about NACA last fall, I simply didn't believe what she told me -- and I didn't attend the seminar required to be approved for a loan. Carole had no such doubts and threw herself into the process. She attended the information session on Oct. 23; she went to her first meeting with a loan officer on Nov. 22; she attended a second meeting on Jan. 6; and she was approved for a $300,000, 5.5%, 30-year fixed mortgage on Jan. 9. Although she hasn't found a place yet, Carole could end up putting no money down. She will save between $3,500 and $15,000 in closing costs and other fees, a typical range for New York City, and her NACA mortgage payment will be $1,703 -- less than the $1,839 payment she'd pay at the current rate of 6.21%. I was forest-green with envy, the color I might paint my new dining room. If I owned one. Which I don't. But as relieved as Carole is to have taken this big step -- and start her apartment search -- she did encounter some hurdles:
What else is out there? NACA plans to double its number of offices this year, according to Marks. And it's just one of a small but growing number of options open to middle-income home-buyers these days. Some of these financial breaks come from low-cost loan programs like the one NACA operates, but in some cities and counties, developers are given incentives to build housing for a larger income range -- including those who earn as much as 120% of the local median income, says Retsinas of the Joint Center for Housing.
Although NACA has few restrictions on its loans or on the properties you can buy, other subsidized programs may have rules limiting the price you can ask when you sell your home. Retsinas suggests starting with your state housing finance agency -- there are 49 of them listed on the National Council of State Housing Agencies' Web site. Your local community-development corporation office is another good source for affordable-home programs in your area, he adds. You can also contact the Institute for Housing Innovation, a nonprofit that supports the development of mixed-income neighborhoods through reduced-cost homes for all income ranges. And I would take a cue from Carole: Don't be shy. I know many people who think they can't afford to put a toe into some of these overpriced real-estate markets. Or who believe that they earn too much to qualify for assistance. But desperate times seem to have made for creative measures. | ||||||||||||||
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