Chrystal Kornegay
As MassHousing watched the economy swing back into high gear, we witnessed first-hand the impact on the housing market. Rising home prices, low inventory, high rents and student debt burdens combined to exclude entire populations out of the state’s housing market. We knew from experience that if we could help potential buyers overcome these forces, creditworthy commonwealth residents would get into a home where they would not only stay, but thrive.
MassHousing responded by launching the only sustainable, conventional statewide mortgage product allowing buyers to achieve homeownership without making a down payment. And several months in, MassHousing’s down payment assistance program is delivering exactly the kind of results we intended. Our high loan standards and flexible financial tools are combining to empower residents who had been marginalized by the current housing market.
MassHousing’s mission is to improve the lives of the commonwealth’s residents by confronting the housing challenges they face. A fundamental way in which we meet our mission is helping the state’s workforce achieve homeownership. Over the past decade alone, MassHousing has helped more than 13,000 lower-income families become homeowners.
In recent years, though, we have seen average Massachusetts families struggle to afford the average home in Massachusetts. Skyrocketing prices – the product of decades of inadequate housing production across the state – have created a housing market that is tough on most buyers, but especially difficult for low- and moderate-income homebuyers to navigate. Working-class homebuying power has eroded, weakening a core pillar of economic security and upward mobility.
In this environment, down payment requirements represent a significant hurdle to first-time homeownership. Recent college graduates are juggling student loan payments and rents that are among the nation’s priciest, while moderate-income families face expensive child care, and wages that haven’t grown nearly as quickly as housing prices. Against those pressures, even a 3 percent down payment requirement can become a prohibitive barrier.
MassHousing’s low-cost, fully-amortizing subordinate mortgage allows first-time homebuyers with incomes at or below the area median to buy a home with little or no down payment. We’ve seen over the years that successful, sustainable homeownership is far less connected to loan-to-value ratios than it is to a borrower’s creditworthiness and preparation to succeed. We combine down payment assistance loans with strong underwriting, homebuyer education, low-cost mortgage insurance with unemployment insurance benefit, and high-touch mortgage servicing.
Creating Sustainable Homeownership
Several months in, the results are compelling. Down payment assistance has allowed Massachusetts residents to reengage with a housing market they had been priced out of. We are now creating more homeownership opportunities for lower-income residents, without lowering loan quality standards.
To date, MassHousing’s down payment assistance program has helped 200 families purchase their first home. MassHousing has closed on $49 million in home purchases utilizing down payment assistance, and the loan pipeline is healthy. Since the product’s launch, three of every 10 MassHousing mortgages have utilized down payment assistance.
Down payment assistance is helping to drive an uptick in home purchases in Gateway Cities like Worcester, Fitchburg and Springfield. But it’s also encouraging that homebuyers have already used MassHousing’s down payment assistance to buy a home in 87 of the state’s 351 cities and towns, from Agawam and Andover, to Hingham and Plymouth.
Most of the first-time homebuyers utilizing down payment assistance are under the age of 35. These are folks who want to sink down roots in Massachusetts, but had not been able to, because student debt made saving for a substantial down payment impossible.
And, in a state where white residents account for 88 percent of all homeowners, we are especially proud that more than one in every five mortgages with down payment assistance have enabled a buyer of color to purchase a first home.
This is what sustainable homeownership looks like – high-quality mortgages allowing high-quality buyers to sink roots in their community and build equity for their futures.
Chrystal Kornegay is the executive director of MassHousing.
