Two tenants pose in front of their new home they rented from Roots, a program that helps renters invest in real estate.
Courtesy: Katie Curran
Earlier this year, when Will Hunnicutt was apartment hunting in Atlanta, expensive lease He was frustrated when his application was rejected.
“In a lot of places, when they want $3,000, a three-and-a-half times income-to-rent ratio is a little bit unattainable,” the 30-year-old social worker said.
Then Hunnicutt found a two-bedroom apartment for $1,050 a month, with rootan Atlanta-area real estate investment trust that helps renters The properties in its portfolio build wealth toward home ownership. His $1,000 deposit is invested in a real estate investment trust, and so far he’s received another $200 in quarterly rebates for taking care of his units. Pay rent on time.
“The ultimate goal is to buy a house, so having investment funds, which is passive income, will be very helpful,” Hunnicutt said.
Will Hunnicutt and his dog Bailey in the Atlanta home he rents through Roots, a company that helps renters build wealth by investing in real estate.
Courtesy: Will Hunnicutt
Roots is currently only available in Atlanta, but plans to expand this fall. It’s just one way to achieve a broader goal: helping consumers become financially ready to buy a home.
As homebuyers continue to struggle with housing affordability, experts say programs to help with down payments may be worth reconsidering.
For many, the dream of owning a home is becoming increasingly out of reach become more expensive. Aspiring home buyers It needs to be done Buying a typical U.S. home costs $113,522 per year, according to national brokerage website redfin tuna — 35% higher than the average household’s annual income.
one Barriers to Home Ownership Have enough savings for a down payment. Nearly 40% of Americans who doesn’t own A home points to a lack of savings According to the 2023 CNBC Your Money Survey conducted by SurveyMonkey, you’ll need a down payment. The report surveyed more than 4,300 adults in the United States in late August.
“Thousands of Down Payment Assistance Programs”
Down payment assistance programs come in different forms and come from different sources, including state agencies, cities, nonprofits, financial institutions and mortgage lenders. Therefore, you have to search around to see what is available in your area.
Typically, assistance programs focus on first-time homebuyers and those who meet certain income qualifications. Other plans focus on “first generation home buyers”.
In many down payment assistance programs, participants are required to attend a homebuyer education class. Depending on the program, they may also have to meet other conditions, such as getting a mortgage through a specific lender or saving a certain amount to put towards the home purchase.
The assistance can be huge. For example, Alternative Federal Credit Union in Ithaca, New York, There is a program Available from $9,000 to $20,000. chicago housing authority can assist Up to $20,000.
More from Personal Finance:
Social Security COLA estimates fall in 2025 as inflation cools
Gen Z is willing to buy a home that has been renovated. Some people already regret it
Economists say high inflation is largely not Biden or Trump’s fault
Housing experts say such programs are one way to achieve equity in homeownership, as systemic barriers still block the path to homeownership for many Americans.
That’s especially true for Black Americans, who have largely made up for the losses of decades of redlining, exclusionary zoning and predatory lending, said Nikitra Bailey, executive vice president of the National Fair Housing Alliance.
Programs targeting first-generation homebuyers are crucial, she said. Although it is very common for families Help with down paymentpotential buyers whose parents rent for Not too possible can provide this help.
“We know that cities have adopted thousands of down payment assistance programs. These programs are not well reaching underserved consumers of color,” Bailey said. “That’s why ‘First Generation’ is so important, because it’s a race-neutral way to allocate resources to the consumers that the future health of the housing system depends on.”
How much down payment do you need
Part of the reason a down payment is so daunting is that buyers often think they have to pay 20% of the home’s purchase price. they are wrongexperts say.
The National Association of Realtors survey, based on transactions from July 2022 to June 2023, found that the typical first-time homebuyer With 8% down payment. Some loans require even less, As low as 3.5% or even 0%.
Keep in mind that putting less than 20% down usually means you have to pay Private Mortgage Insurance (PMI). PMI can cost anywhere from 0.5% to 1.5% of the loan amount each year, depending on different factors, according to Mortgage Report. Typically, you can request cancellation of mortgage insurance after equity reaches 20%.
“These dollars should not be invested in the market”
First-time home buyers may qualify No penalty for withdrawals Up to $10,000 from a 401(k) plan or traditional or Roth IRA. but financial advisor It is recommended that these funds be retained Retire when possible.
While Roots may help tenants invest to build wealth, experts often emphasize saving rather than investing for short-term goals.
For those with a buying horizon of five years or less, lower-risk options including high-yield savings accounts, certificates of deposit, or Treasury bills may be ideal.
“Anything that requires dollars in the next three to five years, those dollars shouldn’t be invested in the market,” said Janet Stanczak, a Minnesota-based certified financial planner and founder of Financial Empowerment. “The market typically moves at three to five. The worst-case scenario is that you find a house that you want to move to and your money is on the market, and the market goes down.”
