Moving On

June 1, 2009 3:33 PM

Are there any assistant programs out there for people purchasing a home? I'm aware of various programs for FIRST TIME HOME BUYERS, but that is not me. Is there any help for us?

A few years ago we dropped a 20% down-payment on a home (we sold our first home and bought this current home put a 20% down payment). With the market the way it is, that 20% is now long gone. If we sold our home today, we would just barely be able to pay off our mortgage - and that's even iffy.

I've heard of the $8,000.00 tax credit for first time home buyers, but what about the rest of us who just lost a crap load of money that I thought was safely tucked away into the equity of our home?

Any programs out there that you're aware of? I'm especially interested in programs that aren't "builder" programs (new build incentives).

posted by Sassyfras to home & garden (17 comments total)

sorry for my curtness but there's been no government handouts to me for making my monthly rent payments for the past 20-odd years so I get a little wound up about this.

To expand on my quasi-answer above there has been a concerted effort by the Fed to purchase mortgage-backed securities in the effort to decouple the mortgage market from the macro interest rate environment (and replace China as a buyer of these since China bailed on their holdings after the Fannie Mae and Freddie Mac blowups last year).

At these inflated levels (still way above rents) home prices are DIRECTLY driven by interest rates, if & when rates rise back to 6 or 7% the average J6P buying power will decline significantly -- according to my spreadsheet a rise from 5% to 7% reduces my buying power from $375,000 to $325,000.
posted by @troy at 4:21 PM on June 1

I'm not aware of any programs, but you may want to check the recent mortgage rates news. It's really hard to find 4.5% now, as of last Wednesday.
posted by ejaned8 at 4:22 PM on June 1

And I am sorry, because I really don't understand what you just wrote. Not being snarky, I'm just slightly retarded when it comes to number stuff, interest rate, and big words like "decouple the mortgage market from the macro interest rate environment."

I, too, have received no handouts for making our mortgage payments for the last 10 years. I get steamed about incentive programs for first time home buyers when those programs include $0 down, low (er than my) interest rate (even though we have excellent credit), and $0 for mortgage insurance. Not to say I wouldn't take advantage of such program if it were offered, though. I was just wondering about people, like me, who did their due diligence and put their 20% down (or risk the higher monthly payment of obtaining mortgage insurance) and then "lost" it. I understand it was a risk, that there's always the possibility of the market going belly-up like it did. But with so many programs and tantalizing ads for "first time homebuyers," I was a little curious if there were similar programs for people that would like to move out of their current residence (for whatever reason - relocating for work, what-have-you) but can't because their down payments and equity are all gone.

Maybe this was a bad question to ask. I was not asking for a handout, just more curious at what second-time home buyers are doing - without foreclosing, but honestly wanting/needing to get into a different home. Or are they just foreclosing?

And to perhaps expand on the question - why no (obvious) programs for second-time home buyers (with exception to the possibility of a lower interest rate - which is not guaranteed?).

Sorry if I'm rubbing people the wrong way. It's an honest question being asked by someone who just doesn't understand "markets" very well and the reasoning behind a lot of this type of stuff.
posted by Sassyfras at 4:36 PM on June 1

"I, too, have received no handouts for making our mortgage payments for the last 10 years."

Except for the mortgage interest payments. Which is probably your biggest single expense per year. I would be tickled pink of Obama suggested cutting it out entirely to handle health care. Also keep in mind that the "first time homebuyer" definition is weird. Anyone else wondering about this might check the FAQ:

The law defines "first-time home buyer" as a buyer who has not owned a principal residence during the three-year period prior to the purchase.

Buying a home versus renting is an investment decision, and I don't see any more reason to offer existing home owners compensation than compensating losses in my IRA of broad US index funds.

There's a dozen houses in my neighborhood for rent. In the very limited time I've spent looking at it, it seems like prices are not done falling. Rather than keep trying the same thing expecting a different result, why not join the winning team and rent a home?
posted by pwnguin at 5:00 PM on June 1 [1 favorite]

I, too, have received no handouts for making our mortgage payments for the last 10 years.

Actually in a sense you did - the mortgage interest deduction on your federal income tax, which neither @troy or myself are benefiting from.

At any rate, this thread may be quickly getting off the rails, but I believe the answer to your question is no, there are no assistance programs for people in your position. It is assumed that people who already own a home are not in need of government assistance in the same way as new home buyers are, people who do not currently have a "nest egg" and may be having trouble saving one.

As you point out, it is also possible for home owners to find themselves in this predicament, but no, that is not something that has been generally addressed by government assistance programs in this country. I would be glad to be proved wrong on this, but that is my understanding.
posted by rkent at 5:01 PM on June 1

Is there an accountant you can talk to? I thought the 8k was for buying a house in this market (stimulate sales), not just for first time home buyers. I thought my accountant said we'd be able to get the tax break if we bought in this market (we're not close yet, or I'd have paid more attention).

We're in the same boat as you, paying on time for the past ten years, and now we're having trouble selling. I'm not cueing violins, just letting you know you're not alone after being responsible. It sucks, but it is what it is.
posted by cestmoi15 at 5:06 PM on June 1

My decision to own a home has not been from an investment standpoint - but more of a "stability" standpoint. I fear that if I were renting, my rent payments could go up. As is the case with owning my home, my mortgage payments are fixed. I also fear that at some point the owner of the property would decide to no longer rent and we'd have to find another place - one within the school district for my children, which could be difficult to do.

For me, it's worth owning a home for those reasons. If I didn't have those fears, I'd be all for renting. And maybe my fears are silly.
posted by Sassyfras at 5:14 PM on June 1

Where do you live? If your city is interested in urban development, they may have a program. Also try NACA. They're primarily for low to middle income buyers, but they might be able to steer something your way. A friend went through their homebuyers counseling program and eventually bought with their assistance.
posted by electroboy at 5:24 PM on June 1

My understanding is the cestmoi15 is correct: There is no incentive offered to induce people who already own a home to purchase a different home. The purpose of the $8000 incentive is to reduce the glut of homes on the market, and trading one home for another (regardless of the reason) doesn't further that purpose.

With that said, though, I certainly appreciate your sincerity in asking the question.

As it happens, there are some usual and unusual things going on for folks like you who want (or need) to move but don't have much equity available to grease the skids. For example, I've heard of people trading homes (with cash changing hands as needed to make the values equivalent).

It might be worth talking to some real estate agents in your area to find out what ideas they have. If people aren't able to sell homes, their volume of business necessarily goes way down and I would expect some agents are doing creative things to put some fluidity in the housing market.

Good luck!
posted by DrGail at 5:31 PM on June 1

Sassyfras: "My decision to own a home has not been from an investment standpoint - but more of a "stability" standpoint. I fear that if I were renting, my rent payments could go up."

I suppose that's true. In effect, renters are shorting homes. But there's a market force at work: high rent prices drive high home values, which drives construction, which drives down prices. This is basically why America is up shit creek today: everyone was willing to believe prices could only go up. "They're not making any more land!" True, but we can make a hell of a lot more houses than there are currently. What you're ignoring is the very real possibility that rent prices go down in response to building.

But there's a good logical reason why there isn't a general "buy a house; get a discount!" Imagine Alice and Bob own houses, and participate in a plan that offers a refundable tax credit on the purchase of a home of 10 percent of the price. Alice wants a larger home, and Bob wants a smaller one so they trade by selling to each other. They each get a 10 percent refund of the sale price. Arguably, this is already a scam, but there's more. Six months later, they trade back; we'll blame buyer's remorse. Because there's no first time buyer qualification, they again qualify. Now Alice and Bob are each owed 10 percent the total value of their home and their trade partner's, from the government.

10 percent on an investment in this economy is still a pretty sweet deal. I feel like someone clever could concoct a scheme in my old neighborhood where I was a grad student: imagine six college roommates on a property, one of whom bought the house from the previous landlord (sans mortgage for this example). They concoct an arrangement whereby they transfer ownership every two months in rotation, and the original roommate owner gets it back at the end. 60 percent of this home is paid out as a result. No change in ownership. Closing costs probably harm the proceedings, but I can imagine a firm streamlining the gravy train.

I'm not even sure what my point was anymore, other than I would much richer by committing tax fraud. So I'll just non-sequitur: the point is, the goal is to move people into empty houses. The problem is basically people already have homes, so you're just screwing apartment landlords.
posted by pwnguin at 6:22 PM on June 1

To expand on my admittedly opaque point again in the interests of clarity, US Gov policy is working to indirectly help current homeowners out by doing all they can to keep mortgage interest rates low, up to and including using the 2008 bailout money allocated by Congress.

This helps support price levels, because the lower interest rates are the more we can all afford to pay for the same home.

For example, if I were a buyer and wanted to buy your house now I could afford to pay up to $375,000 at these currently low giovernment-sponsored rates.

But if Bernanke and Geithner lose control of the situation and mortgage rates go back to 7%, I could only afford to offer you $325,000 for your house. So you can look all at this Fed activity as a $50,000 bailout to you, as long as it lasts.

There was also quite a wave of refinance activity this Spring when 30-year rates were dipping under 5%, which is what many 2, 3 and 5 year ARMs were started at back in the day. This helped out many people and the powers that be really need to keep this party going as long as possible.

Also, if you have an entry-level home that first-time buyers are looking at you can basically think of their $8000 giveaway as a (partial) price support for you if you sell this year, due to the microeconomics of price subsidies and the supply curve (in a tight market where demand exceeds supply giving every bidder $X will tend to just push up the selling price that amount).

This is in theory of course, if you only have one bidder on the property you want to sell then he has the pricing power to set the price at whatever level he wants.
posted by @troy at 6:43 PM on June 1

Also try NACA. They're primarily for low to middle income buyers, but they might be able to steer something your way.

Yeah, depending on location, you may be able to go through NACA. While they have no income limits on their assistance, they do cap the loan they can give you depending on your geographic location. For the Bay Area, it is around $450k, which is enough to buy a home in many parts of Oakland, but not going to get you anywhere near the nicest parts or much of anything in SF. YMMV depending on region.

The process is also (supposedly) very long. They require you to go to a (poorly organized, absolutely worthless) 'seminar' where they essentially show you a video or two and outline in excruciating detail the next steps in the process (basically, filling out a couple of forms) once you get your NACA ID. I'd share more, but it's been two weeks since I attended and I'm still waiting on my ID number. I get the idea that they are way understaffed (apparently there are only two FT employees for all of Northern CA) and so they try to weed out the folks who aren't serious by being extremely slow and forcing you to be proactive.

That said, the rates they offer seem really really low -- it's hovering around 4.5% now, and while they won't let you make a down payment (huh?) they do let you 'buy down' the interest rate. I'd don't know if that makes for a sensible loan for someone who already has good credit and a sizable chunk of cash, but there you are. There's a couple other catches besides the slowness: they require that you live in your house for the duration of the loan (ie, you have to re-fi if you want to rent it), and you have to commit to volunteer some trivial amount of hours a year (5, 8?) for the first five years or something that you have your loan. I haven't done a ton of research, but they seem fairly legit, and I'm going to at least try going through the process. Whether or not I quit in frustration and get a regular loan remains to be seen.
posted by fishfucker at 7:12 PM on June 1

(oh, catch #3 -- no interest rate lock-in -- you get the interest rate that is in effect when your offer is accepted.)
posted by fishfucker at 7:12 PM on June 1

A handout for homeowners? You're kidding, right? I haven't, and won't, get a handout for diligently paying my rent on time. Nor will I get a handout to help me pay my student loans, even though I'm having a damned hard time earning the money to do so because I was laid off in December when the shit hit the fan.

If you bought during the up market, then you gambled that the value/price of your home would continue going up. You've lost that gamble. Don't expect other taxpayers to cover your loss.

To answer your question, no, there are no "already-a-homeowner" assistance projects to help you recoup that 'lost' equity.
posted by LOLAttorney2009 at 7:52 PM on June 1

Thanks for the responses. I'm sorry for stirring up some anger.

I am not looking to sell our home or purchase a home any time soon (if ever). I was merely curious as to if there were any helps/bailouts out there for home owners like me - I was using my scenario as an example, but I did fail to make that clear - which was evident in the backlash.

I realize we gambled by purchasing our house, but it was a "gamble" we were fine with considering we weren't considering moving any time soon, if ever, and because we are perfectly comfortable with our mortgage payment and are quite content with the area, especially the schools, our house is in. But mostly, the "gamble" didn't seem like a gamble because we had no intentions of moving after this home and didn't even consider any monetary gain that was possible if the market continued to go up. We were not looking to or expecting to make any money on the house - we just wanted to get into a house that fit our criteria - area, price, 3+ bedrooms, etc. We were looking for a home to keep - a home where our children would grow up in and we found it. Yeah, it's a shame that our equity is gone. But I was never banking on that money to be available to begin with.
posted by Sassyfras at 10:21 PM on June 1

I am with the OP: we live in a small house we can afford. But we want to move since we've hade kids since we bought the place in 2008 (multiple children in a Cape: ugh). Man, I wish we could find a program as good as $8k back for moving!

To the dismissive renters, think of this point of view: we've also been buying stuff at Home Despot to fix up our places and thereby stimulating the economy, while also (for people with better design sense than me) increasing the town's tax base by making our houses nicer.

But I really do see what you mean about the mortgage interest tax thing.
posted by wenestvedt at 8:18 AM on June 2

not a handout, and questionable practice in my book, but there are creative ways for sellers to incentivize a sale. Also, as mentioned, if a first-time buyer wants to purchase the home that you want to sell, you might recoup some or all of the $8k incentive through the purchase price of your home. Not likely in the current market, though.

To summarize others' points without being snarky, the first-time home-buyer assistance program is not designed to help people buy their first home. The program is designed to reduce inventory, (hopefully) contributing to the overall health and stability of the residential market.

The USA is a culture of real estate ownership, for better or worse; renters can bemoan the mortgage interest deduction till they're blue in the face, but it's a long-standing policy to incentivize ownership over rent. Unfortunately for you, that policy does not extend to making your current assets more liquid so you can move elsewhere, except in a very very indirect way. There are no public programs that will subsidize current owners who wish to sell.
posted by Chris4d at 4:30 PM on June 2