Low Income Home Buying Options
Low-income home buying programs cover a wide swath of options for various groups of people. Confusion can ensue, however, as initiatives in different jurisdictions use different ways of determining exactly what level of annual earnings count as "low-income." In fact, some programs that people confound as "low-income" do not even target a place's neediest prospective buyers.
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Definition
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Most housing assistance programs, regardless of who governments and other entities direct them to, use HUD's income limits to restrict access. Because HUD's figures are sensitive to location, what the agency classifies as low-income in one area may not be low-income in another. In fact, as Jeremy Schnitker reports for SFGate, many home buyer assistance programs actually focus on helping middle-income residents, particularly in regions of the country such as the San Francisco Bay Area, where the cost-of-living often forces people to the edge of town or further away in search of affordable shelter.
Function
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One key aim of low- to moderate-income homeownership programs is too keep a city's lowest earners from having to move. In addition, these programs often try to stop households from overspending on housing. As the National Low Income Housing Coalition explains, families often settle for low-quality housing and overcrowded conditions to stretch their housing dollar. Some households commit more than half of their income to the cost of housing, much higher than the recommended 30 percent that has become the national standard for housing affordability. Many low-income home buying programs subsidize the cost of housing to close the gap between what low- to moderate-income families can afford and the market rate.
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Programs
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In some cities, needy families can benefit from HUD's Section 8 Homeownership Vouchers program. The catch is that the household needs to have been enrolled in the rental portion of Section 8 for at least a year, no easy feat considering the long waiting list and limited availabilities that accompany Section 8 housing in most places. That said, a family can use the Section 8 subsidy it receives, usually allocated toward to their rent, to pay a monthly mortgage, if they qualify.
The most common programs that tend toward low- to moderate-income households either use different price controls or provide assistance with the costs and process of getting into a house. For instance, as Schnitker notes, San Francisco's Below Market Rate program requires private developers to construct affordable housing as a part of many market rate projects. The city passes these units on to middle-income buyers, primarily at reduced prices. The Georgia Dream Homeownership set of programs is representative of initiatives run by housing agencies across the nation. Through this scheme, low- to moderate-income buyers can qualify for low-interest rate loans, receive down payment or closing cost assistance, and attend homebuyer education classes.
Income Eligibility
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As noted, most programs defer to HUD's income limits to determine eligibility. HUD sets the caps annually. The agency groups people into three categories, based on how much money their household takes in relative to their area's median income. The three categories are "low-income" (families with earnings at or below 80 percent of their area's median), "very low-income" (at or below 50 percent) and "extremely low-income" (at or below 30 percent).
Geography
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Income limits vary considerably by program. The general idea, however, is that initiatives typically only accept applications from households with earnings below a certain percentage of their area's median, whether it is one of HUD's three classifications or another number, such as 60 or 125 percent. Geography makes a major difference. For example, HUD labels a family of four "low-income" (the 80 percent threshold) if the household earns $80,700 in the San Jose-Sunnyvale-Santa Clara, California metropolitan area. Across the country, however, in the Atlanta-Sandy Springs-Marietta metro, this number drops to $57,450, as of 2010.
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