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Millions of Americans formerly shut out of homeownership
because they have been unable to save enough for a downpayment
NOW HAVE AN OPTION
The issue of millions of Americans locked out of homeownership continues to frustrate well-intentioned policymakers. Their concerns are hardly trivial. Recent studies make it clear that those who own homes are far more likely to attain greater financial security and social stability than those who do not.
Even as America’s overall homeownership rate languishes, one segment of that total is further disadvantaged. Minorities are nearly 30% less likely to be homeowners than Caucasians, since the rate of Caucasian homeownership is 74%, while the minority rate is 48.5%. This means they face a much more uncertain fate when it comes to achieving the American dream of homeownership.
Spending on housing represents 20% of the national economy. No wonder, then, that the foundation of most families’ wealth in the United States is homeownership. A home is normally the fastest-growing part of their portfolio.
In many cases, 95% or more of the initial home cost is provided by the lender, who secures the obligation through a mortgage. This means, for those who qualify for a downpayment gift provided by a nonprofit downpayment provider or through the American Dream Downpayment Fund have instant equity in that property. This is because the gift or grant is just that: It is not repaid. A $5,000 downpayment gift or grant on a $100,000 home yields the buyer $5,000 in immediate equity in the property. Assuming a 3 percent per year price appreciation, the home’s value will increase to nearly $116,000 in five years. This means an equity increase of nearly $21,000 assuming the buyer has paid down $4,900 of the mortgage principal over that time. This represents an annual investment return of more than 33%.
Recent studies focused on the social impact of living in one’s own house clearly demonstrate a broad range of advantages accruing to homeowner families. These benefits span a broad range of quality of life payoffs – from higher school grades and lower teen pregnancies to stronger neighborhood collaboration and greater voter participation in local, state and federal elections.
Among the findings:
- Children of homeowners showed a 9% higher probability of being in school than those of renters.
- Teenage pregnancy rates in families owning their homes are from 2-4% lower than for families who rent.
- Children of homeowners have a 25% higher probability of completing high school than renters’ children.
- Children of homeowners have a 116% better chance of graduating college than renters’ children.
- Children of homeowners had a 59% better chance of being homeowners themselves within 10 years of leaving the parental home.
- Math achievement scores are 9% higher among homeowners’ children than renters’ children.
- Reading achievement scores are 7% higher among homeowners’ children than renters’ children.
- Homeowners are 25% more likely to vote in local, state and federal elections than renters.
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It has become unmistakable that homeownership is America’s most effective vehicle for citizens to achieve family generational wealth. This wealth begets an economic “ripple effect” in neighborhoods where new homeowners settle, creates jobs, and increases the tax base and spurs business start-ups. As recent studies make clear, homeownership is also the cornerstone for vast improvements in quality of life.
Children of homeowners are more likely to go to school, do well at school and go on to college. Homeowners themselves are more active in community and exercise their fundamental right to vote in local, state and federal elections in far larger numbers than those who do not own their homes.
Homeownership is not an entitlement. But it opens the door for those who enjoy it to achieve the economic and social stability and life quality that is the envy of the world.
The American Family Funds Down Payment Assistance program helps more families accomplish the dream of homeownership.
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