A local home-buyer assistance program set up a lottery to help people buy residential properties. Why have only two people closed on homes?
Effectively addressing homelessness requires a number of approaches, but getting people into permanent housing remains a key factor in sustaining lasting results. Models like “Housing First”—which have been adopted across the US—focus on providing or connecting people to permanent housing before addressing access to additional services and resources.
In the East Bay, a number of programs have been developed to help first-time homebuyers afford the costs of buying a home. Though not specifically geared towards unhoused people, these programs are designed to assist low-income or otherwise disenfranchised individuals through the process.
Hello Housing is a Bay Area nonprofit that carries out some of these programs. According to Hello Housing’s president, Jennifer Duffy, the organization helps people who are not able to cover the upfront down payment and closing costs.
“We specialize in home ownership—all things home ownership, whether it’s creating access to home ownership or helping to create new below-market-rate homes that are designated for home ownership,” Duffy said, adding that one of these programs—Alameda County’s Down Payment Assistance Loan Program, or AC BOOST—was “designed with equity in mind.”
With AC BOOST, the majority of borrowers are people of color earning between 70 and 100 percent of the area median income—a key metric for determining eligibility for affordable housing programs, according to Duffy.
However, the number of applicants who ultimately purchase a home through AC BOOST is low.
Of the 8,375 pre-applications submitted to the AC BOOST program since its introduction in 2019, only 480 applicants have been approved for a loan.
But of those 480 approved applicants, only 264 have successfully closed on a home. Lengthy program requirements and standard requisite procedures from lenders—such as income verification, compliance measures, and assessment of debt-to-income ratios—have hindered many applicants from completing the process.
“It really depends on, ‘can they qualify for a first mortgage? Can they meet the program’s guidelines?’” Duffy said.
In Emeryville, a smaller city-sponsored program has experienced similar hurdles for potential home buyers. Much smaller than AC BOOST, the program offers a similar structure, in which the borrower benefits from lower interest rates and repayment of borrowing costs.
But like AC BOOST, the ratio of applicants to approved loan holders remains slim. According to Duffy, the Emeryville program has gathered roughly 500 pre-applications so far, which are then selected through a tiered lottery system: 30 applicants are approved for loan processing, and 120 are placed on a waitlist for later consideration. Of this year’s lottery cohort only two borrowers successfully closed on a home.
Street Spirit spoke with one of those borrowers, who closed on their home in April. They asked to use the alias “Monica” for this story, citing privacy concerns.
Monica spoke to the hurdles borrowers must overcome throughout the loan acquisition process. They detailed the lengthy process of not only qualifying and being selected for a lottery program, but the lengthy procedures that followed their approval: a pre-application, submission of tax records, proof of income and bank statements, and additional stipulations that assessed their existing debt-to-income ratio.
Monica’s bills and debts were required to be within a certain ratio of “front-end” and “back-end” loans, which speculate how gross monthly income would be allocated to mortgage payments and other monthly debt obligations, respectively.
“Back-end” loans—such as credit cards, car loans, child support, and other living expenses—have proven to be a significant roadblock for loan approval, and life circumstances such as divorce can further complicate the process of income verification for applicants. Securing closing costs after loan approval also proves to be a challenge for hopeful borrowers, many of whom give up in the process.
“We’ve got a lot of scenarios where [applicants are] just not able to meet the debt-to-income ratio, they’re just over it,” Duffy said.
Beyond loan acquisition, the housing market is also a deciding factor in the success of home-buyer programs, which must consider the availability of homes in the applicant’s price range that fit the lender’s conditions, usually within a specified window of time.
As part of the Emeryville home-buyer program, Monica’s housing search was limited to Emeryville city limits, and they were given six months to secure an offer after receiving loan approval. Based on the loans front- and back-end ratio calculations, their budget could not exceed $375,000.
For Monica, timeline and price range requirements made it incredibly tricky to place an offer of a home, let alone find a lender that would approve a loan in the first place.
Monica had waited to submit documents for the underwriting process, hoping to include income from their second job. But Monica wasn’t allowed to include their second source of income until the two-year mark of employment, which shortened the window of time to confidently shop for a home.
“That’s the kind of thing—you have to be on every, every aspect of it,” Monica said. “It’s complicated.”
In April, Monica ultimately closed on a home with the help of a specialized loan from Fannie Mae, a national housing creditor. Monica’s original lenders had disqualified the finance package due to limitations with their $375,000 budget—which did not meet current market housing availability in Emeryville—and additional costs associated with HOA approval, insurance challenges, and home repairs. In the end, the special, one-time exception from Fannie Mae allowed Monica to secure the loan and make an offer on a house.
“I couldn’t have done this without the Emeryville [program],” Monica said, “It would be years, if not impossible, for me to buy a home [without] this program. But I still think there were a lot of barriers. I don’t think I would have been able to utilize the program if the stars had not aligned.”
Kelsey Oliver is a freelance writer covering East Bay health and housing.