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Governments cosigning for low-income home buyers

New programs are surfacing to help low-income families become home owners. In today’s market, those programs are desperately needed.

Mortgage financing has become more difficult in recent months, with lenders tightening their underwriting policies and cutting their offering of adjustable-rate mortgages to subprime borrowers. At the same time, home prices remain high, with some markets showing a slight reduction in median prices and others continuing to increase prices.

One method to help families acquire a home is called shared equity. It allows communities to provide affordable home ownership opportunities that remain affordable while helping home buyers build individual wealth in a sound, predictable way, according to the National Housing Conference.

Under this program, a state or local government provides funding to help a family purchase a home. In return for this investment, the government entity shares in the benefits of any home price appreciation that might occur, according to a Housing Conference representative.

The public’s share of the home’s appreciation may be used in two ways: It can either be returned to the government in the form of a cash payment that can be used to help another family, or it can stay with the home, reducing the cost of that home for the next family.

“By sharing the gains in home price appreciation with the public investor, shared equity results in substantial benefits now and for years to come,” the report stated. “Home buyers benefit from lower home prices and the opportunity for significant home equity gains. Local communities benefit by retaining vital workers who otherwise couldn’t afford to live in the communities they serve.

“Also, by ensuring that the public’s investment keeps pace with the housing market, shared equity strategies allow governments to help generations of families achieve home ownership with a single initial investment.”

A good example of a successful program is one implemented by the Champlain (Vt.) Housing Trust. It uses an appraisal-based resale formula to maintain lasting affordability. On resale, a home owner obtains 25 percent of any appreciation in the home value.

To purchase a home in the trust, a family must earn less than 100 percent of the area’s median income. For more information, visit or call 202-466-2121.

Send inquiries to James M. Woodard, Copley News Service, P.O. Box 120190, San Diego, CA 92112-0190. Questions may be used in future columns; personal responses should not be expected.

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