HOMEOWNERSHIP MAY BE THE MOST IMPORTANT asset-building strategy for individuals. Homes hold significant value and often appreciate over time, and can be passed down from generation to generation; indeed, for two-thirds of homeowners, their house is their largest asset (Joint Center for Housing Studies [JCHS]*). Homeownership yields other benefits. For example, children of homeowners are more likely to own homes and attain higher levels of education than children of renters (Boehm and Schlottmann*).

There are significant community benefits to homeownership as well. Owning a home gives residents a stake in the community and a sense of "rootedness" in their neighborhoods (Higgins*; Schubert*). A large presence of homeowners in a neighborhood increases the number and diversity of businesses in the neighborhood and stimulates economic investment (Bipartisan Millennial Housing Commission [BMHC]*). Although urban neighborhoods with affordable homes and mortgages may undergo gentrification and quickly become unaffordable (Goetzmann and Spiegel*), the advantages of attaining a "critical mass" of homeownership in a neighborhood are much greater (Higgins*).

In 2003, 68.3 percent of American households owned their home. Many low-income households, however, lack the savings needed to make the down payment for conventional mortgages. And many homeowners, particularly the elderly, have trouble paying for home repair. Housing is also the largest expense for most American families. In 2003 more than one-third of homeowners spent more than thirty percent of their income on housing (JCHS*). In addition, large economic and racial gaps persist in homeownership. In 1999, there was a 32.3 percent gap in homeownership between low and high-income households (BMHC*). In 2003, the rate of homeownership for blacks (48.4 percent) and Hispanics (47.4 percent) lags that of whites (75.1 percent) (JCHS*).

Many nonprofits that focus on housing, such as the Local Initiatives Support Coalition and the National Low Income Housing Coalition, develop programs to assist people gain financing for homeownership. These programs require a staff that is well versed in housing lender practices and federal, state, and local assistance for low income homeowners. Nonprofit organizations wishing to help clients purchase affordable housing should follow some general findings about homeownership programs.

Know the local housing market.

Understanding the specific needs of the community will help in crafting an overall strategy for the program. It is important to know the base conditions of the housing market and the needs and resources of potential homeowners, such as income distribution and mortgage packages offered by local banks (Quercia and Wachter*). Often a region undergoes economic change in job bases and demographics, increasing or decreasing the pool of potential homebuyers (Suchman*).

Have a long timeline.

The purchase of a home is only the beginning; making regular mortgage payments and undertaking home repair are often challenging. It takes a long time for programs to help instill the self-sufficiency needed to own a home (Bratt and Keyes*).

Work one-on-one with clients throughout the process, including after the purchase.

At the least, homeownership counseling should help clients address their credit history in preparation for a loan application, selecting a home, applying for the loan, closing the purchase, making payments, and addressing home repairs (Quercia and Wachter*). Often clients have other problems that keep them from homeownership but are easily solvable, such as transportation from home to work. Nonprofits should leverage their experience with these issues into their homeownership programs (Bratt and Keyes*).

There is also evidence of strategies that work during specific stages of a homeownership program:

Selecting potential homeowners

Not every client will benefit from owning a home; indeed, families with the most potential as homeowners might not be the ones with the most need for a home (Brookings*). Clients should have sufficient motivation in order to sacrifice to make mortgage payments. Although a perfect credit history is not necessary, clients should have a good record of making consistent rent payments (Suchman*).

Financing and Negotiating the Loan Process
The share of housing loans made to low-income households has increased over the past decade. The Community Reinvestment Act requires banks, savings and loans, and other financial institutions to meet the credit needs of the communities they serve, including low-income residents (JCHS*). There are several kinds of loans that require either zero or very small (three percent of the home value) down payments.

However, many banks have also switched to automatic underwriting processes, which tend to overvalue credit ratings and undervalue regular loan or rent payments (Mozillo*). And default rates are higher for subprime mortgages than for regular mortgages (JCHS*). Nonprofits play a large role in helping clients bypass some of the underwriting obstacles through strengthening their loan applications, while ensuring that clients obtain reasonable payment terms for their loans.

Many nonprofits pursue one of two strategies for helping clients obtain financing. Most try to match clients with private lenders who offer several kinds of low down payment mortgage products. Other, more specialized nonprofits, such as the Local Initiatives Support Coalition and the Enterprise Foundation, actually offer second mortgages (Collins, Belsky and Tripathi*). Organizations helping clients obtain mortgages should:

	Form partnerships with public or private entities that can offer expertise on mortgage products as well as actual loans, such as savings and loans, banks, large local businesses or universities. But also be flexible in partnering with organizations (Fannie Mae Foundation*).
	Secure multiple streams of financing. Although not the most efficient way to structure a mortgage, multiple finance sources are a good way to hedge bets if one source falls through (Suchman*).
	Find staff that has expertise in the housing finance market (Suchman*). Housing finance experts can help to navigate the process of identifying and obtaining loans and coordinate a potentially complex arrangement of several loans for one mortgage (Colton*).
	Counsel clients. Even the most qualified clients often see the loan application process as intimidating and complex. Several hours of either classroom or individual counseling, or a mixture of both, is best. (Hirad and Zorn*). Some sources for loan education are nonprofit-sponsored housing fairs, bank-sponsored lending seminars, or bank presentations to community groups (Ratner*); but one-on-one counseling should be offered in addition to group meetings.

After Sales Are Completed
Many new homeowners find the responsibility and costs associated with home maintenance to be challenging. In addition to mortgage payments, the average homeowner spends $2,770 on housing costs (such as utilities, property taxes, insurance, and repair) annually. Those paying over fifty percent of their income on housing (about twice as much as the average homeowner) often live in homes needing major repair. Because sixty one percent of low-income homeowners are elderly, maintenance is a particularly acute problem for older people (JHCS*). Federal housing aid for home repair has declined in recent years, however, and low-income homeowners spend less than one hundred dollars annually on home maintenance (Louie, Belsky, and McArdle*).

	Intensive counseling helps clients create plans for making regular mortgage payments and a household budget that allocates money for yearly home repairs, which may be augmented by the nonprofit organization (Listokin and Wyly*).
	For elderly clients, reverse mortgages (which allow the client to borrow against the value of a home for repair and maintenance and postpone repayment until they move, sell, or die) are an option (Louie, Belsky, and McArdle*).

HOMEOWNERSHIP:
PUBLICATION FINDER

	The State of the Nation's Housing 2004 (PDF) Joint Center for Housing Studies A data-rich overview of the changes in home ownership and rentals among individuals and changes in the housing markets in the last two decades. Contains several appendices with information in tabular form. Cambridge: Harvard University, 2004.
	Meeting the Housing Needs of Families (PDF) Annie E. Casey Foundation This guidebook focuses on addressing the serious housing problems of low-income families. An introduction to housing needs, the potential challenges and opportunities, and promising approaches provide a sound overview to help communities develop appropriate projects. Baltimore, MD: N.D.
	Rethinking Local Affordable Housing Strategies: Lessons From 70 Years of Policy and Practice (Executive summary). (PDF) Brookings Institution. 2003. An argument that the most important actors in housing policies are state and local governments, and suggestions for governments to avoid previous pitfalls in housing policy.
	Minding the Gap: Issues in Overcoming the Information, Income, Wealth, and Supply Gaps Facing Potential Buyers of Affordable Homes (PDF) J. Michael Collins and Doug Dylla This paper explores solutions to the gap in homeownership rates between low and higher income households. The authors pose a menu of strategies including home buyer counseling, second mortgages, and housing production policies and programs to increase the supply of affordable housing, Washington, D.C.: Local Initiatives Support Center, 2001.
	Reaching Emerging and Underserved Home Ownership Markets Andrew I. Schoenholtz and Kristin Stanton Jones This paper presents home ownership outreach strategies for financial institutions, community-based organizations, and other housing industry players. Five practices are discussed: understanding emerging markets, creating institutional capacity and partnerships, creating knowledgeable consumers, determining creditworthiness, and making homeownership affordable. Washington, D.C.: Local Initiatives Support Center, 2003.

HOMEOWNERSHIP:
WEB SITE FINDER

	Enterprise Resource Database(tm) Part of the Enterprise Foundation web site, the database is a comprehensive collection of online tools and resources for community development practitioners. The housing section focuses on homeownership, supportive housing, program marketing, homeownership counseling and other issues. There is also a separate section devoted to rural housing issues.
	LISC Online Resource Library A project of the Local Initiatives Support Corporation, the library is a resource for affordable housing practitioners. Case studies, industry tools, and other information resources address topics related to homeownership, housing preservation, and housing design.