In many cities around the country, finding a place to live is harder than ever before. There are a lot of reasons for that, including simple supply and demand, restrictive regulations regarding height limits and zoning, and explosive economic growth leading to shortages. For younger adults — millennials, in particular — the difficult part is not just in finding a home, but also securing a mortgage to pay for it.
Because if you’re already delaying other aspects of your adulthood — getting married, having kids, etc. — you may as well start earning some equity from your housing situation. Right?
Well, there’s good news. Fannie Mae, the government-sponsored Federal National Mortgage Association, has just developed a new program with one big objective in mind: make it easier to get a mortgage. The new program is called HomeReady, and it replaces MyCommunityMortgage, which was previously used to tackle the same objectives, though it fell short in some key areas.
“HomeReady will help qualified borrowers access the benefits of homeownership with competitive pricing and sustainable monthly payments,” said Jonathan Lawless, vice president for underwriting and pricing analytics at Fannie Mae, in a press release.
“We are also confident this mortgage option will create business opportunities for lenders serving the changing demographics and borrower needs seen in today’s market. The combination of our risk management safeguards and an innovative online education tool will put HomeReady borrowers in a strong position to succeed in homeownership.”
To qualify, Fannie Mae says that “HomeReady will be available to borrowers at any income level for properties in designated low-income census tracts, and to borrowers at or below 100% of area median income (AMI) for properties in high-minority census tracts or designated natural disaster areas.”
According to Fannie Mae’s HomeReady Fact Sheet, borrowers will benefit in a number of ways, including lower down payments, flexibility in funding sources, and homeownership education, which grants access to an online class.
Sounds great and all, but what does it actually mean for consumers who are currently striking out in the housing market?
It depends. As The Urban Institute points out, HomeReady is really designed with a couple of key demographics in mind: “cash-poor, tech-savvy millennials and the growing minority population.” And it makes a lot of sense that Fannie Mae would want to redesign its program to better serve these populations. After all, we’ve all seen how millennials have been reluctant (or unable, to be more precise) to become homeowners, and minority and immigrant populations are steadily growing. It only follows that the government would have a vested interest in promoting homeownership among these groups.
The way in which Fannie Mae’s new program has been adapted to serve in this way is multi-faceted. Pricing will be more simplified, households will be more configurable, and, at the center of it all, HomeReady will make it easier for those with moderate or low incomes to find a lender willing to work with them.
So, if you can count yourself among those populations, HomeReady may be a good thing for you. Overall, it’s probably going to be positive for the economy as well — at least that’s the hope. There are definitely benefits and drawbacks to owning a home, but conventional wisdom typically points to higher levels of homeownership being a net positive, economically.
When more people own homes, people are more closely tied to their community, have a vested interest in taking better care of their homes and property, and often try to make their neighborhoods a better place to live. Of course, there are also tax and personal finance factors that come into play, and when you own your home, you’re also building equity.
So, there are a lot of reasons to pursue it. The problem, as we know, is that groups like millennials and minorities have been somewhat excluded for a period of time, mostly due to financial strife. But that’s what Fannie Mae is trying to address. The question is, will it work?
We’ll see, with time. And if there is a good sign to take away from the HomeReady announcement, it’s that government-backed organizations are recognizing the need for adaptation, and jumping on it.
Follow Sam on Twitter @SliceOfGinger