Home-buyer aids, help or harm?

In the past 25 years, the percentage of homeowners in the United States has increased from 65.1% in 1979 to 69.2% in 2004. During the same period of time, the Federal Housing Administration foreclosure rate increased from .78% in 1979 to 2.93% in 2004, while the conventional mortgage foreclosure rate increased from .25% in 1979 to .55% in 2004. Clearly, many homeowners have experienced homeownership-related financial hardship. Past studies have found an association with the increase of homeownership rates and higher foreclosure rates. Lower income households may be at greater risk than other households for home foreclosure. Because many of these households rely on home-buyer aids to become homeowners, there may be a link between the usage of home-buyer aids among lower income households and their financial well-being. The goal of this research was to examine this link. Potential homeowners use home-buyer aids to overcome barriers to purchase their homes. These aids include federally issued or insured loans, grants for down payment, or other federal, state, or nonprofit home-buyer programs. Using the 2001 data from the Survey of Consumer Finance;s, this study compared all households to determine the effects home-buyer aids have on financial stability. This study also compared households based on their housing tenure and homebuyer aid status (i.e., homeowners with a mortgage, homeowners with home-buyer aid, and renters). Five financial ratios were utilized to measure the financial stability of these households. A closer examination of households considered to be at risk was also conducted to understand the risk facing those homeowners. Multivariate results showed that aid recipients have decreased financial stability in one financial ratio compared with traditional homeowners and have mixed results when compared with renters. In the at-risk analysis, aid recipients had decreased financial stability in two of the five ratios compared with traditional homeowners and again had mixed results when compared with renters.