Galloway and Collens, PLLC

State grants help prospective homeowners make the leap

Deciding to buy a home is an exciting and daunting prospect, whether it's your first purchase or you're a seasoned residential real estate investor. Low home prices have contributed to a favorable real estate market for buyers, but many families are still suffering from other symptoms of the recession and buying a home remains slightly out of reach.

This is where state-funded financing options come in. Many states around the country want more people to own homes rather than rent and want to stimulate the housing market to help aid in the overall recovery. As a result, housing agencies have been giving grants and administering loans to home buyers to cover costs like appraisals, insurance, and origination fees, which can often help make a purchase within reach for more people.

State housing finances agencies are in a unique position to provide these loans and grants because of their high credit ratings and the security of these loans. Moody's credit rating has ranked municipal bonds at a double-A level, which makes them attractive for investors. Experts say that this great combination of benefits to cities and states has helped increase the number of loans and grants that they can provide, which in turn benefits residents.

Since big banks are unlikely to offer the same types of incentives or have the same ability to back the loan, state agencies are often the only options available to lower and middle income buyers. And since the state agencies aren't solely profit-driven, they can focus their loan programs on residents who have been underserved by traditional commercial financing options. In turn, this can open up a whole new segment of potential buyers and help fill homes that were emptied by foreclosure and aid in the overall housing market recovery.

Source: Bloomberg, "Housing Rebound Accelerated By State Agencies: Mortgages" Romy Varghese, June 27, 2012.

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