|Volume 1, Issue 6, 2001||Federal Reserve Bank of Dallas|
Receive e-mail announcing the latest
Section 8 Vouchers Make Home-Ownership Dreams a Reality
In March 2001, a single mother in Waco, Texas, did something she had envisioned only in her dreams. She purchased her own home, moving her children from a small apartment to a new three-bedroom, two-bath brick house in a quiet residential neighborhood.
The purchase was made possible by the Department of Housing and Urban Development's new Section 8 home-ownership option program, which allows recipients of Section 8 federal housing assistance to apply their monthly rental vouchers toward purchase of a home.
"Our dream of owning a home has come true," the new homeowner says. "Without this program, I don't think it would have been possible."
Since March, the Waco Housing Authority has moved four families out of apartments and into houses under the Section 8 home-ownership option program. WHA is currently working to place 38 other families in new homes.
Qualifying families must earn at least $10,300 annually and have been employed full-time for at least a year. Section 8 assistance payments supplement the family's income. In most cases, the family uses 30 percent of their monthly income for their house payment, and the housing assistance payment covers the balance. On average, it takes about four months to move a qualifying family out of rental-assisted housing and into a new home.
"A large part of what makes this program successful is that we make sure the families are well prepared to make the commitment," says La'Tanya Matthews, special operations manager for WHA.
Because the program gives families the option to buy a new home as well as an existing one, it offers local builders an opportunity, too. In Waco, Weatherby Homes is working with the local public housing authority to build homes under the home-ownership option program. The homes average 1,200 square feet and sell for about $72,000.
"These are not the homes people usually think of when it comes to Section 8," says Gene Evans, vice president of Weatherby Homes. "These are brick homes with ceramic tile, dishwasher, master bath, garage and other amenities."
For lenders, the program offers new business possibilities. WHA lists Washington Mutual, Austin Loan, Liberty Lending and Southlake Mortgage among participating banks and mortgage companies.
Todd Ollendorff, chief executive officer of Austin Loan Corp., views the program as an excellent way to improve the community's economic stability. He credits his flexible underwriting guidelines as the reason he can finance some of the families' mortgages under the home-ownership option program.
"The families I have worked with have good credit, but for most conventional financing guidelines it's just not good enough," he says.
The program requires a family to provide a 3 percent down payment with at least 1 percent coming from their personal funds. In Waco, the city has provided Community Development Block Grant money to assist with down payments and closing costs.
Housing authorities in Galveston and Taylor, Texas, are also implementing the home-ownership option program. The Galveston Housing Authority has moved one family into a new home and is working with six other families to secure financing. The Taylor Housing Authority adopted the program last summer, and Weatherby Homes expects to start construction of homes in Taylor in early 2002.
e-Perspectives, Volume 1, Issue 6, 2001