Kansas City banks reach out to low-income homebuyers as assistance programs vanish
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‘Priced out’
Skyrocketing home prices across Kansas City have been good for sellers, but not necessarily for buyers. And none are having a harder time than low-income and first-time buyers.
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Housing advocates say local banks are increasingly stepping up to provide a boost for low-income homebuyers.
Previously, local governments offered all kinds of programs that offered down payment assistance, favorable rates and closing cost grants. But many of those have vanished just as housing prices have appreciated at record rates.
“They’re just not as plentiful as they once were,” said Rick Jackson, chief lending officer at Capital Federal bank. “We are just not seeing the number of programs or funds available that were in the past.”
His Topeka-based bank is among several in the area that work to make homeownership more attainable for low-income buyers. Through the bank’s Home-at-Last program, it can offer flexibility with borrowers’ debt-to-income ratio and offer reduced costs for closing, underwriting and appraisals.
But with a dearth of affordable homes and a raging real estate market, Jackson said the bank hasn’t seen a lot of participation as of late.
“Capitalism is kicking in and everybody sees the opportunities ... so people are capitalizing on that,” he said. “And unfortunately, those at risk are not in the position to do that.”
Jackson said more local governments should invest in subsidies for low-income buyers. Wyandotte County is the only one in the area that he knew of that still offers some sort of assistance.
“We need to have more localities, more city governments that have some type of set asides to help assist individuals,” he said. “They need this type of assistance.”
Helping low- and moderate-income families move from renting to owning has always been important. But Jackson said it’s especially crucial now when many of those families cannot afford the bidding wars of today’s marketplace.
“Homeownership creates stronger neighborhoods. Everybody has a vested economic interest in that,” he said. “It’s also good for low- and moderate-income individuals to become homeowners because it’s one of the historic ways that we as Americans have been able to build wealth and help our families.”
But fewer cities are playing a role nowadays.
The KC Dream program previously offered up to $20,000 to help first-time buyers with down payments and closing costs. Kansas City relied on several nonprofit partners to assist with implementing the program. But city spokesman John Baccala said it ended about a decade ago when the U.S. Department of Housing and Urban Development changed underwriting guidelines and local partners stopped originating loans.
More recently, Lee’s Summit ended its first-time buyer program. The city historically allocated $9,000 to $45,000 biannually in federal grant funds, said spokesman Eric Stoyanov. Those awards were capped at $3,000 each. But the city stopped offering them three years ago because of a lack of interested and eligible buyers, Stoyanov said.
Lee’s Summit also rescinded a number of those awards from buyers who did not fulfill the city’s requirement to live in the homes for three years.
Similarly, the Missouri Housing Development Commission says participation in its homebuyer program has declined since the onset of the coronavirus pandemic. A spokesman said the agency is receiving 30% fewer applications from first-time homebuyers.
Since launching its Neighborhood Connection program in January 2020, Commerce Bank has funded nearly 300 loans totaling more than $36 million. The program helps borrowers at or below the area’s median income to buy a home or improve or refinance an existing one.
About 230 of those loans funded home purchases, the vast majority of which went to first-time buyers. Buyers must purchase a home in a low- or moderate-income census tract.
“We think it’s making a difference,” said Jeff Gerner, president of the Kansas City bank’s mortgage division.
He said the program reduces down payments without charging private mortgage insurance. Buyers may also receive closing cost grants and can qualify with credit scores as low as 580.
Gerner said the Neighborhood Connection mortgages have low delinquency overall. He said the program is showing that lower-income buyers can have success not only buying a home but keeping it, with some assistance on the front end.
“For us, it’s all about sustainable homeownership,” he said. “That’s a really important word to us. It’s not the dangerous predatory lending that led up to the housing crisis in 2008-2009. We never did that. We never believed in that.”
Of course, offering assistance doesn’t always mean buyers can land a house.
Lisandro Gonzalez, a housing counselor at Community Housing of Wyandotte County, said the organization has seen more demand for financial counseling and homebuyer education in recent months.
“Even though we’re seeing a lot more people for counseling,” Gonzalez said, “we’re not actually seeing the numbers of people buying a home or closing on a home.”
It’s a similar story for Wyandotte County’s Community Housing Investment Partnership, which provides up to $14,999 in assistance to buyers at 80% of the area median income. That program helped 65 homebuyers between 2015 and 2019.
But none has successfully purchased a home with the program’s assistance since 2019, said Wilba Miller, director of community development at the Unified Government of Wyandotte County/Kansas City, Kansas.
“I know people want to buy houses,” she said. “I just don’t know that now is the time to buy, especially knowing that there’s so much competition for the market out and the housing stock.”
This story was originally published September 1, 2021 at 5:00 AM.
