Housing vouchers were one of the lesser known government real estate subsidy programs before the media helped to make it a political point of contention in late 2015. Regardless of the recent political flame war about housing vouchers, the pre foreclosure homes program known as the Homeownership Voucher Program is taking real people from renting to homeownership. Here are the facts behind housing vouchers, pre foreclosure homes, and how the government is helping to provide new housing opportunities using both.
What is the Homeownership Voucher Program?
The Homeownership Voucher Program is a special type of housing voucher that is focused on helping low income and bad credit borrowers own a home. Vouchers allow the recipient to choose an approved housing structure for ownership.
Previous generations of vouchers were for rental units; however, the current generation of vouchers has expanded into homeownership. Homeownership Voucher Program recipients have their choice of pre foreclosure homes, a market that tends to experience some lag. Pre foreclosure homes take longer to sell, have fewer offers put on them, and attract lower quality buyers than other levels of housing. This is not necessarily because of the condition of the house is worse or the house is older or unlivable. The reputation of the foreclosure market drives many would be buyers away before they even look at the properties deeply.
Am I eligible for the Homeownership Voucher Program?
Your local public housing agency will determine if you are eligible for a homeownership voucher. Because these agencies receive funding from the U.S. Department of Housing and Urban Development (HUD), many of the eligibility requirements from the local agencies come from HUD.
The first eligibility requirement of HUD is the gross income of the household. In most cases, only citizens will be eligible for the program, although certain categories of non-citizen workers with immigration status may also receive a voucher. Eligible income of a household is based on a percentage of the median income for the local area: The income of the household usually cannot exceed half of the local median income. The public housing agency must give at least three fourths of the vouchers it has to applicants with incomes that are below 30 percent of the median income of the area. If you do not know the median income for your area, your local public housing agency will have these statistics.
After verifying your income, the agency will also ask about your assets and how large your family is. The agency will also coordinate with your bank and employer before finalizing your eligibility. If you are eligible, then your name will go on a waiting list. When your name comes up, you will receive your housing voucher.
If you are looking to apply to the program, you can start by contacting your local public housing agency or the local branch of the HUD.
How long is the waiting period for a housing voucher?
The waiting list will vary depending on the number of applicants and the money that your local public housing agency has. However, certain people and certain households will receive preference in receipt of their vouchers: homeless people, people currently in substandard living conditions, people paying more than half of their income in rent, and involuntarily displaced people. Families living in these conditions will receive preference over families who are not. The local public housing agency has a great deal of autonomy in determining preferences.
How does a housing voucher work?
After an individual or a family receives a voucher, that household will then choose its own property from the market of eligible properties. These pre foreclosure properties must meet HUD standards for size, cleanliness, and other health and safety concerns. The public housing agency will conduct the inspection and serve as the arbiter of what is considered up to standard.
If the chosen property passes muster with the agency, then the household will then receive a subsidy based upon the financial resources that it has available to it. The household cannot pay any more than 40 percent of its monthly income as a mortgage payment, but the subsidy has a hard upper limit as well. A great deal of the extra room that low income buyers receive under the voucher program is the waiver from many of the fixed fees that would otherwise take funds away from the buyer at closing.
Why do housing vouchers work with pre foreclosure homes?
HUD is one of the biggest guarantors in the United States government, and its volume of business allows for a great deal of financial leverage. Sellers who are being squeezed out of a home with a foreclosure proceeding now have a buyer with a relatively low risk profile who can instantly validate the investment that the lender has made in the property. Lenders are much more likely to do business with the government than try to work it out with the current resident: This is part of what accounts for the government underwriting around 97 percent of the home loans in the United States.
2 Point Highlight
Because these agencies receive funding from the U.S. Department of Housing and Urban Development (HUD), many of the eligibility requirements from the local agencies come from HUD.
Lenders are much more likely to do business with the government than try to work it out with the current resident: This is part of what accounts for the government underwriting around 97 percent of the home loans in the United States.
