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Public Information Office CB99-175
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e-mail: pio@census.gov
Howard Savage
301-457-3199
Help With Down Payments and Closing Costs Would Convert
Renters to Owners, Census Bureau Report Shows
Helping renters with down payments and closing costs would have
substantially increased the proportion in 1995 who would have been able to
afford a modestly priced house in the area where they lived while about 1 in
10 would have qualified for a mortgage with no help at all, according
to a new report released today from the Commerce Department's Census
Bureau.
A modestly priced house was defined as one that is less expensive than
75 percent of all owner-occupied houses in the area of residence.
If renters received a down-payment subsidy of $5,000, about 2 in 10, or
8.9 million renters would have been able to afford a modestly priced
house. A $10,000 subsidy would have increased the proportion of renters
who would qualify for a mortgage to 3 in 10, or 13.4 million renters.
"Surprisingly, decreasing the mortgage interest rates and reducing the
required down payment would have less effect on affordability than
down-payment assistance," said Howard Savage, author of the report, Who
Could Afford to Buy a House in 1995?
Reducing interest rates by 3 percentage points would have increased the
proportion of renters who would have qualified for a mortgage from about
10 percent to about 11 percent. Requiring no down payment would have
increased the proportion of qualified renters to about 13 percent. This
option would lower the amount of cash required for the down payment and
closing costs, but would increase the amount of income necessary because
of higher monthly mortgage payments.
Other highlights from the report, available on the Internet at
http://www.census.gov/hhes/www/hsgaffrd.html, include:
- The percentage of all families (both owners and renters) financially
able to buy a modestly priced house was slightly lower in 1995 (56 percent)
than in 1993 (58 percent).
- Three primary reasons explain why families and individuals cannot afford
to purchase a house: excessive debt, not enough cash for a down payment
and monthly mortgage payments too high for the family to afford on its
current income.
- Affordability for families and individuals was greatest in the Midwest
(55 percent), followed by the Northeast (50 percent), the South
(48 percent) and the West (39 percent).
- Two-thirds of married couples, 36 percent of male-householder families
and 22 percent of female-householder families, could afford a modestly
priced house in 1995.
The data come from the Census Bureau's Survey of Income and Program
Participation. As in all surveys, the data are subject to sampling
variability and other sources of error.
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