Assistance with down payments would put more people into a modestly priced home than lowered interest rates or closing costs finds a new report by the Census Bureau. And, one in ten potential home buyers could have qualified for a mortgage with no help at all.

Howard Savage, author of the report, Who Could Afford to Buy a House in 1995" defines a modestly priced house as one that is less expensive than 75 percent of all owner-occupied houses in the area of the residence.

The report reveals that 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.

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, 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.

Published: September 23, 1999

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