The fledgling and often overlooked non-profit housing grant industry has boosted its visibility with the new Homeownership Alliance of Nonprofit Downpayment Providers, or HAND.

The new association will help the industry become more proficient at giving away the hundreds of thousands of grants each year ranging from $6,000 to $15,000 per home buyer.

For qualified and approved buyers, typically low- to moderate-income home buyers who are often first-timers who can't otherwise afford a home, the gifts unlock the door to the American Dream.

Approximately 2 to 5 percent of the cost of a home, the grants are enough to cover closing costs and or some or all of the down payment -- two of the primary barriers to home ownership.

"I've been talking to professors of urban affairs and almost no one has heard of this industry. It's a five-year old industry and there are about 22 agencies. We are doing it with private capital. It is a gift to a buyer. The buyer doesn't repay the money. That's the main appeal," said Jon Cottin, the new association's executive director.

HAND members target creditworthy consumers who may already spend as much as half their income on rental housing, but because of those prohibitively high living expenses can't gather the cash for the upfront costs associated with buying a home.

Targeted home buyers also typically qualify for Federal Housing Administration (FHA) loans, which max out at $300,700. Do the math. That means the grants can be as much as $15,000.

A Federal Reserve Bank of Minneapolis study says grants bridge the gap to home ownership and can be a better deal for first-time home buyers than lower mortgage rates. The study says mortgage rates would have to fall two full percentage points just to nudge up the rate of home ownership.

"It's (HAND operations) opening housing up to a new pool of buyers," said Cottin.

Most of the grants come from sellers who donate, as a grant, a percentage of the proceeds from the sale of their home, says Cottin. The young grant industry generates 120,000 transactions a year, Cottin says.

Upcoming federal efforts pale by comparison.

"The (Bush) administration and Congress are heading toward an appropriation of $200 million..you'd get about 45,000 transactions over five years and the federal grants are coming out of taxpayers pockets. For the most part, our donations are made by the sellers," Cottin said.

In addition to gifts, many industry players also offer home and mortgage counseling, mortgage payment protection insurance and other services that help novice home buyers get and keep a roof over their heads.

The new agency will also establish self-regulating standards to ensure that the industry works toward reducing mortgage defaults and foreclosures. Another industry goal is to foster the creation of innovative affordable housing products.

The digital paint is still wet on HAND's Web site, scheduled to open later this year, but consumers who need a hand with buying a home can contact HAND's founding members directly to determine if they qualify for a grant.

Published: September 11, 2002

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A journalist for 35-years, Broderick Perkins parlayed an old-school daily newspaper career into a digital news service offering editorial content and consulting services. Perkins' San Jose, CA-based DeadlineNews Group includes the flagship news site, DeadlineNews.Com, offering real estate, personal finance and consumer journalism, and a backshop, the Deadline Newsroom.