Aid for middle-income homebuyers shrinks in San Mateo County

And since Silicon Valley Bank’s collapse last year, coupled with a generally high-interest rate market, Boris Vatkin, senior program manager for the nonprofit HEART, said lenders are shrinking offerings to those who could benefit the most.

“[Lenders] have pulled back, at least in San Mateo County,” Vatkin said. “Since the Silicon Valley Bank thing happened, a lot of them have gone more conservative … there are less options than there were four or five years ago.”

Many middle-class families who earn close to the area median income — $175,000 for a four-person household as of last June — are unable to afford a standard 20% down payment, however, they earn too much to qualify for below-market-rate housing. While it’s possible to secure a loan paying a lower percentage up front, that comes with additional costs, specifically in the form of private mortgage insurance, as banks often require buyers who can only afford around 10% down to purchase a policy that protects lender risk in the event of defaults.

Depending on the cost of the home, that can add an additional $6,000 a year over several years, penalizing middle class buyers and further disincentivizing a purchase.

HEART has offered first-time homebuyer programs in the county for about 15 years, specifically focused on earners making anywhere from $180,000 to $220,00 a year. The organization, which is jointly funded by public agencies and private foundations, has issued about 114 loans over that time period, which Vatkin says may not sound like a lot, but it also doesn’t have the same constraints as similar programs that have fixed funding limits, which include lottery systems or fluctuating availability. The nonprofit partners with Meriwest Mortgage, which will make the traditional loan, requiring 20% down and subsequently receive the second down payment loan after closing, which HEART guarantees. Buyers pay a minimum of 5%, while the down payment loan covers the remaining 15%. Repayment begins right away.

But even with the financing boost, Vatkin said it’s still tough for residents to enter the market. Continuously elevated inflation and interest, not to mention increasing consumer prices, the interest in such programs remains high but the follow-through is mostly guided by the economy.

“The main limitation of our program is the interest rates,” he said. “A lot of people still choose to go out of the area, because they can get the same home for less, or they can get a bigger home for the same price.”