IDA savings put down payment on a home within reach
NASHUA, NH – Nicole Boyle was ready to buy a house. For eight years she had shared a two-bedroom apartment with her three children: Mackenna (14), Briannan (12) and Brent (10). It was time for fast-growing Brent to move into his own room.
Nicole worked full-time at a nonprofit organization, The Youth Council, and knew how to budget and organize effectively. She had recently paid off some credit card debt, but the routine expenses of a household of four made saving enough for a down payment difficult.
The single mom decided to take advantage of a free homebuyer course offered by NeighborWorks Greater Manchester. “Buying a home is a huge endeavor. I wanted to be an informed consumer and avoid getting scammed,” she said. She wanted to avoid becoming one of those people trapped by ballooning mortgage loans or plunging property values.
What she didn’t expect was the opportunity presented by Homeownership Counselor Vanessa Beauchesne, who suggested Nicole enroll in the Individual Development Account (IDA) matched-savings program. Nicole had never heard of IDAs and initially doubted she would qualify. “I don’t (qualify) for Section 8 housing help – I over-qualified by small monthly dollar amounts,” she said.
Nicole applied and hoped for the best. Soon, she was thrilled to learn not only that she qualified for IDA, but that if she met her savings goal and received some financial training, she’d receive a $3 match for every $1 she saved. She could even count her $1,000 tax return as savings.
In July 2011, after saving $2,000 and receiving an additional $6,000 in match money, Nicole and her kids moved into their own three-bedroom house in Nashua. She chokes up as she says, “I’m very proud of being able to provide a home for my children. I feel more settled. We’re in a great neighborhood – the kids can walk to friends’ homes and school. They ride bikes and play in the backyard. There’s more freedom. We’re very happy!”
“The IDA program changed my life,” she said. “Without it, I might not have bought a home now, or maybe ever.”
Savings plus education the key
New Hampshire’s IDA program, which celebrated its 10th anniversary in fall of 2011, is a proven example of how nonprofits, businesses, and government can team up to help people with very-low incomes – more than half have received welfare assistance and nearly half are single parents – become financially stable and achieve their dreams.
The program combines matched savings with financial education to help people with limited incomes save to buy a home or car, to start or expand a business, or to continue their education.
Participants deposit between $25 and $200 each month into their IDA savings accounts, up to a maximum $2,000, and the IDA program contributes three times that amount. People who save the maximum will have $8,000 to put toward their goal – their $2,000 in personal savings plus the $6,000 match.
Before they can use the savings match, participants complete a minimum 10 hours of financial education customized to their savings goal.
“A significant number of IDA participants have never had a savings account,” says New Hampshire Community Loan Fund president Juliana Eades. “They leave the program with savings, relationships with a bank and with a community partner, and an understanding of what it takes to achieve financial goals.”
Forty-four percent of IDA’s 1,280 participants have used their savings to reach their goals, with a combined savings of more than a million dollars. Those who didn’t reach their goals still save an average $900.
Citizens takes lead role
NH’s IDA program was launched by the New Hampshire Community Loan Fund in September 2001. Citizens Bank has been the program’s leading corporate supporter from the outset, providing professional expertise, considerable funding, and hosting most IDA savings accounts.
“At Citizens Bank, we take our responsibility to make our services accessible to all members of the community very seriously,” said Citizens Bank president Joe Carelli. “By partnering with the Community Loan Fund, we have helped thousands of families who are working hard to increase their savings and improve their lives.”
Additional grants have come from a mix of private, public and charitable sources, including the New Hampshire Community Development Finance Authority and the Assets for Independence (AFI) Program sponsored by the U.S. Department of Health and Human Services. AFI has provided approximately 30% ($1.76 million) of the costs for NH IDA.
Participants sign up for IDAs and receive financial education through community-based nonprofits around NH, including NeighborWorks Greater Manchester, More Than Wheels, Granite State Independent Living, and New Hampshire Housing.
These community partners also advise participants through their purchase, steering them away from predatory lending and toward better terms from consumer-oriented lenders.
About two-thirds of the graduates saved for homeownership; they’ve bought 267 houses for an average price of $168,000. Those homebuyers, despite their low incomes, hold onto their homes over the long-term. A study published by CFED in 2010 found that foreclosures on IDA homebuyers nationally were two and three times lower than on other homebuyers.
In the same study, only one of 168 homes (all those for which current property status was available) purchased by NH IDA participants between October 2001 and February 2008 had gone into foreclosure. The rest were still occupied by the original IDA buyers.
