What in the World is Shared Appreciation? (And Why Should I Consider It?)

Shared appreciation. It sounds like you must give up wealth-building. But have you heard the old adage, "In order to receive you must also give?" That's how we see shared appreciation. It's a huge win-win and you definitely gain more than you give.  The long-term trend in most American cities is that housing prices are rising faster than middle-class incomes are rising. 15 years ago, it would have been easier to buy a home on U Street or the Southwest Waterfront, but now, buying a home there is a lot more expensive. CFHomes helps to fight this pattern.  We make homeownership more affordable with a Down Payment Assistance Loan, which lowers monthly and upfront costs.  Each time the home is sold, 75% of the home's "growth in value" will be a direct grant to reduce the home price for the next, CFHomes-eligible buyer of the same property.  As a result, the home stays "permanently affordable!" But the key is, even if you are sharing appreciation, you still build significant wealth.  Let's look at the numbers:  Buying the same $199,900 home*  CFHomes vs. buying with FHA loan vs. buying with Conventional loan with 5% down payment                               CFHomes          FHA          Conventional    Total upfront costs       $3,998          $14,254         $17,253 Total monthly costs      $1,316          $1,529            $1,536 Suppose you decide to sell after 5 years.  Assume the home has grown in value to $231,739; and you sell it for that amount.   After paying back all mortgage loans and sharing 75% appreciation (CFHomes), the seller walks away with:                                   CFHomes        FHA      Conventional                                   $7,007        $34,608       $38,506 However, you must take into account how much moreyou spent on the same home with FHA and Conventional, due to higher monthly and upfront costs: FHA - Spend $22,197 more than CFHomes Conventional - Spend $25,617 more than CFHomes What is the true amount that the seller walks away with at sale, after considering how much more you spend on the same home with FHA and Conventional?                                 CFHomes        FHA      Conventional                                    $7,007         $12,411    $12,889 Bottom Line: When you buy with FHA and Conventional, although you don't share appreciation, you will have to give up some of that money anyway through higher monthly and upfront costs. What CFHomes can offer is homeownership at reduced monthly and upfront costs, and wealth building for your future. *In this example, we use March 2010 interest rates, assume an individual with a 720 credit score, and assume 3% annual home price appreciation. For a detailed explanation of the numbers or to see other cost scenarios, e-mailjyothi@cfhomes.org