Bad Credit? No Savings? Unconventional (Maybe Risky) Ways to Buy a Home

Bad Credit? No Savings? Unconventional (Maybe Risky) Ways to Buy a Home

Nery Peña, 27, a first-grade English teacher, bought a two-bedroom apartment in Washington, DC, overlooking the Washington Monument for $50,000 in 2021. Similar homes nearby start at $350,000.

The building is part of the Douglass Community Land Trust, a portfolio of properties purchased by former tenants and charitable groups, with qualified buyers typically fetching between 30 and 70 percent of the area’s median income. In DC, that could mean a family of three makes about $35,000 to $81,000 a year. The Land Trust also owns rental housing.

Ms. Peña, whose family rented the building before it was turned into a co-op in the 1990s, cobbled together $15,000 from her life savings and a gift from her mother, and funded an additional $35,000 through a credit union.

She pays $1,420 per month including co-op fees; rent similar units nearby for double the amount. If she decides to sell the home, the selling price will be capped at her $50,000 purchase price plus 3 percent for each year she stays.

“Honestly, I never thought it was possible,” she said. “‘Most of the people who live here have known me since I was 2 years old.’

One of the biggest problems with the model is scaling. About 250,000 homes in the United States live in shared-equity units, said Tony Pickett, executive director of Grounded Solutions Network, a national organization in the field. This includes approximately 1,200 HDFC cooperatives in New York City.

“That’s tiny,” he said.

Finding lenders to fund the loans is a challenge because mortgages are generally smaller than those for commercial homes. Grounded Solutions aims to reach 1 million homes over the next 10 years and is pushing for legislative changes that could make it easier to complete such loans.