So this is really awesome news: a recent study has shown that homebuyers who used Individual Development Accounts (IDAs) to purchase their homes not only got better mortgage loan terms but also were two to three times less likely to lose their homes to foreclosure.

For the uninitiated, the IDA program is an innovative savings program that is designed to help low-income individuals save money towards a specific goal and to help them become more finanicially savvy.

The biggest attraction of the program is the match componant — the amount a person saves in their IDA gets matched as much as 3:1.  So for example, someone who is saving for a house can incrementally save $1,000 and at the end of the program, they will have $4,000 to put towards a down payment.   Along with the saving, people with IDAs go through training so they learn more about financial responsibility.

This study is important because it validates the basic premise of the IDA program: that by providing a little incentive and solid financial education, low-income individuals will be more financially stable in the long run.

Study was done by the Corporation for Enterprise Developmentand where they looked at 831 homebuyers who purchased homes using IDAs.  When compared to other low-income homebuyers in the same communities and time, IDA homebuyers received much better loan rates, with only 1.5% having high-interest mortgages compared to 20% in the non-IDA group.  Also, they were two to three times less likely to go into foreclosure.  You can download their full Weathering the Storm report on their website.

We have an IDA program here in King County that is a partnership between us and YMCA.  We’re really excited to see this program get such positive attention!