Housing Market Ebook
First Time Home Buyers Guide
If you are getting ready to purchase your first home or if you think you can't afford to purchase your first home, don't make another move until you have read this important information! Every year, Federal, State and Local government and community development programs help thousands of people obtain there first home.
Residential properties are real estate constructed and used as homes and dwellings. Interestingly, the residential mortgage market has created a more limiting definition of acceptable residential properties. Standard residential loans deal with exclusively residential housing in the conforming sense. Conforming programs define residential properties as having 1-4 units, with all of the units zoned and occupied for residential usage.
After a residential loan is approved and closed, the borrower has three business days during which time the loan may be rescinded. If the borrower does change his or her mind and rejects the loan, the borrower may still be liable for certain origination costs. The rescission period is applicable for mortgage refinances on owner-occupied residential properties. However, there are NO rescission period required for purchase transactions or refinances on investment properties. For more information, see the Refinance Loan article in the Loan Programs section.
However, the contract will usually have a description of permitted and prohibited usage of the property. For example, contracts for residential properties will normally not allow the buyer to use the property for commercial purposes. Most installment contracts, especially for residential homes, will also include a provision requiring the buyer to maintain the property's appearance, stability and functionality.
With many commercial properties and select residential properties, a loan assumption can be an advantageous alternative to a standard purchase. The loan assumption is an ideal alternative for prospective home buyers and real estate investors currently unable to qualify for sufficient mortgage financing.
During the 1970s and 1980s, mortgage interest rates tended to be very high. During much of the period, home buyers had to settle for double-digit rates on their mortgage financing. This was due to the fight against high inflation being conducted by the Federal Reserve. By increasing market rates, the Federal Reserve slowed economic growth and inflation. It has now become common practice among home buyers to take future refinances into consideration when buying a home. During periods of relatively higher interest rates, home buyers now often select ARM loans. ARMs have lower initial rates and most home buyers figure wisely that they can always refinance to a long-term fixed-rate loan when interest rates have cycled back down to more attractive levels.
The average home buyer does not have the assets to purchase property without some type of mortgage financing. Even those home buyers who can afford to pay for the entire property with cash, it is sometimes not a good idea to use mortgage loans for tax and investment purposes. Two-unit residential property, owner-occupied 90 Three-unit residential property, owner-occupied 80 Four-unit residential property, owner-occupied 80 However, home buyers and real estate investors can actually find higher LTVs with non-conforming programs. For a detailed discussion of the many no down payment tactics available, see our No Down Payment Programs article.
This approach of obtaining a lease with a purchase option is advantageous for home buyers and real estate investors who currently cannot qualify for a sufficient mortgage loan. It is also another variation of the no down payment plan. This article looks at this program in the following areas
GPM loans are rarely available today, because their benefits and advantages do not really offset their costs and disadvantages. Again, most home buyers will discover that they are better off with a Temporary Buy-Down program or a standard 30-year fixed-rate loan, rather than the GPM.
So, Yield Spread is another big secret that mortgage brokers hope people will never learn. Imagine if all homeowners and home buyers knew this secret. If you were refinancing your home or buying a new one, you could simply tell the broker you want the best rate. You want what the market bears, and you don't want him to make any Yield Spread Premium. Suddenly, you'd have the power -which is exactly how it should be in The Mortgage Game.
For example, consider the case of Robin who has a lease agreement with a purchase option on a 100,000 condominium. The rental credit provision of this agreement earns Robin a 150 credit toward the down payment each month. After two years, Robin has earned 3,600 (24 months x 150) toward the down payment. That amount is enough for the minimum 3 down payment requirement for first-time home buyers.
By connecting the residential mortgage market with the broader, more powerful financial market, home buyers receive an increased supply of loan funds. Without this connection into the secondary mortgage market, banks will have a more limited supply of mortgage funds. Again, this abundant supply means lower pricing or interest rates.
What the average homeowner or home buyer fails to realize is that bankers, loan officers, mortgage brokers, or whatever your lenders call themselves, are salesmen. Certainly, if you purchased your home from a realtor and used her lender, you most likely got a feeling of trust in that person, because the realtor referred him. This guy will help you complete your loan, the realtor will tell a prospective buyer. He'll help us close quickly, and you'll be in your new home in less than a month. When I worked in the mortgage business as a full-time loan officer and sales manager, the average customer was far more concerned with the costs of completing the loan and the final monthly payment than with the interest rate on the money they were borrowing. This is one of the biggest mistakes home buyers and people refinancing make in completing a home loan.
In order to understand the program that is best, let's consider The Mortgage Game's big picture. The absolute number one mistake home buyers and home owners make, when it comes to mortgage loans, is not understanding The big picture. They see only the now. How much do I have to pay today How much will
Better known as Freddie Mac, the FHLMC is a quasi-government agency and publicly traded company that raises money to purchase mortgage loans from lenders through the sale of FHLMC-guaranteed mortgage participation certificates (PCs). Similar to Fannie Mae (FNMA), Freddie Mac plays an important connection for the flow of funds between the financial investment market (supply) and loan borrowers (demand). Because of Fannie Mae and Freddie Mac, more funds are made available for the housing market thus making homeownership generally more affordable. For more information, see the Conforming Loans article in the Loan Programs section.
If the problems in the mortgage market were limited to subprime loans, then the carnage would mostly be behind us and this would be a history book, useful only in learning the mistakes of the past so they won 't be repeated. Unfortunately, however, the bubble infected nearly every area of the mortgage market, and things got crazy not just in subprime but also in a number of other areas. Thus, the problems in the housing market are not over by any means.
After 2006, it became practically impossible to turn on the TV without seeing another increasingly gloomy report about the subprime crisis. Even as trouble spread far beyond this particular corner of the housing market, the word subprime was being used as shorthand for the cause of the nation's financial woes. But does the entire concept of subprime lending really deserve the stigma that has been attached to it by the media's coverage
In the late 1980s, the California housing market was booming. Even though interest rates were around 9 to 10 percent, homebuyers, investors, and speculators pushed prices higher and higher. Then the recession of the early 1990s hit California hard. Mid- to upper-price-range homes fell in value by 15 to 30 percent. Unemployment rates approached 10 percent. By 1993 to 1994, mortgage interest rates dropped to as low as 6.0 percent. Great time to refinance, right
The theoretical work on the impact of down payment constraints (Stein 1995 Lamont & Stein 1999 Ortalo-Magne & Rady 1998, 1999, 2002) is difficult to place in our categorisation of credit market rationing. This is because the theories are concerned with the consequences of binding liquidity constraints rather than their cause. The theories do have implications for housing and therefore mortgage market adjustment. They predict housing booms and slumps, and over- and under-reaction to exogenous shocks such as changes in income levels. It can be shown that credit constraints amplify the effects of income shocks on the housing market, and significantly effect the timing of housing moves. Thus initial liquidity constraints may generate cycles in which the market is significantly, if temporarily, out of equilibrium, exhibiting an excess demand for mortgage credit. Insofar as house price increases facilitate meeting down payment requirements then credit rationing is endogenous to such models....
Each housing finance system has its own developmental issues. In the UK the debate is in terms of obtaining the benefits of the US model with its prevalence of long-term fixed rate debt, leading to a less volatile housing market. There is an existing basis for securitisation in the UK, which might facilitate the supply and adoption of long-term fixed rate instruments. The adoption of the FRM might also be encouraged by some implicit or explicit FRM subsidy, as in the US. One suggestion has been changes in the funding arrangements of lenders, to achieve a better matching of assets and liabilities. This could be assisted by making fixed rate mortgage-backed bonds of interest to pension funds (Maclennan et al. 1998). Discussion in this book has noted reasons why we might observe a variety of mortgage contracts, so that long-term fixed rate debt might not suit all. Defining the issue in terms of encouraging borrowers to adopt a long-term perspective on financial planning might lead to...
Some loan advisors claim that the big national mortgage companies, Fannie Mae and Freddie Mac, set underwriting standards for nearly all mortgage loans. Fannie and Freddie actually account for less than 40 percent of the residential real estate financing issued throughout the United States. A big number, yes, but hardly all-powerful. Moreover, Fannie and Freddie do not perfectly mirror each other. Both Fannie and Freddie publish
Given the increased reliance on automated underwriting, what should lenders do to ensure that their lending policy is strictly observed and that any assistance offered to loan applicants or prospective applicants to improve their credit score is offered equitably Lending policies must be observed to ensure sound financial business decisions and to avoid any potential disparate treatment of applicants.1 At the same time, policies must allow lenders to evaluate individual credit needs and varying applicant scenarios. Lenders must be conscious of nontraditional applicants for whom relaxed underwriting may be key in obtaining a loan. For example, Midwest BankCentre offers the FreddieMac Affordable Gold 97 mortgage product for first-time home buyers. This program, in contrast to many others, allows for a 3 percent down payment from any source (e.g., gifts). Given the increased reliance on automated underwriting, what should lenders do to ensure that applicants have a clear understanding of...
Purchase money mortgages are also common in transactions involving residential properties, such as when the buyer does not have a sufficient down payment. The remainder may be obtained by assuming an existing mortgage or giving the seller a new mortgage. Either way, the seller is willing to take a mortgage as part of the payment. Consider the following example to illustrate the use of a purchase money mortgage in residential properties. Seller A is asking 80,000 for a single-family residence. Buyer B likes the house but only has 10,000 for a down payment. The lending institution will only loan 64,000 on the house. To be able to sell the house, Seller A agrees to take a purchase money mortgage for 6,000 from Buyer B. In addition to taking this purchase money mortgage, Seller A is willing to accept a lower priority of claim if Buyer B should default. In this case, the lending institution has the first claim because it has a first mortgage. The purchase money mortgage is a second...
Over the next five years, the average loan-to-value ratio rose to 84 percent, meaning that the average borrower was putting down only 16 percent, affording lenders much less protection in the event home prices tumbled. The situation was even more extreme for first-time home buyers, who were putting down only 2 percent on average by early 2007.
As the mortgage market changed, so did the way home ownership was viewed, which had a striking impact on the structure of the mortgage and housing markets. Many homeowners no longer sought to pay down their mortgages but instead saw their homes as investments and sources of cash. They became accustomed to refinancing on a regular basis, effectively using their homes as ATMs to fuel consumer purchases or, in some cases, to buy additional property to speculate on the fast-rising real estate markets. By 2005, the housing market in Florida was hotter than it had ever been, and the frenzy spread across all levels of society. Migrant farmworkers took jobs as roofers and drywall hangers in the construction industry. Nearly everyone you met around Tampa had a Realtor's license or a broker's license or was a title agent. Alex Sink, the state 's chief financial officer and a Democrat, said, When the yardman comes and says he 's not going to mow your yard anymore because he 's going to become a...
In cities such as Atlanta, HUD may sell as many as 1,000 properties a year. In the San Francisco Bay area, HUD's annual sales may total fewer than 150 homes. Depending on the strength of the housing market and the local economy, the number and selection of HUD properties vary widely. Still, every area offers at least some HUD homes. To locate HUD properties, go to www.hud.gov and then click on HUD homes. Go to the state and county that interests you.
Housing demand has been typically analysed by treating housing as an asset (Poterba 1984). In this approach the demand for housing is based upon the user cost of owner occupation. User cost reflects the theoretical models discussed above it is the marginal rate of substitution between housing and non-housing consumption. This measure gives the amount of non-housing consumption forgone for a one-unit increase in the consumption of housing services. The trade off reflects mortgage costs, forgone rates of return on housing equity and expected capital gains on residential property, and would also have depreciation and property taxes as arguments. Thus user cost reflects both consumption and investment aspects of housing choices.12 The theory implies that mortgage demand equations should either have user cost arguments in the specification, or such This concern with housing consumption and household liquidity has been further developed by Ortalo-Magne & Rady (1998, 1999, 2002). Their work...
The train wreck in the U.S. housing market has triggered a credit crunch that has caused a severe economic decline worldwide. This, in turn, is exacerbating the problems in the housing market, creating a vicious circle. For example, if a business has difficulty borrowing Further, j ob losses and the collapse of the housing market caused consumer confidence to plunge to an all-time low in January 2009, as shown in Figure 3.20.
Figure 3.34 Private Construction Spending on Residential Property Declines since the Peak of2006 (Monthly, 1993-September 2008) 84 Figure 5.21 The Importance of Fannie Mae and Freddie Mac vs. Commercial Banks and Savings Institutions in the Residential Real Estate Market (Q2 2008) 176
In Oakland, California, several years back, Lynne Jerome and her husband Brian Conan had for years wanted to become homeowners. But they could never put together enough for a down payment.1 We tried, says Lynne, but it was always out of our reach. With Lynne studying for a graduate degree and Brian's work as a truck driver, their family income didn't go far in the expensive California housing market.
The work of Ortalo-Magne & Rady (1998, 1999, 2002) demonstrated a correspondence between the outcomes of their consumption driven theory of housing demand and the aggregate behaviour of the UK housing market, pre- and post-financial deregulation. Ortalo-Magne &Rady (1999) estimate the relative contributions of income shocks or financial deregulation to the housing boom (1982 to 1989) and the bust (1990 to 1993). Their theoretical model, discussed in Chapter 2, indicated that rising income caused increases in house prices, with owner occupation among young households falling during the transition to equilibrium. However, this is not what occurred during the 1980s when owner occupancy rates among young households increased. Thus, the authors deduce that financial liberalisation allowed more young households to enter owner occupation.
If you live in a high-priced housing market, invest in areas of the country (or world) that yield higher cash flows per dollar of investment. In recent years, for example, many Californians have bought property in Nevada, North Carolina, Arizona, Texas, Mexico, and Costa Rica.
Though house price inflation can reduce user costs by generating capital gains on residential property, the tilt may offset any such benefit. A number of alternative mortgage designs have been suggested to overcome, or to minimise this problem for example the graduated payment mortgage or GPM. The tilt owes its importance to other capital market imperfections, such as liquidity constraints that prohibit borrowers taking out additional loans to overcome their temporary cash flow difficulties. This has led to suggestions that mortgage payments should be indexed, so they remain equal in real rather than nominal terms over time (Friedman 1980 McCulloch 1982 Houston 1988, Buckley et al. 1993). These arguments and the proposed alternative mortgage instruments are discussed below, but firstly it is important to understand exactly what the tilt is, and when it is a significant problem.
In the US a major innovation in the mortgage market was the introduction of adjustable rate mortgages (ARMs) during the 1980s. In the UK a key change was the creation of short-term fixed rate contracts (FRMs), during the early 1990s. Volatile and unanticipated inflation prompted the issue of ARMs in the US, while a depressed and risky housing market, together with financial deregulation, encouraged fixed rate debt in the UK (Miles 1992). These contract choices have major implications for risk sharing between borrowers and lenders with potential impacts upon the housing market and general macroeconomic management. Interesting is the emergence of the sub-prime lending market, where lenders advance mortgages to the so called 'credit impaired'. There are a number of interesting agency problems, issues concerning asymmetric information, and questions relating to credit rationing that arise out of a consideration of the growth in sub-prime lending. This is a market that is also growing in...
The caveat is that a consumer must have a clear understanding of what the credit score is and what factors affected his score. The disclosure of the number itself has little meaning. If the credit score is low, for example, the consumer needs to know which factors in his credit history had the most impact on lowering the score. He could then decide whether to delay applying for the loan and how best to clean up his credit. For this reason, HomeFree-USA, a counseling agency in Washington, D.C., and a member organization of NCRC, always includes credit score counseling in its home-buyer preparation courses. Similarly, NCRC educates consumers about their credit scores in its financial literacy curriculum.
The GRM is a factoring tool used by the property appraiser to assess the market value of a property, under the income valuation approach. The multiplier is a rate based on the sales price divided by the gross monthly rent of comparable properties. This multiplier is then applied to the market rent of the subject property to estimate the value of that property. For example, if an appraiser is analyzing a four-flat and discovers that similar four-flats in the area have market values that are 10.5 times their market rents, the appraiser will use a GRM of 105. Applied to the subject property, the appraiser will multiply the subject property's market rental income by 10.5 to estimate the property's value via the income approach. Commercial, industrial and larger residential properties use the gross income multiplier system. For more information, see the Analyzing Appraisal Reports article in the Loan Process section.
The mission of the Federal Reserve System's Credit Scoring Committee is to publish a variety of perspectives on credit scoring in the mortgage underwriting process, specifically with respect to potential disparities between white and minority home buyers. To this end, the committee is producing a five-installment series of articles. The introductory article provided the context for the issues addressed by the series. The second article dealt with lending policy development, credit-scoring model selection and model maintenance. The third article explored how lenders monitor the practices of their third-party brokers, especially for compliance with fair-lending laws, pricing policies and the use of credit-scoring models.
To some extent, all of our forecasts regarding the future of the housing market depend on what the government does. If the government wanted, it could borrow a few trillion dollars and save every troubled mortgage in the country. While this would be foolish from a policy perspective, it would make our estimate of future foreclosures look silly.
The whole notion of adjustable rate mortgages (ARMs) is relatively new. Until the early 1980s, there had been no more than ten or so of these ARMs those that did exist offered no caps and they were available for residential properties only. Back in the early 1980s, when inflation was as high as 20 , no one wanted to be tied to an adjustable rate mortgage. But when interest rates dropped by the late 1980s the banks came out with adjustable rate mortgages that offered annual and lifetime caps.
Most home buyers still have a natural aversion to ARM loans. Older homeowners who remember the 19 interest rate of the 1970s, are especially leary of the inherent risks of ARM programs. However, ARM loans do have their advantages, which make them ideal for people who can see the home or property purchase as a financial investment.
By connecting the residential mortgage market with the broader, more powerful financial market, home buyers receive an increased supply of loan funds. Without this connection into the secondary mortgage market, banks will have a more limited supply of mortgage funds. Again, this abundant supply means relatively lower pricing or interest rates.
We know from data that a significant share of new loans used to purchase homes in 2005 were nonprime (subprime or near-prime), and the share of securitized mortgages that are subprime climbed in 2005 and in the first half of 2006. But we believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited, and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system. Remarks by Federal Reserve Chairman Ben S. Bernanke Federal Reserve Bank of Chicago's 43rd Annual Conference on Bank Structure and Competition Chicago, Illinois May 17, 2007
The buyer must pay the monthly installment payments with a personal check, and then retain the canceled checks. The lender will require copies of the canceled checks to support the buyer's credit history and ensure that the buyer has been making the monthly payments on time. In a sense, the installment contract becomes a training regimen for first-time home buyers or investors. As such, it is crucial that the buyer make all contract payments on time in addition to maintaining overall good credit.
Fannie Mae is a publicly listed corporation that supports the secondary mortgage market by purchasing conventional mortgages, as well as FHA- and VA-backed loans, from lenders nationwide. FNMA then packages and resells these loans as securities. Similar to Freddie Mac (FHLMC), Fannie Mae plays an important connection for the flow of funds between the financial investment market (supply) and loan borrowers (demand). Because of Fannie Mae and Freddie Mac, more funds are made available for the housing market thus making homeownership generally more affordable. For more information, see the Fannie Mae article in the Mortgage Industry section.
The continuing decline in the U.S. housing market and wider economic slowdown is contributing to new loan deterioration delinquencies on prime mortgages and commercial real estate as well as corporate and consumer loans are increasing. With default rates yet to peak and the recent heightened market distress, declared losses on U.S. loans and securitized assets are likely to increase further to about 1.4 trillion
Underwriters and processors do not normally visit the residential properties involved in the mortgage applications they are processing. They depend on the appraiser's comments in the appraisal report. However, loan underwriters also examine the pictures required and providedicmas well as their general knowledge about an area to see if improvements are required. FHA loans actually require more review from the appraiser, with regard to the property's condition.
A clause in the deed that restricts the use of the property. For example, a residential property normally cannot be converted into a commercial property. Deed restrictions placed by developers to control the quality or aesthetics of a subdivision are often called restrictive covenants. Note that when zoning and restrictions conflict, whichever is more restrictive is usually followed. Unlawful deed restrictions are unenforceable. For more
With a purchase mortgage, the closing agent disburses the loan proceeds at the conclusion of the closing. However, if a borrower is refinancing a primary residential property, the disbursement must be delayed three business days. This three-day delay is called the Rescission Period, and allows the borrower to reconsider and possibly cancel the refinance loan. For more information, see the Closings and Transactions article in the Real Estate In-Depth section.
Moreover, even if the real estate purchase (sale) contract does not mention any easements, recent court decisions have established that the title would still be considered marketable-as long as the easement is visible. For example, the city has an easement over the residential property to place a sidewalk through the front yard, along the street. Although the real estate contract and evidence of title makes no mention of the easement, the title would still be considered otherwise marketable.
A jumbo loan is any loan that exceeds conforming guidelines. Since Fannie Mae and Freddie Mac's charter are focused on servicing America's low, moderate and middle income home buyers, loan amount limits filter high-income borrowers. Two-unit residential properties 207,000 Three-unit residential properties 371,200 Four-unit residential properties 461,350
Home buyers can avoid or minimize loan rejection by using the assumption feature. Buyers who have been rejected for financing but still wish to buy a home should strongly consider assumption loans. In many cases, buyers who cannot qualify for a conventional loan may find a solution to their problems with an assumption.
This article will provide anintroduction to the purchase process that may help home buyers and real estate investors save hundreds, perhaps thousands, of dollars. For more information about purchases, please see the Homebuyer Guide, Mortgage Deed and Promissory Note and Closings and Transactions articles.
If a home buyer is considering a stay of only five to seven years, the balloon mortgage loan is the definite choice. It has all the stability of a 30-year fixed-rate loan (during that period) but at a lower interest rate and, consequently, payment. Even if the home buyer plans to consider a longer stay in the property, the balloon mortgage loan can still be a wise choice. The buyer can always refinance to a standard fixed-rate loan at the end of the balloon term, as well as in some cases exercise a conversion option.
Lenders will generally loan a higher percentage of the appraised value with an insured mortgage. There may be times when a potential home buyer does not have a sufficient down payment to qualify for a conventional loan. In this case, an FHA-insured mortgage may be appropriate. However, the insurance premium is an added expense to the borrower.
The credit bubble was not limited to the U.S. housing market the same loose lending standards infected nearly every other debt market Multiply this by the millions of toxic loans made during the bubble both in the housing market and beyond and it's clear that there will be huge additional very real losses that have not yet been recognized.
Having taken a look at what happened and where we are today, let's now turn to what's likely to happen to the U.S. housing market and the overall economy and stock market in the future. The short answer is that we 're probably in the late stages of home price declines, in the middle stages of write-downs by the banks and other institutions that are exposed to the U.S. housing market, and, regrettably, in early stages of the overall credit crunch. That said, we think there are great opportunities for savvy and courageous investors, on both the long and short sides, but especially on the long side not surprising given that the major indexes are down more than 50 percent from their peaks (as of the end of February 2009). While debt markets of all types are encountering severe distress, we have kept the focus of this book on the U.S. housing market for two reasons first, it's our area of expertise and we have few insights to add elsewhere and second, we believe that the U.S. housing...
The most widely followed metric is the S&P Case-Shiller 20-city composite home price index, which includes numerous bubble cities such as Las Vegas, Phoenix, Miami, and many in California. Thus, this index shows the greatest rise in prices during the bubble as well as the greatest decline, relative to other national home price measures that include a wider swath of the housing market. For perspective, we include in Figure 3.12 the S&P Case-Shiller national index, the Office of Federal Housing Enterprise Oversight (OFHEO) 's Purchase-Only Index, and median sales prices of existing homes from the National Association of Realtors, in addition to the S&P Case-Shiller 20-city composite index.
Housing demand, the sharing of risk between borrowers and lenders and the role of contract choice in signalling borrower characteristics. Empirical research in the US has enquired into the impact of the adjustable rate mortgage on the stability of the housing market (Brueckner & Follain 1989 Goodman 1992 Gabriel & Rosenthal 1993). In the UK there has been concern over the prevalence of variable rate debt which effects the sensitivity of economic conditions to changes in short-term interest rates (Maclennan et al. 1998 Chinloy 1995 Britton & Whitley 1997 Munchau 1997). Prescribed loan-to-value ratios are an important feature of mortgage contract design that can impact upon a households' tenure choice and savings behaviour (Slemrod 1982 Hayashi et al. 1988). These are all examples of different mortgage designs having wider economic implications. Why we observe different mortgage contracts and how households choose are important topics for this book. Moreover, the choice set that...
A package mortgage allows home buyers to pledge household items of personal property, in addition to the real estate, as security for a loan. For instance, lending institutions may allow items such as ranges, refrigerators, dishwashers or air conditioners to serve as security, thereby allowing the home buyer to finance major appliances over the term of the loan at relatively low mortgage interest rates. This practice allows lenders to increase the amount of a loan with no added administrative costs and little additional risk. It allows buyers to purchase home appliances and other major items of equipment they may otherwise might not be able to afford.