The City Council on Tuesday approved an unusual mortgage program for first-time home-buyers that will assist families with incomes of less than $39,800 a year. The program provides a portion of the down payment and encourages buyers to purchase existing instead of new housing.
"The whole purpose is to help people who would not have any hope otherwise," said Syed Rushdy, manager of the Housing and Neighborhood Bureau.
Earlier this week, Long Beach, Garden Grove and the counties of Los Angeles and Orange jointly sold revenue bonds to generate money for first mortgages at below-market interest rates. Of Long Beach's $6.5-million share, $5 million is available only for the purchase of existing homes.
That provision could help the city gain a measure of economic stability, Rushdy said, by stimulating home sales in some of its less attractive neighborhoods, primarily downtown, the westside and the north and central areas, except for the more exclusive Bixby Knolls and California Heights neighborhoods.
On Tuesday, the council came up with another $375,000 from the city's housing development fund to provide additional loans that would reduce the buyer's down payment. Under that program, buyers would typically qualify for purchases of up to about $120,000, a modest amount considering that as of June the average price of a single-family home in the Los Angeles area rose to $182,364, according to the California Assn. of Realtors.
A buyer purchasing a home for $120,000, for example, would be required to make at least a 5% down payment--$6,000. The city would then provide an additional $13,000 loan so the first mortgage would be reduced to $101,000, about the maximum amount that the Federal Housing Administration will insure.
The city's loan would be at a lower interest rate, and buyers would not have to repay it until the house was resold or refinanced at a later date.
While most of the second-mortgage money is earmarked for existing housing, $1.5 million is for townhouses due to be constructed in north Long Beach. A Lakewood-based developer, Spongberg, Kirkland & Associates, paid the city a fee so that the loans could also be used for their project at 1731 E. 68 St., Rushdy said.
Guidelines, such as who gets the loans if there are more qualified applicants than money available, have not yet been drawn. The program will not be in place for another 60 days, city officials said, and some planning still remains.
Half of the money will go to families making no more than the median income of a family of four, or $39,800, Rushdy said. The other half of the money will go to those families making 90% of the median income, or $35,820.