Michigan Drafts State Bond Plan for Home Buyers

In an unprecedented attempt by government to aid first-time home buyers, Michigan Gov. James J. Blanchard on Tuesday proposed a state program that would guarantee that young families could save enough to make a down payment on a home.

Under the plan, state residents would set aside funds by investing in tax-free state bonds that would pay no interest. In return, residents would be guaranteed that upon maturity the bonds would cover down payments on homes in their communities, no matter how much housing prices had risen over the intervening years.

“The thought is that the No. 1 impediment to owning a home is getting enough for the down

State Calculates Payments

Residents would choose the number of years they planned to save until they were ready to buy homes, the communities they planned to buy in and the price ranges of the homes they wanted. The state would then determine how to set the monthly payments it would require of the investors.

For instance, to guarantee that the state bond program would provide enough for a $10,000 down payment on a $100,000 home, an investor would pay in $288 per month for three years, totaling $10,368. But if the price of the house had risen to $150,000 in three years, the state would guarantee that the investment would be worth enough for a 10% down payment, or $15,000.

The state has the use of the funds interest free in the interim, thus helping to finance the plan. State officials say they should be able to spread the fund’s risk by staggering the bonds’ maturity dates so that they would pay out over three, five, seven or even ten years.

Parallels Tuition Plan

State officials said they are still working out details of the plan, which parallels a similar state plan introduced last fall to allow parents to pay a set amount into a fund today and be guaranteed that it will cover the cost of tuition when their children are ready to enter college.

Blanchard unveiled the housing plan in his annual State of the State address Tuesday night, and his political opponents in the state quickly attacked it.

“There is no doubt in my mind that it would be far better to take the money you are going to put into this program and simply buy property now, perhaps in a lower price range, rather than waiting,” said State Sen. Doug Cruce, a Republican and a realtor. Despite the guarantee on the down payment, Cruce added, “you are still going to lose ground to housing inflation, because the down payment is just one factor that goes into buying a home.”