Home Spun Dreams
Gloria and Gilberto Burgos had been dreaming of owning a home for most of their married lives. But each time the North Hollywood couple, immigrants from El Salvador, put a little money aside, life interfered with their plans.
And then there were always the urgent calls for financial help from relatives in their war-torn homeland.
And although once they found what seemed like the ideal house near Toluca Lake, for which only a 3% down payment was needed, a subsequent inspection showed repair costs that totaled $20,000.
“I’d keep telling my daughters, ‘Some day we’re going to have a house,’ ” said Gloria Burgos, 35, a nurse’s aide and part-time student. “And they would say, ‘Oh Mom, stop dreaming.’ ”
But the Burgoses’ dreams got a big boost toward reality when they learned about Home Works!, a little-known city of Los Angeles program designed to put low-to low-moderate-income residents into homes of their own.
Since its start 2 1/2 years ago, Home Works! has helped 25 individuals and families become homeowners through a combination of low down payment and no-interest loans that are linked to tax credits and forgivable second mortgages.
The Burgoses had been shopping for a home for some time when their real estate agent recommended a mortgage broker who had used Home Works! with previous clients.
After being reassured that they could qualify for a home under the program, the couple soon found a four-bedroom, two-bath fixer-upper in North Hollywood. Their mortgage broker helped them pull together the deal and in April, they moved into their $115,000 home.
Under Home Works!, the Burgoses were asked for a 5% down payment, 3% coming from their own money and a 2% loan from the city that is forgiven after the family has lived in their house for 10 years.
An interest-free, payment-deferred $35,000 rehab-purchase loan was also part of the package and went toward fixing up the house.
The couple’s monthly housing cost is $942, which includes the mortgage, taxes and insurance.
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Los Angeles is the only U.S. city to have implemented the Home Works! program, which is a partnership between the Los Angeles Housing Department and the Federal Home Loan Mortgage Corp. (Freddie Mac).
During the first two years of the program’s existence, the opportunities for homeownership were limited to specific areas in the San Fernando Valley, East Los Angeles and South-Central Los Angeles. But when Home Works! was expanded to cover the whole city, the program began to take off.
New Home Works! owners now live in Northridge, North Hollywood, Van Nuys, San Pedro, Venice, Wilmington, the Harbor Gateway region, South-Central and Southwest Los Angeles, said Darryl Booker, manager of the program.
“From the program’s inception in mid-June 1994 through ‘96, we did 13 homes,” Booker said. So far this year, 12 projects have been completed, he said, and “I have three more in the works and just a bundle of others in the initial phases.”
A two-part program, Home Works! can be used as a purchase assistance plan or for the purchase and rehab of a home needing a minimum of $5,000 in repairs.
For the purchase of a home in good condition, Home Works! helps buyers with homes requiring a 5% down payment.
The home must be located within the city of Los Angeles, the purchase price can’t exceed $201,900 and the buyers’ incomes can’t exceed 120% of the county median, or $54,150 for a family of four.
The more widely utilized purchase-rehab component of Home Works!, utilized as a tool to revitalize neighborhoods, is geared to people whose income is at or below 80% of the median family income in the area.
For example, a single person can’t earn more than $28,750, a couple can’t make more than $32,850 and the annual earnings of a family of six can’t exceed $47,600.
The purchase-rehab program works this way:
A buyer can get a “soft-second mortgage” of up to $35,000 from the city. With this type of interest-free mortgage, also called a “silent second,” repayment is fully deferred until sale 1869750388time, the city recovers its original investment and receives a share of the equity appreciation in lieu of interest.
The use of mortgage credit certificates is also encouraged to further assist the buyer. The federal tax credit can help free up as much as $160 a month in savings per household, according to Booker.
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Gloria Burgos still remembers the “trashed” condition of their North Hollywood home when she and her husband, Gilbert, an electrician, saw it for the first time.
“[The carpet] came out in pieces. The kitchen floor was sinking. You couldn’t see the backyard. It was a dump in the back,” she said.
Nevertheless, light spilled in through the many windows, there was room for a garden and fruit trees in the backyard and a bedroom for each of their three daughters.
With Home Works! helping to find the contractors, supervise the repairs and oversee payments, most of the work was completed in the month before the Burgoses moved in.
Half of their $35,000 loan was budgeted for new copper piping, roof and shower repairs, interior and exterior painting and new flooring. The balance was used for the down payment and closing costs. They took $7,500 from their own pockets to cover a 3% down payment and a portion of the closing costs.
“There are no words to describe it,” said Gloria Burgos. “We’re so used to living in a small place. Finally this chance came. We’re so happy.”
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Home Works! is a very hands-on operation, said Doug Smith, former manager of the Home Ownership Unit, with program administrators working closely with home buyers.
This includes finding the right contractor, monitoring the project to ensure the quality of work and making sure the contractor gets paid on time.
“When we finish with the home, we are going to know that those primary systems are in very good operating condition,” Smith said. “We’re holding hands all the way through.”
Carl Stewart, 40, a student at Cal State Northridge, and Tina Tenerwicz, 28, an employee of Hallmark Aviation, held onto those hands in the nervous weeks before their lender decided to move forward on their loan.
In April, with a $35,000 assist through the Home Works! program, they made it into their three-bedroom, two-bath $121,000 bungalow in the Oakwood neighborhood of Venice.
The couple had become familiar with Oakwood when they had rented there 10 years earlier. “I found out [Oakwood] has incredibly affordable housing,” he said. “I have asthma. Water is just a mile away.”
A dicey financial profile made the outcome of their loan uncertain, Stewart said. With a couple of small businesses on the side “trickling money in,” he said, “until I’m out of school, I’m not much of an income person. There was always the chance someone would say, ‘I don’t like it.’ ”
It didn’t help, then, when their two-month rate lock--a lender promise to give them an interest rate of 7 3/4%--was about to expire.
For Stewart, the unsung hero was Home Works! manager Booker.
“[Booker] got on the phone and convinced [the bank]--and from what I hear it wasn’t so easy--to give us a two-day extension,” Stewart said. “Then he went through the massive task of running the paperwork through the city. He is really willing to do whatever it takes to get people into their own homes.”
Though a home shopper usually learns about Home Works! from a Realtor, Phil Lipp of Allwest Mortgage in North Hollywood emphasized the need to meet early on with a knowledgeable mortgage professional.
It’s important to quickly identify possible credit problems that might arise and whether the buyer’s income fits the program’s guidelines, said Lipp, who has arranged loans for 11 Home Works! buyers.
Nine lenders and brokers have been authorized by the city to make loans through the Home Works! program, according to the Home Works! office.
After the lender has assembled a pre-qualification package and decided on how much of a loan to make, the Home Works! inspectors look at the property. If the job is considered feasible, a work write-up is issued and the prospective owners can start getting bids from contractors.
Both the Building and Safety and Home Works! officials inspect the home while the repairs are being made, and Home Works! pays the contractors as each phase is completed.
Some Home Works! buyers have found a willingness to accommodate individual situations that is uncommon in government programs.
“They consider the individual,” said Ellen Stohl, 30, who is disabled and works as an integration specialist for disabled preschoolers at Cal State Northridge.
In 1995, Stohl, became the second buyer to go through the Home Works! program, purchasing a $75,000 condo near the campus.
To help Stohl move from renting to owning, Home Works! administrators opened up the program’s criteria to include condos.
Stohl says she had been living in a subsidized apartment complex that was “going down hill” when she was seized by the desire to own a home. A call to the Los Angeles County Housing Department for information about first-time home buyers’ programs led her to the city’s Home Works! program.
At the suggestion of a Home Works! representative, she attended a first-time home buyers’ seminar conducted by the mortgage broker who eventually helped pre-approve her mortgage. A year later, with the help of a Realtor, she found the foreclosed property that met her housing requirements.
“This was the only condo I had ever seen that had an actual ramp to the street,” said Stohl, who had been trapped on the second floor of her apartment during the ’94 Northridge quake. “I wanted to be in a place I could get out of on my own. I never wanted to be in that situation again.”
With her Home Works! loan, Stohl spent almost $17,000 to pay for accommodations to make her two-bedroom, two-bath condo wheel-chair accessible. A sizable $22,000 down payment--$4,000 came from her own resources--brought her monthly mortgage to $415.
“I can be secure for the rest of my life knowing that no matter what happens with the state of the government or with my health, I have a place to live,” Stohl said. “It’s an amazing program.”
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How to Learn More About Home Works!
For more information on Home Works!, call Darryl Booker, the program manager, at (213) 847-7690.
