Help Making the Leap to Homeownership
Despite seven years of pinching pennies, Andrew Tasker despaired of ever being able to sock away enough money to make a down payment on a home. But just in time for Christmas, he picked up the keys to his very own three-bedroom home in Glendora.
“I still can’t believe it,” said the 36-year-old manager of a Pomona manufacturing company. “With the help of the city, I was able to get the ball rolling. I learned that [home buying] was not out of reach.”
With mortgage interest rates at historically low levels, more and more eager buyers like Tasker are taking advantage of the dozens of government home-buying programs available to those seeking financial and other assistance. Programs specifically designed for teachers, police officers and families of varying income levels are available, if you know where to find them.
Tasker learned about the Glendora First-Time Home Buyers program, for example, after attending a home-buying class at North American Mortgage Co., a division of Washington Mutual in West Covina.
The single Glendora resident, who moved in with his mother several years ago after an accident left him disabled, knew that he could afford the monthly payments on a home, but sought assistance with the down payment. He learned in the home-buying class that he qualified for a loan and was eligible for the city of Glendora’s assistance program.
The federally funded program, which provides “silent seconds” to qualified applicants, provides a 30-year, $25,000 loan. During the first five years of the loan, no interest accrues and no payments are made. Thereafter, simple interest accrues at 3% per year. Borrowers do not have to pay back the loan until they sell the house.
Like participants in most home-buyer assistance programs, Tasker’s income had to fall within the limits imposed by the city from which he borrowed the money. In Glendora, where home prices are higher than some areas of Los Angeles County, program participants may not earn more than 120% of the area median income. The annual income for a family of four there, for example, cannot exceed $65,400; for an individual, $45,800.
Most home-buyer assistance programs in the Los Angeles set an annual income limit of $43,600 for a family of four, because median home prices there are lower. Income-level requirements vary city to city and county to county.
“The bottom line is that these programs can mean the difference between affording or not affording a home,” said Miguel Don, manager of North American Mortgage Co.
That was the case for Marcia Elayne, a single mother who took advantage of the Los Angeles Housing Department’s HOMEWORKS! program, after a lifetime of apartment living.
The city program, in partnership with Freddie Mac and participating lenders, currently offers “soft seconds”--interest-free loans--of up to $75,000 to low-income home buyers who need assistance to purchase and rehabilitate homes in Los Angeles.
Under the HOMEWORKS! guidelines, Elayne was able to buy a $150,000 Van Nuys home with the $35,000 the city lent her. She came up with 3% toward the down payment, and a portion of the city loan provided the other 17% of the down. The remainder of the loan was used for rehabilitating the home, a program requirement.
Under the terms of the HOMEWORKS! program, Elayne will pay no interest on the 30-year loan. She will repay the loan in full only when she sells the house, refinances her loan or, 30 years from the onset of the loan, with a balloon payment. To qualify, she had to prove she did not own another home at the close of escrow and that she earned $34,900 or less annually.
“This program was a blessing for me,” said Elayne, who works as a clerical assistant for the Los Angeles Housing Department. “I’m the only homeowner in a family of six siblings, so now they can stay with me when they need it, or when they’re in transition.”
In addition to the HOMEWORKS! program, Los Angeles offers HOMEBUY, which provides down payment assistance for low-income households to purchase newly constructed or newly rehabilitated homes built by developers working with the city of L.A.
Also available are the city’s Mortgage Credit Certificate program, which issues certificates allowing home buyers to claim up to 20% of the annual interest paid on their mortgages as a federal income tax credit, and Mortgage Revenue Bond program, or MRB, which offers below-market interest rate loans to qualified borrowers.
The latter program also provides home buyers with a gift of 3.5% of the loan amount to be applied toward the down payment, closing costs or prepaid items. MRBs also may be combined with the city’s down-payment and gap-financing programs, if the borrower’s income falls below 80% of the area median income.
Finally, fully credentialed teachers who work at low-performing schools, purchase homes in Los Angeles and are first-time buyers can qualify for the city’s Extra Credit program. This program provides 30-year loans at a fixed 6.5% rate, plus $7,500 toward a down payment and closing costs assistance.
“These programs make dreams come true for people who couldn’t afford to buy a house, and that’s a huge population in the city of Los Angeles,” said Doug Smith, manager of the Los Angeles Housing Department’s homeownership unit. “Our program helps between 500 and 1,000 families a year.”
The County of Los Angeles Community Development Commission sponsors homeownership assistance programs for residents buying in the unincorporated areas of the county. Individual cities verify the borrowers’ eligibility and supplement the main county program with local dollars.
Long Beach, Glendale, Burbank and Culver City each sponsor separate programs that have different eligibility rules from most county programs. Potential borrowers should consult the local housing, community development or redevelopment agencies of the city in which they are considering buying a home to check out the individual programs.
Orange County also provides a host of home-buying assistance programs, including a rebate program that provides up to $5,000 for home improvements to qualified participants, second-mortgage assistance, mortgage credit certificates, the Police Residence Assistance Program and the Homebuyer Assistance Program.
The U.S. Department of Housing and Urban Development, which provides the bulk of funding for most government home-buying assistance programs, also sponsors the Teacher Next Door program for qualified, certified teachers, and the Officer Next Door program for full-time law enforcement officers who work for a city, county, state or federal law-enforcement agency.
HUD also oversees the Federal Housing Administration, which insures a type of mortgage financing that allows lenders to ease credit guidelines for marginal borrowers and provide lower down payments.
Fannie Mae, the nation’s largest provider of mortgage money, is a partner in 65 homeownership programs in Los Angeles and Orange counties.
“Homeownership is how people send kids to college, start small businesses, retire,” said Barbara Zeidman, Fannie Mae’s director of the Los Angeles Partnership office. “If we want those good things, we have to invest in the future of our communities.”
Secondary lender Freddie Mac also is a partner in many homeownership programs. Their Affordable Gold 97 and Community Gold programs allow borrowers to buy a home with minimal down payments. The Federal Home Loan Bank of San Francisco offers their Individual Development and Empowerment, or IDEA, program, which provides matching subsidies to lower-income households saving to buy a home.
“These programs offer economic advantages to those of us who never thought we could own our own homes,” said Elayne, the Van Nuys homeowner. “More importantly, my daughter now has a backyard to play in.You can’t place a money value on that.”
