CA: State offers life raft for struggling first-time home buyers

Bakersfield Californian ^ | 4/1/05 | Jim Wasserman - AP

[NormsRevenge]

SACRAMENTO (AP) - In a state where half the houses for sale cost almost $500,000 and low income means a $95,000 salary in Marin County, the state's affordable housing bank is throwing a new life raft to residents struggling to buy their first homes.

That's a fixed-rate, 35-year loan - an alternative to the mortgage industry's conventional 30-year loan - offering buyers interest-only payments the first five years. Though more costly in the long run, it's aimed at those who can't initially afford a full payment, and fear waiting until the state's housing market rises still higher, state housing officials said.

State housing banks in Rhode Island, Virginia and Wisconsin already offer similar deals.

The loan program will "open doors to thousands of Californians who may have thought buying their first home was impossible," said Theresa Parker, executive director of the California Housing Finance Agency.

By state guidelines, eligible customers could include moderate-income Ventura County families earning nearly $113,000 a year who are trying to buy new houses worth up to $811,000. In Central California, a low-income Kings County household earning $43,000 a year could use the loan to buy a new home worth $250,000.

"Given the high cost of housing, without this they may not qualify at all," Parker said.

In California, where prices have escalated dramatically in recent years, the program will also apply to $647,000 existing homes in Santa Clara County, $643,000 homes in San Francisco and $620,000 houses in Santa Barbara County.

Unlike the increasingly popular interest-only loans in the private sector that come with variable-rate interest rates, the CHFA loans keep the same interest rate for 35 years. First-time buyers can also qualify for no money down or a variety of state-run down payment assistance programs.

The current interest rate for the program is 5.25 percent.

Parker acknowledged the "higher risk" to lenders associated with a program "where the customer doesn't really have anything out of pocket." But she said it helps would-be buyers avoid even greater risks with variable-rate loans.

Mortgage industry officials hailed the move as "thinking outside the box."

"It's aggressive and exactly what's needed at this point in California," said Michael Faust, legislative chairman for the California Association of Mortgage Brokers.

By state calculations, buyers taking a $300,000 home loan with monthly payments of $1,656, would pay $1,312 a month the first five years, initially saving $344 monthly.

The CHFA, a 30-year-old state agency formed to help first-time home buyers, offers below market-rate loans by selling tax-exempt bonds. In the fiscal year that ended last June 30, the agency financed 6,668 loans worth $1.24 billion.

The state bank's new program will also make the payments for six months if the buyer loses a job. Parker said many potential first-time buyers hesitate for fear of losing jobs, then the home.

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On the Net:

California Housing Finance Agency: http://www.calhfa.ca.gov

[NormsRevenge]

Now, I know, you're thinking,, "But what about first time homebuyer illegal aliens?"

Covered? You betcha.. :)

ApRiL FooLs!!

For Now anyway..

[WilliamofCarmichael]

Soon there will be multi-generational loans? It happened in Japan. It took the parents and the children to pay the mortgage.