Low- and median-income families get financing help

November 17, 1991|By James M. Woodard | James M. Woodard,Copley News Service

*TC A new financing program makes it possible for many low- and moderate-income families to acquire their own home.

The plan, called the Community Home Buyer's Program (CHBP), allows a qualified family to borrow up to 97 percent of the price of a home. For example, a $160,000 home or condo could be purchased with a down payment of only $4,800 plus closing costs. Those closing costs, including loan points, typically add up to about 2 percent of the loan amount, or $3,104 in the above example.

The innovative concept was conceived by Fannie Mae, the large, congressionally chartered organization that buys home mortgage loans from primary lenders. There are some restrictions. But it's a plan that's working for an increasing number of first-time and other home buyers.

Fannie Mae has allocated $10 billion for this and other mortgage loan programs for low- and medium-income families for use through 1994.

For starters, the basic CHBP program provides a 15-year or 30-year fixed-rate mortgage for up to 95 percent of the home's purchase price. These loans require less family income to qualify and less cash for closing than a conventional mortgage loan.

Families cannot earn more than 120 percent of the median income in their area. The purchased home can be a single-family detached home, town house or condominium unit.

The program also allows for another interesting possibility called the "3/2 Option." This permits the buyer-borrower to put up only 3 percent of the purchase price. The other 2 percent can come from a non-profit government housing agency, or as a gift from friends or relatives.

These unsecured funds are sometimes called "sleepy seconds." The extra 2 percent, added to the basic 95 percent-of-value loan, gives the buyer the opportunity to finance 97 percent of the purchase price.

To qualify, a family's total monthly housing expenses must be no more than 33 percent of monthly family income. And total obligations (payments of all kinds) can be no more than 40 percent of income.

Before a buyer can be accepted for the special program, he must be given a three-hour training course. This covers such basic but important things as selecting the right home, explaining the loan process and budgeting to meet payments and home maintenance costs.

"The Community Home Buyer's Program is a very creative and workable plan," said Scott Husted, a mortgage banker. "Its concept is quite unique in that it's offered as a partnership between banks, mortgage insurance companies and Fannie Mae.

"The program's basic purpose is to provide affordable home ownership for local residents. It offers a good opportunity for many people who thought they could never save enough to buy a home."

It should be noted that these high-ratio mortgage loans must be covered by private mortgage insurance. This involves an upfront cost as well as premium payments each month with mortgage principal-interest payments.

*

Q. I recently heard that the growing vacation ownership industry has a healthy impact on our environment. What's the reasoning for this?

A. The mere fact of being a vacation unit owner -- full owner or time-share owner -- is an encouragement not to behave like a casual visitor, it was pointed out in Vacation Ownership Review magazine, a trade publication of Worldex Corp.

"A vacation unit owner is more likely to take care of his unit and related environment where he hopes to enjoy vacations for years to come," it said. Worldex Corp., based in Miami, also owns and operates Interval International, a major vacation exchange network.

Q. Are first-time home buyers still being squeezed out of the market by high prices and tough financing requirements?

A. The percentage of total home sales that involve a first-time buyer is growing. Currently, first-time purchases account for about 38 percent of national home sales.

While high prices discourage many step-up buyers (existing homeowners seeking a bigger and better home), first-time buyers are actively taking advantage of lowering prices in many areas and extremely low mortgage interest rates and favorable terms.

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