Program will help homebuyers with closing costs

November 18, 1992|By Melody Simmons | Melody Simmons,Staff Writer

In an effort to stimulate home sales in Baltimore -- where settlement costs are the highest in the state -- city officials have launched a $2.5 million loan program to provide second mortgages to cover settlement expenses.

Under the program, a homebuyer can borrow up to $5,000 for closing costs on the purchase of a city property selling for between $60,000 and $100,000. The program was funded through through a city bond sale, and the loans are expected to be available early next year.

Mayor Kurt L. Schmoke and city Housing Commissioner Robert L. Hearn provided details about the Settlement Expense Loan Program yesterday at City Hall. The SELP program does not set an income limit for borrowers, and its loans range from $1,000 to $5,000. A SELP loan can be financed as a second mortgage note extending up to 10 years.

SELP loans are available to prospective homebuyers who seek conventional mortgages or mortgages from the Federal Housing Administration, the Department of Veterans Affairs or the state-backed Community Development Administration.

City settlement costs for a home purchase typically run 8 to 9 percent of the purchase price of the house, while those in other jurisdictions in the state run 5 to 6 percent, according to city housing officials.

The higher settlement costs stem from higher property taxes in the city. Typically, a homebuyer must prepay 12 months of property taxes when settling on property in Maryland.

Maryland National Bank, First National Bank, Signet Bank, Loyola Federal Savings and the Municipal Employees Credit Union are the lenders participating in the program.

The city will sponsor a homebuyers' seminar from 6 p.m. to 8 p.m. Dec. 1 at the Enoch Pratt Free Library.

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