Loans help homebuyers clear initial cash hurdle Families offered up to $6,000

February 21, 1993|By Jackie Powder | Jackie Powder,Staff Writer

Howard County real estate agents and mortgage lenders have heard it all too often, especially from prospective first-time homebuyers: "We could handle the mortgage; we just don't have enough cash for a down payment and closing costs."

In an attempt to help moderate-income families become homeowners, the county housing office is ready to help cash-strapped households cover those upfront costs with loans of up to $6,000 through a new Homebuyer's Assistance Program.

"Many people are having difficulty, not in meeting the monthly payments but in coming up with a sufficient down payment," said Leonard Vaughan, the county housing administrator.

Typically, the combined down payment and settlement costs for a $100,000 house are about $8,000 said Natalie Lobe, an agent in Grempler's Columbia office.

"We find first-time homebuyers with perfectly adequate incomes buy a home, but they simply don't have the cash," said Ms. Lobe, who started a program at Grempler to help low- and moderate-income families find housing they can afford.

To qualify for the county program, a household must have income of no more than $48,500, and the homebuyer must be approved for a mortgage by a bank. Applicants also must prove that they don't have cash available to cover the down payment and settlement costs, Mr. Vaughan said.

The borrower is not required to make payments on the count loan in the first two years, Mr. Vaughan said. Officials expect most of the loans to be prepaid within five years.

The county has budgeted $60,000 for the loans, but more money might be made available if there is significant demand, Mr. Vaughan said.

The Homebuyer's Assistance Program is part of a package of housing measures sponsored by former County Executive Elizabeth Bobo. The County Council passed legislation in 1990 allowing the county to implement the program.

The program languished for a year, however, because of turnover among administrators in the housing agency, said Mr. Vaughan, who became housing director in 1991.

When county Councilman Paul Farragut asked about the status of the program, Mr. Vaughan put together a task force of mortgage lenders and real estate professionals to draft regulations.

The council approved the regulations for the program last spring, but housing officials found that bankers weren't receptive to the idea.

The banks said the Federal Housing Administration wouldn't insure the loans because the county loan was essentially a second mortgage.

"They didn't want to have anything associated with the loan that increases their risk," Mr. Vaughan said.

County housing officials argued that the county loan would not present an added risk because the loan was structured so that it wouldn't interfere with the buyer's ability to make payments on the primary mortgage.

After further negotiations between the county and mortgage lenders, who encouraged the FHA to support the county's program, the federal agency agreed last month to insure the loans.

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