Home buyers' aid is widened Baltimore County program helps with settlement expenses

Low-cost loans to $5,000

Older neighborhoods, first-time buyers benefit from funds

September 22, 1996|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

Hoping to revitalize older communities by encouraging homeownership, Baltimore County has increased the number of neighborhoods in which first-time buyers can get help with settlement expenses.

Low- and moderate-income buyers can get loans of up to $5,000 toward a down payment and closing costs through the county's Settlement Expense Loan Program (SELP), which has $2 million available through next June.

The program, now in its second year, has been expanded to include nearly all established neighborhoods as part of a county initiative to conserve older areas.

Rapidly developing areas, such as White Marsh and Owings Mills, are not included.

"We hope to make Baltimore County an attractive place for first-time buyers," said JoAnn Copes, manager of the housing program in the county's Office of Community Conservation.

"A lot of these neighborhoods have perfect starter homes." The county expects to make at least 400 loans in areas east of York Road such as Dundalk, Middle River, Towson, Cockeysville, Lutherville and Greater Hillendale, and in areas west of York Road such as Reisterstown, Pikesville, Woodlawn, Catonsville and Arbutus.

Buyers who qualify -- and contribute 5 percent of their gross annual income toward settlement expenses -- can get loans of up to $5,000, with 5 percent interest only in the first year.

The loans must be repaid when they sell the house or move.

For example, a family of two with an annual income up to $33,300 would qualify and need only $1,665 up front to buy a house. A family of four earning no more than $41,600 annually could borrow $2,920.

The down payment and closing costs, typically amounting to 8 percent or more of the price a house, are often the biggest barriers for first-time homebuyers who don't have equity in a property.

For many, a program such as SELP means the difference between buying and not buying, said Barbara Schmitt, vice president of community lending for First National Mortgage Corp.

"They've saved some money and have a little for the down payment, but then are faced with $5,000 worth of closing costs, and where will they get the money for that?" Schmitt asked.

"It's giving the ability to buy a home to someone who qualifies otherwise -- has good credit and job stability. They just don't have the cash."

The county is using a grant through the federal HOME program to finance SELP. Six nonprofit groups help administer the program, offering counseling to purchasers.

To get a SELP loan, a buyer must apply for a mortgage through one of 18 participating lenders. Borrowers can apply for SELP through the lender.

Buyers are required to attend workshops at area libraries and community centers to help clear up credit problems and determine what they can afford.

Workshops cover budgeting, loan application, home maintenance and settlement.

Buyers also must get and pay for a home inspection.

The sessions are offered by the six nonprofits: Community Building Group, Comprehensive Housing Assistance Inc. [CHAI], Associated Catholic Charities, the Eastern Baltimore Area Chamber of Commerce, Harbel Housing Partnership and Neighborhood Housing Services.

From January through June, 266 borrowers were granted loans averaging $4,245. Buyers had an average income of $29,978 and bought homes costing an average $78,806.

Baltimore County has made 53 other loans during the past 2 1/2 months.

"This reduces the amount you need up front for closing costs," said Dennis Burton, a loan officer with PNC Mortgage, one of the program's lenders.

"A lot of people are still under the impression you need 20 percent down to purchase a home. You really don't."

SELP is among several initiatives to conserve older neighborhoods in the county.

Low-cost loans are available in many of the same neighborhoods through the state's Maryland Mortgage Program.

And nonprofit groups, such as CHAI and NHS, have begun running community-based programs to boost homeownership in Pikesville and Greater Hillendale.

Pub Date: 9/22/96

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