Friday, June 18, 2010
Residents are benefiting from a federal program to help save neighborhoods -- and make home ownership a reality for many for the first time!
Though time is running out for these areas to spend millions of federal stimulus dollars buying and renovating abandoned and foreclosed homes in neighborhoods hard-hit by the foreclosure crisis.
Some cities are buying foreclosed properties and fixing them up to sell or rent.
Others are providing grants to low- and moderate-income home buyers to use for down payments and repairs on foreclosed homes they purchase.
Either way, the ultimate goal is the same: to save neighborhoods from a glut of neglected, foreclosed homes, condos and town houses; put more property tax dollars in government coffers; and make home ownership a reality for people who may be buying for the first time.
About five months remain for the county and cities to dole out their shares of federal aid from a program which is an offshoot of a previous government grant program.
The federal government gave U.S. Department of Housing and Urban Development money to help communities deal with the rising number of foreclosed vacant properties.
The money trickled down to states, counties and cities. Any money not committed by the end of August goes back into federal coffers unless Congress extends the program! That spend it or lose it aspect has local housing officials scrambling to wrap up everything on time.
"We're on a short time frame but our goal is still to help as many people as we can and spend all of the money we were given," said a spokesperson for the program. So far the agency has assisted in the purchase of at least 61 properties with another 26 under contract waiting to close.
With foreclosure rates among the nation's highest, the need to turn around blighted neighborhoods is crucial, officials have said. Nationally, the federal government set aside about $4 billion for this free government grant program, but only a third of the 300 local governments that received grants have made a dent in them, according to HUD.
Part of the problem has been that investors with fistfuls of cash scoop up foreclosed properties before buyers in the program have a chance to get them.
Earlier this month, HUD eased the program's rules to allow homes in mortgage default and uninhabitable homes with lingering code violations to be purchased instead of having to wait for the foreclosure to go through, which can take months.
To qualify for this financial assistance program, the home, condo, town house or villa must be in the target area designated by that city; it must be a foreclosed property or one in the process of foreclosure; and a buyer must attend a home-buyer counseling course paid for by the program before purchasing a home.
In addition, buyers can earn no more than 120 % of the specific areas' annual median income to be considered for a financial grant.
Some properties will be reserved for families earning as little as $38,250 and individuals making $26,800.
The down payment and repair assistance comes in the form of a forgivable no-interest loan that doesn't have to be paid back as long as the buyer lives in the house for a certain number of years, which varies by city. The range is typically between five and 15 years. Cities vary in the amount of money they offer for down payments and repairs. Some cities set a maximum purchase price for a home to be eligible for a grant, say at $250,000, but other cities don't have that limit.
For one lucky recipient buying a town house would have been impossible without a big boost from the city. The 45-year-old mother and her teenage daughter moved into a town house in September. The city gave her $25,000 for a down payment to buy the foreclosed property, which sold for its listing price of $94,900. The single mother
figures she is saving $400 a month by owning instead of renting. She said the program is a lifesaver! "There's no way I could have put the traditional 10 percent down and qualified to own this place on my own," she said.
She is also hoping to receive grant money for renovations. Before she moved in, she had to buy appliances, light fixtures, an air-conditioning compressor and paint.
Recently, one area increased the amount of their purchase assistance and expanded its target area to cover almost the entire city. Low-income households can now qualify for a maximum of $50,000 for a down payment and repairs, double the previous amount of $25,000, which is available to moderate and middle-income households.
Among the biggest challenges for low- to moderate-income buyers in the government program is increasing competition from private investors.
Says another prospective buyer, "We could never afford to buy a house now without this help. The married couple now rents a small apartment and considers now a great time to buy because prices are down, the market is still flooded with homes for sale and interest rates are still low but nudging higher.
Getting a federal tax credit is another incentive for buyers in the program. First-time buyers can get a tax credit of up to $8,000, and existing homeowners up to $6,500.
There is also another program that has $2.3 million to spend on purchase assistance and repairs!