Real Estate Roundup with Sharon Alva: Down payment assistance available
With all the talk about plummeting prices and foreclosure, we sometimes forget to mention that affordability remains an issue in California in general, and in Alameda in particular. While prices have dropped, or at least stabilized, getting a first home is still beyond many. By the third quarter of 2009, the California Association of Realtors (CAR) calculated that 64 percent of households in California could afford to buy their first home, but in Alameda County that number was only 52 percent. In the city of Alameda that number is probably lower, although we don’t have Alameda specific stats.
But alas homebuyer, do not despair, because there are first time homebuyer programs that can help. (Sort of!)
Many find themselves in the bind of being too rich for the program, but too poor to buy. Or even worse, poor enough for the program but too poor to get the loan. Most down payment assistance programs are best when used either by a bigger family, or for a very modest property, like a condo or townhouse.
Let’s look at the options.
Alameda, San Leandro, San Mateo and a few other towns have contracted out their first-time buyer programs to the Bay Area Home Buyer Agency (which in turn is part of First Home). You can find them online here.
Alameda has a great program, which has been funded again for 2010. The money in the pot is limited and is given out on a first-come, first-served basis – assuming one qualifies, of course. The program provides amounts of either $50,000 or $80,000 for down payment assistance, depending on whether a household is seen as low- or moderate-income.
Qualifying depends on income and family size. So two working adults with no dependents are unlikely to qualify, but the family with one salary and one stay-at-home parent of two could make the program’s guidelines even if that one salary is over $100,000.
The down payment assistance can be part of the 3.5 percent down payment required for an FHA loan, so essentially a family only needs closing costs to be able to buy a property. The loan is interest-free for five years. If the amount has not been paid back after five years, then amortized payments begin, including equity sharing on the rise in value proportional to the program’s loan and the price of the property. So a $400,000 home whose owners used $50,000 in down payment assistance will see one-eighth of the increase in their home’s value (if there is one) go to back to the program. This recycled money can then help other first-time buyers in Alameda.
I have had clients tell me recently that their lenders told them to not pursue down payment assistance programs because they never work out. I find that unfortunate, because I know several people who have been able to buy because they used the program. It does require the lender to do more work, and your real estate agent has to be proactive in pursuing the program administration. The Bay Area Home Buyer Agency is more responsive to the lender and agent in my experience than they are to the borrower.
To start on your path to using any down payment assistance program, you need to make sure your lender is willing to do the leg work, and then attend one of the agency’s scheduled workshops. The workshops are free and you can register by going to the agency’s website. Sellers may be cautious about accepting an offer that comes with money from a down payment assistance program, so try to have as many of your ducks in a row as you can so you are ready to offer a reasonable closing timeline.
The Bay Area Home Buyer Agency’s next workshop is from 9 a.m. to 2 p.m. Saturday, February 13 at the East Oakland Senior Center, 9255 Edes Avenue, Oakland. For more information on this and other workshops, you can go to the agency’s website.
Sharon Alva is a real estate agent with Alain Pinel, living in Alameda. You can reach her at email@example.com.