Two new loans for buyers

Both devised for first-time owners

By Gregory J. Wilcox, Staff Writer, Sacramento Bee

The state today will begin offering two products structured to help first-time home buyers -- free mortgage payment insurance and a 35-year, fixed-rate interest-only loan.

They are part of the California Housing Finance Agency's effort to ease the sting of rising home prices that are squeezing many first-time buyers from the market.

"With the increasing cost of real estate, the challenge for Californians to purchase their first home has never been greater," said Theresa Parker, the agency's executive director.

The agency says its interest-only PLUS loan will reduce mortgage payments by hundreds of dollars per month. Borrowers just make the interest payment for the first five years, then the principal plus interest kicks in.

But holders of these mortgages will know how much their monthly payments will be increasing because the interest rate won't adjust.

The rate on these kinds of loans can go up once the principal becomes due.

"What we're trying to do is create a loan product that would help people that don't really have sufficient income to qualify for these expensive houses," she said.

HomeOpeners is a free mortgage protection program. If a borrower loses a job, the monthly payment is automatically covered for six months.

Parker said this buys homeowners peace of mind if they lose their job for a while. The insurance covers up to $2,500 a month and is in effect during the first five years of a loan.

They are the latest in a portfolio of specialized loans that help first-time homebuyers get in the market.

CalHFA's below-market mortgage rates are available to first-time home buyers who meet certain requirements, including income and home sales price limits.

There are separate price limits on new and used homes in what the agency calls targeted areas, census tracts where 70 percent or more of the families have an income equal to 80 percent or less of the state median.

For example, in Los Angeles County the purchase price limit is now $549,601 for a new house and $671,735 for one in a targeted census tract, 22 percent higher than the year-ago level.

For a resale house, the price limits are $457,608 in nontargeted areas and $559,298 in targeted areas, the agency said.

To qualify for the program, a single person or couple cannot earn more than $78,600 and for a family of three or more, the cap is $91,700.

Parker said loans in this usually range between $250,000 and $325,000.

The median price in most communities around the county are well above this price level.

Savvy shoppers who do a lot of research and shopping might be able to find a property, though.

Jim Hamilton, president of the California Association of Realtors, said condominiums might be the best bet in high-cost areas.

"There are a lot of loan products out there and this is one more avenue to take. It sounds like a pretty good program," he said.