Federal funds aid new home buyers

By

Originally published 09:38 p.m., June 2, 2004, updated 12:00 a.m., June 3, 2004

• Print
• [-][+] Font Size
• E-Mail Alerts
• Tell a Friend
• Got a Question?
• You Report
• Click-2-Listen

First-time home buyers will have access to $161.5 million in funds this year to help with down payments and closing costs, Housing and Urban Development Secretary Alphonso Jackson announced yesterday.

"Homeownership is extremely important, and it has long been the American Dream," said Sen. Wayne Allard, Colorado Republican, one of the program's supporters. "Our forefathers came to America because there was one basic principle: They got to own something that was theirs. We're just carrying forward that legacy."

The money will be given out by 434 state and local governments under the American Dream Downpayment Act, which President Bush signed into law in December.

The money will be available in grants of $10,000, or 6 percent of the home's purchase price if it is greater, to people earning less than 80 percent of their area's median income.

The program includes money for the District and suburbs of Maryland and Virginia.

This is the first federal block-grant program to aid first-time home buyers, but it is not the first program to reduce down payments.

For example, Fannie Mae, a government-chartered company that buys mortgages and encourages homeownership, has a program that allows for down payments as low as $500 and considers "nontraditional" credit histories, such as those of recent immigrants, said spokesman Jon Searles.

It also has a program in which people who are "credit impaired" can reduce their interest rates by making payments on time as well as other incentives to encourage mortgage lenders to "reach out" to low- and moderate-income borrowers.

Cities and counties nationwide also offer down-payment assistance programs.

The federal government, however, has not had success with such programs. A program begun in 1968, known as Section 235, provided low down-payment mortgage loans guaranteed by the federal government, leading to a wave of abuse that ended the program in the early 1970s after what one policy analyst called "a complete disaster."

Do you have another point of view, photos, audio, video or more information about a story?