The news from the housing market has been encouraging the last couple of months. Foreclosures have slowed and the construction of new homes is increasing, indicating a recovery is in the works.
That all sounds good, but banks aren't loaning money as quickly as they once did, so some families still can't find a way to jump in the inviting waters of homeownership.
And even if breadwinners have good credit and can pay their rent regularly, some don't have enough savings for a down payment and closing costs. That alone can kill hopes of homeownership.
Well, I have some good news.
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The Kentucky Housing Corporation has $3 million available for down payment and closing-costs assistance on a new mortgage. And the Neighborhood Down Payment Assistance Program offers a loan of up to $10,000 for qualified buyers at one percent interest for 30 years.
Let's look at it a little closer. If you were to buy a $100,000 home, the Federal Housing Association (FHA), which provides mortgage insurance on most loans, requires you to pay 3.5 percent of the cost in the form of a down payment. In this case, that would be $3,500 plus closing costs, which vary and which you may already have in savings.
That $3,500 over 30 years at 1 percent interest would be less than $12 a month on top of the mortgage payment. Considering the mortgage payment would probably be about the same amount you are paying for rent, that very affordable $12 could help move your family into homeownership.
Local realtor Joe Smith, who told me about the program, said there are a few rules, as you would expect.
■ First, the homes that qualify for this program must be foreclosed properties, on a short sale or have been on the market for at least six months. That latter group can be either new construction or existing homes.
■ Second, buyers must have an income less than $124,775 and a credit rating of 640.
■ Third, the purchase price of the home cannot exceed $243,000.
"That is the caveat," Smith said. "They have to be able to afford the mortgage and the additional payment. Just because you qualify for a home, doesn't mean you should buy it. Mortgage companies look at gross income and we all know you don't bring home gross income."
Before the bubble burst on the real estate market, too many home buyers signed for loans they couldn't afford because of some less than savory tactics used by predatory lenders, he said.
Most of those lenders are gone now, Smith said, and banks have tightened their requirements.
"And that is not a bad thing," he said. "It is tougher to qualify, but you want them to get those homes and to stay in there."
Some homeowners who have been through foreclosure and have repaired their credit can qualify for this program as well, he said. "We went through a tough spell with people being foreclosed," he said. "Things happen to people, but they rebound."
Fortunately, KHC has been around for 40 years, helping Kentuckians find safe and affordable housing, Smith said. But if this particular program doesn't suit your needs, KHC has a few more that might.
The Neighborhood Down Payment Assistance Program benefits the seller who has had property on the market for a while and the buyer who needs help moving up to the next level, said Joyce Casey of Bluegrass Mortgage Group, a loan officer familiar with the program.
"It is meant to stabilize the neighborhoods, too," she said.
Buyers don't like to see a lot of For Sale signs in a neighborhood, Smith said. They wonder if something is wrong with the area. "It is strictly psychological," he said. "When you see Sold signs going up, it helps the whole neighborhood."
If you have a stable job and good credit, this program may be what you need to capture the American dream.