The dream of homeownership has been brought within reach of many lower-income Valley residents by a local finance program that also stabilizes neighborhoods hurt by the recession and the housing-market crash.
More than 1,500 low- to middle-income residents and veterans have bought houses through the Home in Five Advantage Program since it began in September 2012.
The program, run through the Industrial Development Authority of Phoenix and and the Industrial Development Authority of Maricopa County, has helped homeowners obtain more than $244 million in 30-year fixed-rate mortgages with a competitive mortgage-loan interest rate. The program helps homeowners obtain certain types of federally backed loans to purchase any home within Maricopa County — from Waddell to Queen Creek.
Each loan comes with a 5 percent grant of funds that can be used for a down payment or closing costs. Military personnel receive a 6 percent grant. Giving veterans a special portion was important to leaders of both industrial-development authorities, officials said.
“There are still a lot of people out there in need of financing tools, like Home in Five, for homeownership opportunities,” said David Adame, president of the Maricopa County Industrial Development Authority, which uses bonding and other mechanisms to finance projects that produce jobs or increase affordable housing.
Metro Phoenix was among the first regions in the country to pilot the program, which has expanded to 10 states and 15 local jurisdictions.
There is more money available through the program, and county and city officials are encouraging prospective homeowners to apply.
Many homes sold through the program are foreclosed properties or are involved in short sales. The program’s focus helps stabilize neighborhoods by putting responsible owners back into vacant properties, restoring their value and their contribution to the community’s property-tax base, Adame said.
The average borrower’s age is 36, with an average household of two people.
The majority of participants have purchased single-family homes; 99 percent are first-time homebuyers.
The 5 percent grant has made a difference to homeowners who otherwise might not have been able to come up with a down payment or closing costs, said Juan Salgado, executive director for Phoenix’s Industrial Development Authority. The program also has helped reconnect the network of real-estate agents, lenders and potential homebuyers across the Valley, he said.
Lisa Vaaler, a teacher in the Madison School District, moved in last May to the first home she has owned, a central Phoenix house with three bedrooms and one bathroom.
Vaaler used the 5 percent grant toward closing costs on her home.
“Without this assistance, it would’ve been really hard for me because I am a single teacher. I think my family would’ve helped me out but they didn’t need to with the closing cost, thank goodness,” said Vaaler, who now lives close to work.
Before the recession, state and local housing-finance agencies funded mortgage programs through tax-exempt single-family bonds. Those bonds were sold at a slightly higher price with a slightly higher interest rate. The premium was then used to finance down-payment assistance.
It has become difficult for state and local housing-finance agencies to sell tax-exempt single-family bonds since the financial crisis, said Mark O’Brien, Raymond James and Associates’ Dallas-based managing director who acts as investment banker for the Maricopa County and Phoenix industrial-development authorities.
A new program model used by Home in Five provides a taxable, non-bond alternative for housing-finance agencies to distribute mortgage loans and down-payment assistance grants, O’Brien said.
Some of the limitations that used to constrain bond programs no longer apply, creating more flexibility in the program. It is not limited to first-time homebuyers, nor is it restricted to the income levels that certain bond programs require. That allows the program to expand its reach to moderate-income homebuyers or those who have rebuilt their credit scores after losing homes, O’Brien said.
Participants are required to attend a homebuyer-education course approved by the U.S. Department of Housing and Urban Development. They must receive a certificate of completion and have a home inspection.
Michael Trailor, director of the Arizona Department of Housing, said the counseling requirement is a critical component of the program.
“We put a lot of people into homes that really weren’t prepared and capable of sustaining homeownership over a long period of time,” Trailor said. “I don’t think you can falsely fuel the market and increase the percentage of homeownership in this country by lowering all of your qualification standards.”
The state Housing Department also has similar programs to provide 4 percent down-payment assistance in 13 rural Arizona counties.
