City program offers mortgage assistance to qualified locals
Low- and moderate-income Hollister residents will have another
leg up in their quest to become homeowners after the city’s recent
approval of a $500,000 mortgage assistance program.
City program offers mortgage assistance to qualified locals
Low- and moderate-income Hollister residents will have another leg up in their quest to become homeowners after the city’s recent approval of a $500,000 mortgage assistance program.
In an area with the seventh highest foreclosure rate in the state and more than 200 foreclosures in recent months, city officials recognized that many families need down payment assistance to purchase a home.
“The program will help first-time home buyers get into homes and help reduce the inventory of foreclosed homes,” said Bill Chow, director of Hollister’s Redevelopment Agency, which is funding the program. “The foreclosure crisis was the impetus for this.”
Eight to 10 families are expected to be helped by the mortgage assistance program, which will offer 1 percent second mortgages up to $50,000 for people who meet income requirements and have not owned a home within the past three years. Applicants selected for the program must contribute at least 3 percent of the purchase price as a down payment toward the purchase of a home.
If more than 10 qualified applicants apply, the selection of applicants will be determined by a lottery.
“With depressed home values, many foreclosed homes are selling at very low prices,” said Hollister Mayor Doug Emerson. “There may be families that can qualify but do not have the cash for a 20 percent down, fixed rate mortgage.” The Hollister Second Program may help these families cover part of their down payment and closing costs, he added.
City officials recently hosted community meetings at the Veteran’s Memorial Building to discuss housing needs with residents and affordable housing advocates. The Hollister Second Program idea resulted from those meetings.
Applicants must earn less than 100 percent of the county’s median income as determined by the state Department of Housing and Community Development or Federal Housing and Urban Development Department. Chow said Monday that number is likely around $72,000 (depending on the size of a family), but he expects to have specific parameters determined by the end of the week.
While the goal is to reduce the inventory of foreclosed homes, people approved for the program will be able to purchase any home of their choosing. Preference will be given to applicants who live or work in the city of Hollister and Chow said the home purchased through the Hollister Second Program must be within city limits.
“If we have any information on foreclosed homes, we can direct people to those,” Chow said.
Applicants seeking the second mortgage through the city must agree that the home they are buying will be their primary residence. Additionally, their first mortgage must be a fixed-rate loan and they must not have entered into a purchase contract on a home prior to applying for the Hollister Second Program.
The one percent interest rate on the 45-year city loan is “intended to offset the administrative costs of operating the program,” according to city documents. There will be no monthly payments associated with the loan, though interest will accrue through the 45th year, when the note and interest will be forgiven.
If an applicant decides to sell or transfer their home prior to the 45th year or the property is no longer their primary residence, the second mortgage must be repaid to the RDA in full, including interest.
Funds for the mortgage assistance program have only been set aside for the current fiscal year, Chow said, but its impact could result in an extension of the program.
“If new homeowners are happy, that would be an indication of success,” he said. “Also, if we see there is huge demand for the program,” then the city may consider extending its efforts.
Mayor Emerson said the program will be re-evaluated after a year and officials will take a look at the need for continuing it based on the state of the local housing market.
“I am enthusiastic about this program, hope it helps some folks and would be inclined to continue it unless I am given some good reasons not to do so.”
HOW TO APPLY
Pick up a Hollister Second Program application at Hollister City Hall, 375 Fifth St. The process requires a general information questionnaire, proof of income, a pre-qualification letter or summary sheet from a lender or mortgage broker, verification of funds in a checking or savings account, and more. Applications will be available starting Monday, Nov. 19 and the deadline to apply for mortgage assistance is Dec. 19. Contact RDA Executive Director Bill Chow at 636-4316 for more information.
