A buyers’ market beckons

Loan programs help put keys in low-income homeowners’ hands

By Steve Law

The Portland Tribune, Dec 11, 2008, Updated Oct 30, 2009 (18 Reader comments)

JAIME VALDEZ / TRIBUNE PHOTO

First-time home buyer Kelly Fitzpatrick gets help from friend Two Bears as she moves into her new house in Lents. Fitzpatrick took advantage of a variety of programs to make the purchase.

When Kelly Fitzpatrick left an unhappy marriage nine years ago, she lost her home and most of her belongings.

Her résumé was thin after 14 years of home-schooling three children. She didn’t know how to manage money or balance a checkbook, and soon filed for bankruptcy.

Fast-forward to the week before Thanksgiving, when the 51-year-old alcohol and drug counselor got the keys to her own ranch-style home in Lents. She bought the three-bedroom, one-bath house on a salary of less than $40,000.

Other Portlanders of modest means are shying away from house hunting, thinking it’s a terrible time to buy their first home after the subprime-loan debacle sent the mortgage industry and world economy into a tailspin.

Fitzpatrick and many housing experts beg to differ.

It’s just like the stock market, said David Feathers, mortgage broker for Oswego Mortgage. Many people flocked to buy real estate when the hype was there –– and prices were overheated. Now they’re scared to buy when prices have fallen.

“If you can afford the payment and that’s where you want to be, it’s a great time to buy,” Feathers said.

“It’s a buyers’ market,” agreed Jon Gail, marketing and outreach coordinator for the Portland Development Commission’s housing section. “There’s a ton of inventory on the market for first-time home buyers to look at, and there’s a lot of motivated sellers.”

Many sellers are so anxious to sell they’ll help pay the buyer’s closing costs, Gail said. And today’s interest rates, at 6 percent or less for a 30-year fixed loan, are “pretty remarkable” by historical standards, Gail said.

Fitzpatrick’s sojourn to homeownership took several years, after she created a new life for herself. Five years ago, she landed a job with the Portland nonprofit Central City Concern. Her first job included counseling homeless people sleeping under bridges.

She was good at helping others, but realized she needed some help herself.

“All my adult life I’ve been struggling financially,” said Fitzpatrick, an Army brat who moved around a lot, and later earned a college art degree.

About two years ago, a friend invited her to a housing fair put on by the Native American Youth and Family Center. The folks there put her into a housing class.

She also was referred to the Portland Housing Center, a nonprofit that offers the equivalent of Housing 101 classes.

“I learned how to clean up my credit score and recover from bankruptcy,” Fitzpatrick said.

The Portland Housing Center helped her start an Individual Development Account, which allows low-income people to establish a savings account, which is later matched by public and private money, to buy a home, start a business or pay for higher education.

In two years, Fitzpatrick saved up $2,000, and then qualified for matching money, which helped her plunk down $8,000 for a down payment on her Lents home.

She bought the house through the Portland Community Land Trust. The nonprofit group retains title to the land, so the buyer doesn’t have to pay the full purchase price, and the home will remain affordable for future generations. That can shave $80,000 to $100,000 off the price of a home, said Jesse Beason, Portland Community Land Trust executive director.

Fitzpatrick qualified for a 5.75 percent mortgage through the Oregon Bond Program, a state program for home buyers of modest means. Monthly payments on Fitzgerald’s $137,000 mortgage, including property taxes and insurance, are around $1,050, Beason said.

Fitzpatrick revels in looking out the picture window of her new home to see crows flying outside. She still marvels at all the programs that were bundled to help her get into a home, calling it a miracle.

Classic loans get a boost

There are a host of programs available to first-time home buyers. Some are relatively new and some are old reliables neglected during the subprime boom — such as Federal Housing Administration loans.

In recent years, many first-time home buyers responded to ads, or misguided pitches from real estate agents and mortgage brokers, that didn’t put them into the best loans for their financial situation, Feathers said.

Some people were steered into subprime loans, or were lured by the subprime teaser interest rates that reset to unaffordable levels after two or three years. Others took negative-amortization or “option ARM” loans, which are akin to credit cards. People can make the choice each month to pay a minimum amount and tack money onto their home loan’s principal, digging themselves deeper into debt.

Real estate and mortgage agents working with lower-income clients are rediscovering the virtues of FHA loans, causing a surge in use of those loans.

Thirty-year FHA loans are available for 5.5 percent interest, and first-time home buyers can get into a home with only a 3 percent down payment, Feathers said. The down payment can come as a gift from a parent.

People with so-called subprime credit often can qualify for the loans, if they have a decent job and a history of making rent or car loans on time.

“People are shocked that they actually qualify for financing,” Feathers said. Their credit records don’t have to be perfect, he said.

Unlike some of the loose lending practices that helped cause the mortgage market meltdown, FHA loans require people to prove their ability to pay back the loan. And the federally backed loans aren’t offered if they require people to put more than 40 percent of their pay into their mortgage, property taxes and insurance, Feathers said.

A husband and wife making a combined $70,000 should be able to buy now, if they aren’t carrying too much debt, he said.

Similar deals are available for veterans with federally backed Veterans Administration loans and a state program for veterans.

First-timers offered help

The Portland Development Commission also helps city residents looking to buy their first homes. The urban renewal agency offers down payment assistance for families below the median income, which is $67,500 for a family of four, if the home is in Lents or four other urban renewal districts.

The loans can enable people to effectively put a 20 percent down payment on a house without paying anything out of pocket. Instead, the PDC loan is repaid when the home is sold or refinanced. That frees people from paying mortgage insurance, shaving $100 or more from their monthly costs.

After working diligently to buy her home, Fitzpatrick is now learning how to maintain it.

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