By Rick Elkins
Visalia - Those looking to purchase a new home can now find some assistance through the city of Visalia's New Home Deferred Second Mortgage Program.
While most admit it is not the complete answer to the struggling home construction industry, they do say the program will help and hopefully it will move some buyers to begin looking at purchasing a new home.
Ricardo Noguera, city Housing and Economic Development director, said the goal of the program is to “enhance employment in the construction community through the building of more homes.”
Replacing the First Time Homebuyers Program for a year, the new program provides up to $40,000 of a second mortgage on the purchase of a new home – one already constructed or yet to be constructed.
The city has set aside $520,000 of its HOME investment fund for the program that Noguera hopes will assist at the least 13 home buyers. Based on the funding formula, the money will be available for homes ranging in price from $120,000 to $180,000.
The council gave initial approval last week to the program that if given final approval this month, will begin Oct. 1.
Georgina Valencia with McMillin Homes is encouraged by the program.
“If that helps sell a couple of houses, that's good,” she said. “If it helps get more people get into a new home, that's better.”
Noguera said about seven local builders will participate in the program. He said the city is looking at builders to offer some matching funds – 5 to 10 percent – to put more money into the program.
This is the first time the city has used housing funds to stimulate new home construction. In the past, such dollars were used for existing home sales. “At the minimum, what it does is it demonstrates the city is trying to help the building community and it helps homebuyers,” he said.
Valencia said any help is welcomed. She said sales of new homes picked up in May, then slowed in June and have not changed a lot since. “We all hoped we'd see more consistency,” she said of the market that has been hit hard by the recession. “People just aren't feeling 100 percent confidence about their jobs,” she added.
However, she remains hopeful and said programs like the one the city is starting provides hope that things will begin to improve soon. She is also pleased to see the city trying to help stimulate the housing construction industry.
One thing is timing, she noted. The extra loan incentive comes on top of the lowest home prices in years and the lowest mortgage rates in history. Last week Freddie Mac reported a 30-year-fixed rate at 4.36 percent.
“Interest rates are phenomenal,” said Valencia.
What Valenica and other builders hope is that programs such as the city of Visalia's will stimulate buyers to once again begin looking at new homes.
So far this year the city of Visalia has issued just 228 permits for new homes and is on pace for about 400 new homes this year. That pails when compared to 2005 when 1,500 new homes were constructed in Visalia.
Program
In order to qualify, an applicant must have a fixed rate first Mortgage, financed by FHA, CHAFA, or Conventional Freddie Mac (VA with approval). They must have good credit.
The city-backed second mortgage is up to $40,000 and payments are deferred for 15 years unless the home mortgage is refinanced or the home is sold. It must be owner-occupied.
Also, the family income must be less than 80 percent of the area median income (Example: For family of four, maximum gross family income must be under $45,050.) And, borrowers must attend an 8-hour homeowner workshop.
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