States help with downpayments

The Wall Street Journal - Don’t have enough money to put down on a house? No problem.

States looking to jump-start their housing markets are tapping tactics that fueled the housing boom–and bust. They’re getting creative to help low-to-moderate income buyers make it to the closing table.

Programs differ from state-to-state. Some offer interest-free bridge loans that essentially convert to piggyback mortgages. They loan money to fund down payments and/or closing costs — possibly getting buyers keys for nothing out-of-pocket. The aim is to be a short-term lender, getting the money back once qualified first-time buyers claim a federal tax credit of up to $8,000 for purchases before Dec. 1. States offering deals include Missouri, Ohio and New Jersey in efforts led chiefly by their housing finance agencies.

Participants are screened carefully to ensure they are occupants with documented income and sound credit. Prices are scrutinized to avoid overpayment, buyers undergo education and the loan of choice is a 30-year fixed mortgage, not adjustable-rate loans that reset with crippling payments.

“The borrowers are not entering into more of the exotic loan products that caused a lot of the problems out there today,” said Greg Spurgeon, single-family homeownership administrator for the Missouri Housing Development Commission, which led the way on such programs earlier this year.http://blogs.wsj.com/developments/2009/04/24/cant-afford-the-down-payment-some-states-putting-up-cash/