Five banks have partnered with the county Housing Trust Fund to raise $3.5 million for the South Coast Workforce Homebuyer Program. The contributions from American Riviera Bank, Community West Bank, Montecito Bank & Trust, Pacific Premier Bank, and Rabobank enable the Housing Trust to provide up to $100,000 in down-payment loans, which are fixed rate and for 10 years, to first-time homebuyers of an entry-level home near their workplace.
The Housing Trust Fund made its first loans late last year, but the roll-out was eclipsed by the fire and flood disasters, CEO Jennifer McGovern said. Borrowers are allowed to pay only interest — currently fixed at 5 percent — on the amount loaned for the 10-year period, she explained, to reduce overall costs. The amount then becomes due — in what is known as a “balloon” payment — but the theory is that after 10 years, payments made by the homeowner increases the equity in the home. That and any increase in value of the property can help with either a second mortgage or line of credit to cover the loan, she said. Borrowers can also pay more of the loan amount during the 10-year run.
The program gives first-time homebuyers a leg up into the housing market, McGovern said, for homes in about the $500,000-$850,000 range, depending on what they’ve saved as a down payment themselves. This includes affordable housing and housing with restricted re-sales. A solid down payment is considered to be 20 percent or more to avoid Federal Housing Administration mortgage insurance requirements, McGovern explained. Also, all borrowers also take an education course to understand the responsibilities involved.
The Housing Trust offers loans of differing amount to North County buyers as well. See sbhousingtrust.org for more information.