INSIDE REAL ESTATE: A new option for homebuyers
The Alaska Housing Financing Corp. has a little-known new grant program for single-family homebuyers called the “Closing Cost Assistance Program.” Available only through First National Bank Alaska and Mt. McKinley Bank in Fairbanks, it offers up to a 4 percent grant (yes, grant, not loan) to homebuyers with a credit score of 660 and above.
A slightly lower credit score reduces the grant to 3 percent of the mortgage amount. The catch is a modestly higher interest rate that changes daily. As of July 11, the published rate was 4.5 percent for a 30-year fixed rate. A 15-year mortgage is not available with the program.
But despite the higher rate, for buyers, particularly millennials, who’ve had to sit on the sidelines of the housing market for lack of down payment and closing cost funds coupled with student loan debt, this program may just be the ticket to owning their first home.
The program is also beneficial to older citizens with good credit but without having had the income available to save for a down payment. The AHFC website for this program tells the story of an out of state grandmother who moved to Alaska to be closer to her family.
Only Alaskan residents are eligible for the grant. The program is also limited to Veterans’ Affairs and Federal Housing Administration loans, as well as the Rural Development loans through the Department of Agriculture.
This AHFC program is part of a nationwide trend to attract more buyers into the housing market that has best been described as stable the past couple of years. Mortgage companies, who relied on refinance income for the past five to seven years now have reduced profits as that market has dried up with higher interest rates.
There is more and more competition from online mortgage lenders who have aggressive mixed media marketing campaigns.
Mortgage giants Fannie Mae and Freddie Mac who are still in government conservatorship, have also jumped into the mortgage market by loosening their credit qualifications.
The nation’s three major credit rating agencies will drop tax liens and civil judgments from buyers’ profiles if the information isn’t complete. If you’ve ever tried to correct your credit score as a result of an identity mix-up, you know how important that is. Both Freddie and Fannie will now allow income to debt ratios of 50 percent, up from the long-standing 45 percent.
All this comes at a time when lenders are competing for borrowers and buyers are hesitant. These steps to spur home ownership are modest and are not like the stated income debacle that helped propel the real estate crash of 2008.