In the Door
First-time homebuyers will get help thanks to Laird’s bill.
Thursday, September 15, 2005
<>>More Monterey County residents will qualify for help buying a home because of a bill authored by Central Coast lawmaker John Laird, which Gov. Schwarzenegger recently signed into law.
Assembly Bill 983 allows first-time homebuyers to use more of their income to qualify for down-payment assistance provided by the Monterey County redevelopment agency. Currently, the agency can provide down-payment assistance to low-income residents for homes that will cost them no more than 30 percent of their income. This same rule allows moderate-income families to spend 35 percent of their income on a mortgage.
In other words, a low-income family of four with an annual household income of $48,650 would have to find a home with a monthly mortgage of $1,350 in order to qualify for down-payment assistance, while a moderate-income family of four, making $72,950 per year, could only get assistance on a home with a monthly mortgage payment of $2,026.
In an expensive real estate market like Monterey County’s, however, where buyers often must spend way more than 30 percent of their income on a mortgage, these numbers aren’t realistic.
“The problem is,” Laird says, “in the over-heated housing market of Santa Cruz and Monterey County, that basically prices you out of the market. If you make $52,000 a year, you could not qualify for anything, even a townhouse or a mobile home.”
Laird’s bill will allow first-time home buyers with modest incomes to spend a bigger chunk of their income—up to 40 percent—on a mortgage and still qualify for assistance.
A similar program has been up and running in Santa Cruz County for the past three years. It has helped 70 families that otherwise wouldn’t qualify for assistance move into homes.
Santa Cruz County and the City of Watsonville both operate first-time homebuyer programs. Neither has reported a mortgage default.
“Seventy families without default, which is the powerful piece of this statistic,” Laird says. “I think it has the potential to help at least as many in Monterey County.”
Secretary of State Bruce McPherson first proposed the housing program when he served as a Republican state senator. Democrat Laird’s bill extends the program until Jan. 1, 2008, and includes the unincorporated areas of Monterey and Contra Costa counties.
“We’ll have to see how it works in Monterey County, and if it’s successful, we’ll look into expanding it to the cities,” Laird says.
In Monterey County, the median home price hit $698,000 in July, according to the most recent data from the California Association of Realtors. To afford such a home—and only spend 30 percent of their income on house payments—buyers would need an annual household income of $169,430.
This means that in Monterey County, only 9 percent of households can afford to buy a median-priced home.
“This legislation gives us a little more flexibility to tailor our first-time home-buyer programs to meet housing needs in our area,” says Jim Cook, Monterey County’s housing and redevelopment director. “Rather than using the old underwriting criteria or people putting 30 or 35 percent of their gross-monthly income towards housing expenses, now we can go up to 40 percent. So in essence, it reduces the gap that we would need to assist homebuyers in purchasing new homes, and it gives us the ability to leverage our funds and spread them a little bit further. It also brings us more in sync with underwriting practices in this high-cost housing area. It’s a good move in the right direction.”
FOR MORE INFORMATION ABOUT MONTEREY COUNTY’S FIRST-TIME HOMEBUYER PROGRAM, CALL 786-1350. LAIRD speaks AT THE CARMEL AREA DEMOCRATIC WOMEN’S LUNCHEON CLUB, SEPT. 20 at 11:30am, LA PLAYA HOTEL, 8TH AND CAMINO REAL, CARMEL. $28. RESERVATIONS PREFERRED. 626-1610.