If you've gone to the Post-Intelligencer website in recent weeks, you may have seen that Polygon Northwest has been running banner advertisements with some enticing promises. "Communities located from Olympia to Everett," read the ads. "Prices starting at $159,990." And the real kicker; "$0 down and $0 closing cost opportunities available."
Wait a minute. Isn't easy money--one of the biggest sources of the housing meltdown--supposed to be a thing of the past?Not exactly. You can still buy a house without digging deep into your own pocket. In fact, the state and federal government enables people to do so through programs that help the low-income, veterans and others. That has given private businesses like Polygon a way to market themselves in a punishing, post-crash environment--a somewhat ironic development given the way the business community often derides "tax-and-spend" government programs.
James "Bob" Phillips, a mortgage consultant with Polygon Home Loans (a joint venture of the builder and Wells Fargo), explains that the P-I ads refer to two programs. One is run by the U.S. Department of Veterans Affairs, which guarantees loans for veterans. The other is operated by the state Housing Finance Commission, which offers assistance to first-time home buyers within certain income limits. King County households that make under $85,600 can qualify for a second mortgage to cover down payment and closing costs.
In the case of the commission, according to homeownership division director Dee Taylor, the state itself actually lends the money for both a first and second mortgage. Wells Fargo, and other participating banks, close the deal for the state. In return, lenders get credit toward meeting their obligations for the federal Community Reinvestment Act and a small fee--so small, Taylor says, that many lenders didn't advertise the commission loans until recently, when many other options dried up. In the past year, the commission has more than tripled its number of down-payment mortgages, to approximately 1,000.
While those mortgages may look like easy money, Taylor says there are more strings attached than the subprime loans banks seemed to be handing out to just about anyone in the bad old days. Borrowers need to document their income, have good credit ratings and take five hours of homeowner education.
Consequently, she says the commission has historically seen less default by its borrowers than in the larger community, although it shot up in the last few years--with about 9 percent of its borrowers having missed payments as of July--due to the rising unemployment rate.