Maryland broadens home loans Low-income program is being expanded to cover middle class; $31 million available; To qualify, couples can have incomes up to $56,000 a year


Hoping to entice middle-income families to buy homes and help spur sluggish sales in Maryland, the state has expanded a mortgage program that had been reserved for low-income borrowers.

Under higher income and purchase price limits that take effect today, a single person or two-member family can earn up to $56,000 annually and buy a new house in the Baltimore area for up to $157,825 with a state loan -- and no down payment. Previously owned homes priced up to $140,634 also qualify for the state loans.

The changes should help boost declining homeownership rates -- most severe in older and city neighborhoods -- and help stabilize communities, said Patricia J. Payne, secretary of the Maryland Department of Housing and Community Development. She announced the new limits to coincide with a month of homebuyer education activities in March.

"This really addresses the primary problem most people have -- a low enough monthly payment, combined with a low cash requirement to get into the house," said Arthur Davis III, president of Chase Fitzgerald & Co. in Baltimore and a regional vice president of the National Association of Realtors. "Home prices have really leveled off. This will mean you can take someone who is qualified [for a loan] and buy just a little more house."

The $31.5 million available through the Maryland Mortgage Program -- enough for loans for about 400 families statewide -- has remained in a loan pool since November, when the state last sold mortgage revenue bonds to finance the program, said Fran Makle, director of homeownership programs for the Community Development Administration, part of the state housing department.

But home sales lagged, and the money remained untouched, Ms. Makle said. Only homes selling for $110,000 or less qualified. Single borrowers could earn no more than $41,800 a year, and households with at least two members could earn no more than $49,650 a year in total income.

The state last raised the income limits in 1994 on loans designed to help people who didn't earn or save enough to qualify for conventional loans.

The state has always has offered interest rates at below-market rates, Ms. Makle said. In recent months, though, market interest rates have steadily declined -- they dipped below 7 percent in mid-February -- and made it more difficult for the state to &L; compete with private lenders' rates.

The income caps were increased to $56,000 for one- and two-member households and $64,400 for households of three or more members. Borrowers accepted into the program make no down payments and pay only 2 percent of the price toward closing costs, Ms. Makle said.

The income caps are the same throughout Maryland, but maximum purchase prices for homes vary by region. In parts of Western Maryland, for example, new homes costing up to $157,059 and existing homes costing up to $92,763 qualify for the state loans.

On parts of the Eastern Shore, new homes can cost up to $157,059 and existing homes can cost up to $133,918. And in the suburbs near Washington, prices are capped higher, at $182,305 for new homes and $180,807 for previously owned homes.

The loans, for which prospective buyers must apply through the Community Development Administration, are made through 62 private lenders throughout Maryland. The loans can be used to buy condominiums, townhouses or detached, single-family homes.

Therese Poku, community mortgage consultant for PNCMortgage, one of the lenders, said the changes will open more doors for those in slightly higher income brackets who are still struggling to make ends meet.

"Everyone in the industry understands that minority or low- to moderate-income is the under-served market, but this segment, too, is also a market that has been overlooked," Ms. Poku said. "They [people on those income levels] can afford the mortgage payments, but the saving patterns are not there. The closing costs are keeping a lot of middle-class people out of the dream of homeownership."

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