When it was time for Sam Weston to start house hunting, he wanted an area he liked and one that was conducive to raising a family.
But after a year of shopping, Weston worried he couldn't afford the escalating prices in the neighborhood where he wanted to live. Like many homebuyers, he watched record-low interest rates spur the housing market and drive prices up by double digits.
Weston eventually tapped a state program that provided a low-interest loan for $145,000. It helped him afford a two-bedroom, two-bath condominium in Arnold - the area where he grew up and the neighborhood to which he'd always wanted to return to live.
Weston originally qualified for a 30-year, $125,000 mortgage at a 6.25 percent interest rate. But the state program provided him with a $145,000 loan at 4.95 percent.
"I knew $125,000 would buy me something," said Weston, who along with his fiancee, Sophia Kuziel, will raise their 18-month-old daughter, Andrea, in the home they bought in November. "But it wouldn't exactly be the neighborhood I wanted."
Homebuyer assistance programs are attracting attention as buyers seek relief from large price increases. Many of these little-known incentive programs are being pursued by homebuyers priced out of the market. Last week, the Maryland Association of Realtors reported that its affordability index for first-time buyers had reached a four-year low in December because of rising home prices.
And with industry experts forecasting that interest rates will eventually begin inching up from record lows, these incentives could become even more important as mortgages become more expensive, experts said.
The slew of initiatives aimed at providing home purchasing assistance - many aimed at low- and moderate-income buyers - are being offered by local, state, federal and nonprofit agencies. Experts said incentives generally include lower mortgage interest rates as well as down-payment and settlement assistance - often the major obstacle to first-time buyers.
The state program Weston used to purchase his house has gained in popularity since officials lowered the mortgage interest rates on its 30-year loans to 4.75 percent and 4.95 percent last year. Rates had been as high as 5.7 percent. The maximum price limits of homes that can be financed under the program also were raised to keep up with escalating home values.
Under the program, a Baltimore family of three or more can earn as much as $98,980 annually and purchase an existing home for up to $247,014 or a new home for up to $261,609. In Baltimore County, that same family can earn up to $81,305 and purchase an existing home for $202,103 or a new home for $259,558. State-backed bonds help pay for the program.
"This program is designed for the work force - police, teachers, service workers," said Victor L. Hoskins, state secretary of Housing and Community Development. "We really want to emphasize that you can still buy into good neighborhoods."
The state's mortgage program was revamped last spring and marketed more heavily among real estate professionals.
Before the changes, the Department of Housing and Community Development handled about two or three loan requests per week. The group is handling up to 60 loans a week.
By the end of 2003, the state guaranteed more than $20 million in mortgages a month, compared with less than $5 million a month before the program was revamped.
State officials hope to increase Maryland's homeownership rate to 75 percent by 2006 - it currently stands at 72.8 percent, according to the housing department. Adjacent states - Delaware, Pennsylvania, Virginia and West Virginia - have a homeownership rate nearing 75 percent.
The state's Down Payment and Settlement Expense Loan Program offers no-interest, deferred loans up to $3,000. Homeowners who qualify for the program must repay the loan when they sell the house or pay off the mortgage.
The state launched the Live Near Your Work incentive in 1997 with $1.35 million. As of June 2003, close to $1.22 million was used. The program offered $1,000 in state funds, matched by the local jurisdiction and participating employers for a total of $3,000 toward closing costs.
No new financing was allocated in the state budget for fiscal year 2004, so only a few areas with remaining funds are offering the program with state dollars. They include Anne Arundel County, Westminster, Salisbury and Hagerstown.
In late 2001, the program gained in popularity after state employees became eligible. Maryland's government paid $2,000 to its workers and the local jurisdiction paid $1,000. Marketing efforts also raised awareness of the program.
It became so popular in Baltimore that city officials continued to finance it even after the state dollars ran out. The city still offers $1,000 to workers whose employers match the grant.
Matthew and Elisabeth Hyleck used a Live Near Your Work grant to buy a home near Hamilton in the city, not far from where they had rented. The couple received a $3,000 grant - $1,000 from the city and $2,000 from Elisabeth Hyleck's employer, the Annie E. Casey Foundation.
"We really wanted to find a home in the same neighborhood because we liked it so much," she said. "The grant didn't make the difference of whether or not we would buy the house, but was an extra advantage for having that cash on hand for other purposes. It was a nice bonus."
To help prospective city homeowners sift through the maze of grants and homebuying assistance available, the nonprofit Live Baltimore Home Center recently opened a storefront at 343 N. Charles St.
There, buyers can obtain information on homes for sale and rent, financial incentives, historic tax credits and other programs in more than 225 city neighborhoods.
"Baltimore City has more incentives than probably any other jurisdiction in the state," said Tracy Gosson, executive director of the Live Baltimore Home Center. "Probably what Baltimore has going for it first and foremost is the affordability of the housing stock. It's still the best housing value in the region."
One of the most popular city programs is the Buying Into Baltimore Home-Buying Fair. The biannual event offers a $3,000 grant for down-payment or closing costs assistance to the first 50 participants who close on a house within 90 days of the fair. There are no annual income limits to participate.
When the program started in 1999, it attracted about 1,000 people. Last year, more than 1,600 people attended.
June Piper-Brandon, who works for Champion Realty, believes there are many opportunities to purchase an affordable home even for low-income buyers.
"A lot of times buyers set their expectations too high," she said. "There are a lot of really, really nice affordable homes, especially within the city."
The federal government's concern about affordable housing led Congress this year to pass the American Dream Downpayment Act.
The act authorizes $200 million in financial grants for an estimated 40,000 low-income families to defray down payments and other initial homebuying costs. It will help income-qualified first-time homebuyers with a maximum grant of either $10,000 or 6 percent of the purchase price of the home, whichever is greater.
For homeowners like Weston, programs and grants to lower borrowing costs often allow them to afford larger homes or more desirable locations.
"I could have used the extra money to get more house in the area I was looking in," Weston said of the low-interest loan he secured from the state to buy a house in Arnold. "But I used it instead to move to a nicer area."