Cities and municipalities are having trouble spending the money allotted by the controversial Neighborhood Stabilization Program, which was passed by Congress last year to acquire houses in blighted neighborhoods.
The goal was to buy vacant properties at 1 percent less than appraised value, rehab them, and either sell or rent the homes to low-income residents.
The stumbling block is that the houses are being purchased by private investors and more affluent home buyers at cheap prices.
Some people don’t see that as a problem. “If the private market is coming back and buying houses and crowding the government out, that’s not a bad thing,” said Joseph Pigg, senior counsel at the American Bankers Association.
In some areas, the nonprofit National Community Stabilization Trust is working with banks to give government access to foreclosed homes before they are put on the market. But that may be too little, too late. “It’s very unclear when the dust settles how much real change in neighborhood stability and quality of life we’ll see,” said housing expert Alan Mallach of the Brookings Institution.
Source: CNNMoney.com, Tami Luhby
Buying a house doesn’t necessarily require getting a 30-year, fixed-rate mortgage.
More and more people are exploring alternative financing plans as it gets harder to get a conventional bank loan.
Here are some creative ways to pay for a home, according to some financial experts:
- Securities-backed loans. The lender gives the borrower 80 percent of the value of his stock portfolio. Then the lender holds the stock for between three and 10 years while charging a 3 percent to 5 percent interest on the loan. At the end, the borrower gets his original shares back. Both win if the stock has increased in value.
- Two-step mortgages. This fixed rate mortgage is amortized over 40 years, but the payment schedule is adjustable.
- Constant-amortization mortgage. Buyers start with a higher payment, but the loan is constantly re-amortized, so principal is reduced faster than with a conventional loan.
- Family loans. In the most successful arrangements, the family puts the agreement in writing and the lender charges the borrower a rate of interest high enough to pass IRS scrutiny, thus avoiding any gift tax.
- Assuming a mortgage. Buyers interested in purchasing a house in the pre-foreclosure stage might ask the lender if they can assume the mortgage. In some circumstances this can be a good deal.
Source: Forbes, Matt Woolsey (01/26/09)
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