Financial thoughts

Michelle Price was attending college and despite working two jobs was unable to put together enough money to buy a house for herself and her daughter.

That was before she participated in a program run by St. Louis County that gave her a $3,000 down payment, covered her closing costs and provided a zero-interest second mortgage. She was able to buy a three-bedroom, two-bath house in Spanish Lake for $165,000.

Individuals and families that meet income guidelines and complete a home-buying counseling course may become first-time buyers for as little as $500 down. Price, 49, said she couldn’t be more pleased with the Plantation Court house she bought last year.

"I really like it," she said. "I’d been in an apartment for 15 years. My house has a big kitchen with an open breakfast and dining area. It has a living room and a full basement, even though it’s unfinished."

Bank of America financed $100,000 of the purchase price with the county-run program financing the rest, Price said.

"I got a good interest rate," she said. "It’s fixed for 30 years."

About 200 individuals and families take part each year in the affordable housing program known as the St. Louis Home Consortium.

The consortium, formed in 2003, includes unincorporated St. Louis and St. Charles counties, Jefferson County, and the cities of Florissant; O’Fallon, Mo.; St. Charles and Wentzville. The city of St. Louis has a similar but separate program.

The Department of Housing and Urban Development gives the consortium about $4 million a year for down payments and second mortgages for first-time home buyers. Income limits apply. To get help in St. Louis County, for example, an individual’s annual income may not exceed $38,000. A family of four cannot earn more than $54,300.

Darlene Rich, a community development manager for the county, runs the consortium. She said the second mortgages — forgivable after five years in Wentzville, Florissant and St. Louis and Jefferson counties — act as "gap financing" for the buyer guaranteed payday loans.

After a bank or other lender approves a program participant’s primary loan, a consortium member purchases a second mortgage equal to the difference between the home’s appraised value and what the buyer can afford, Rich said. If the buyer, for example, can afford a $100,000 mortgage on a house valued at $125,000, the consortium member provides a second loan of $25,000.

Buyers also can use the $8,000 federal tax credit for first-time home buyers.

Participants must complete a home buying-counseling class conducted by one of three not-for-profit housing agencies that also are approved as the program’s lenders.

Second-mortgage foreclosure rates are low, less than 0.5 percent, said Tyrone Turner, acting director of housing and asset management for Better Family Life, one of the three approved lenders.

"Plus, the classroom part, I think, is really crucial, especially for those persons who have never purchased a home before," he said.

Participants learn the basics of mortgages, credit, insurance and even get tips on home maintenance.

In St. Louis County, three small developments are geared toward the affordable housing program. They are Villas at Woodson Ridge in Woodson Terrace, Savannah Heights in Jennings and Glenechort Homes in Wellston. Second mortgages on the homes there range from $25,000 to $42,000.

Turner said the housing slump dropped the number of participants in his agency’s share of the consortium’s mortgage program to about 75 last year from a peak of "well over" 100 in 2006. The $8,000 federal tax-credit for first-time home buyers and the slowly recovering economy will bring the number back to about 100 this year, he said. "There are still people buying homes. There are still people going to work every day."

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