Opening Doors for First-Timers

If you tried to engineer a real estate market to give the advantage to first-time buyers, the result would look a lot like the market we have now.

Prices are down. Interest rates are low. Sellers are willing to make repairs and pay closing costs. They don't balk when buyers demand an inspection or make their offer contingent on financing. The amount of money that can be borrowed using the Federal Housing Administration's mortgage-insurance program has been raised. On top of that, the selection is greater than it has been in decades.

Foreclosures -- once considered only by bottom-fishing investors -- are now marketed on the multiple-listing service to people hoping to find an affordable home. Long & Foster's Centreville office will even run a bus tour today of foreclosed homes in that area. Title agents, home inspectors and lenders will be on board. Other offices are planning similar outings.

But there's still a big hurdle for first-time buyers to overcome: It's tough to find something affordable that isn't in greater need of rehab than Amy Winehouse. For example, a quick search for condos or houses priced at $350,000 or less in Fairfax County showed only six properties. Six!

On average, the Washington area has high incomes to go with those high prices. That means the income caps for qualifying for government help to buy a first home are also high, so don't assume you earn too much until you check.

Most jurisdictions in the region have first-time-buyer assistance programs, but let's examine one available to residents of the District and to some nonresidents buying within its borders.

Low-interest mortgages, financed through the D.C. Housing Finance Agency's bond program, are available to first-time buyers purchasing anywhere in the District and to any buyer (even those who live outside the District) purchasing a residence in a targeted area. Gwen Adams, director of the home resource center for the agency, noted that 82 percent of the District is considered a targeted area. These are 30-year, fixed-rate mortgages that recently carried an interest rate about one-quarter to one-half of a percentage point below market rates. The District makes the mortgage money available through 10 participating lenders.

Low- and moderate-income buyers also can get help paying mortgage points (interest that's owed when the loan closes) and other closing costs. Home Purchase Assistance Program money is available as a 40-year second mortgage, with no payment required in the first five years. Buyers with incomes of up to $72,800 for a single person or $110,450 for a family of eight can receive up to $7,000 in help.

Low-income households also might qualify to use an HPAP loan for their down payment. Down-payment assistance of as much as $70,000 is available for low-income households. The amount of aid declines as income increases. Maximum qualifying income ranges from $52,900 for a single person to $94,500 for a family of eight. For details, go to http://www.dchfa.org.

To qualify for such programs, buyers generally are required to attend a free home-buying seminar. Done right, the sessions are a great, free resource for anyone who would like a bit of impartial advice and education before taking the plunge into homeownership. The agencies offering them also can help buyers with budgeting and with figuring out whether would-be buyers are ready to handle the financial burdens of owning a home.

I sat in on a recent seminar in the District. The sessions are held the second Wednesday evening of each month at the D.C. Housing Finance Agency headquarters on Florida Avenue NW. Twenty-four people attended the March session.

Agency officials outlined the benefits and requirements for subsidized mortgages and the Home Purchase Assistance Program. The meetings usually include a presentation by a lender who participates in the District mortgage program and a presentation by a local real estate agent.

The lender, Scott Barr, manager of Countrywide's U Street office, went over the mortgage application process and didn't fool around when describing the quirks of how credit scores work. He explained that although each borrower has three credit scores, compiled by three companies, Countrywide chooses the middle one. But when looking at a husband's set of scores and a wife's, Countrywide will base its decision on the lower of the two. That's good to know if your spouse has had some credit trouble. Barr also explained that the District reports unpaid parking tickets only to the Equifax credit report company, and that can lower your credit rating with that agency.

Unfortunately, the presentation by a real estate agent that day was more sales pitch than education. Michael Jones, an agent with Exit Premier Realty in Upper Marlboro, even asked participants to fill out "lead generation" forms, designed to allow the real estate brokerage to drum up new business, with their contact information and the price range they're considering. Jones told me later that the information allows him to follow up with participants and to answer questions they might have hesitated to bring up in public.

Finance agency officials tried to prod him to explain important concepts, such as how a buyer's purchase offer is a binding contract as soon as the seller signs it, or to describe buyer-seller negotiations, but Jones didn't follow their lead. Instead he spouted such tired realty-isms as "6 percent is the industry norm" on commissions. He said that's negotiable, but warned that "a discounted commission gets you discounted services." That self-serving statement is certainly open to argument.

You could tell by their questions that attendees were serious about buying their first homes. They had gotten past the "Should I buy?" and "When will prices bottom out?" worries and were digging into the nuts and bolts of the transaction. They peppered the lender with smart questions about the mortgage process, such as how long it takes to get fully preapproved for a mortgage. And they turned some healthy skepticism toward the agent's sales pitch.

It looked as if they learned important lessons on both fronts.

E-mail Elizabeth Razzi at razzie@washpost.com.