First-time home buyer? Not so fast

A well-used state program for first-time home buyers has drastically restricted eligibility because it’s unable to meet borrower demand.

Before May, a single buyer in Pierce County could earn up to $73,000 and qualify for a House Key loan. Today, the income requirement tops out at $34,800, with a return to the more generous limits not expected until January.

And, even then, the House Key program could face the same issue that caused it to rein in lending three months ago.

The program, run through the state Housing Finance Commission, offers 30- and 40-year mortgages at discounted interest rates. Other commission programs include down payment assistance and help for disabled buyers.

Funds for House Key come from issuing tax-exempt bonds – but only as many bonds as Internal Revenue Service regulations and state law allow. The cap for such bonds was hit in April, in part because other groups, such as housing authorities, also were selling the bonds to fund projects.

“It’s not a dead end, but it sure stopped us cold,” said Dee Taylor, director of the commission’s home ownership division.

Since the program launched in the mid-1980s, Pierce County first-time buyers have received more than 3,400 House Key loans, totaling $265.9 million, Taylor said.

Trims for the House Key program arrived as lenders began tightening guidelines for approving conventional loans, making it tougher for many first-time buyers to qualify. And, like its Puget Sound-region neighbors, Pierce County can be a difficult place to afford a home. According to an index compiled at the Washington Center for Real Estate Research at Washington State University, the typical first-time home buyer in Pierce County has only 56 percent of the income needed to buy a typical house.

Emily Molinos-Ott, a National City loan officer in Tacoma, said not having the program is the difference for some between buying and not.

For a two-person household, the income requirement is now $39,750 – limiting a buyer’s ability to qualify for a loan or afford a house payment, Molinos-Ott said.

“If you make $39,000, what can you buy with that? Nothing,” she said.

Mia Vermillion, a Countrywide Financial senior loan consultant in Federal Way, said the new restrictions make it difficult to offer the House Key loan.

“We are telling people to try to wait until the income limits go up,” she said.

If they can’t wait, she is directing buyers to a mortgage-tax-credit program through the Housing Finance Commission. On a $300,000 house, the credit amounts to $325 each month. Beyond getting money back, it can help buyers qualify for a larger loan than they would otherwise, she said.

Home buyers who participate in the House Key mortgage program are required to take a five-hour class and to not have owned a home in the last three years.

The program could attain additional authority to issue bonds in September, when the state parcels out to the Housing Finance Commission and other agencies whatever has not been used.

But Liz Green-Taylor, bond cap allocation program manager at the state Department of Community Trade and Economic Development, said it’s too soon to know how much bond-buying authority would be released in September – if any.

“It appears possible, although it’s probably not terribly likely, that most of the cap in the other categories could be used up by Sept. 1,” she said.

Taylor said the commission is looking at the possibility of taxable bonds to fund loans, but rates on those would be closer to today’s market rate than what was previously offered.

Before, the House Key rates were typically three-quarters to a full percentage point below market interest rates, Taylor said.

Devona Wells: 253-597-8652

devona.wells@thenewstribune.com