A state program that has helped thousands of first-time home buyers has been suspended because it could no longer offer below-market rates.
But the Texas Department of Housing and Community Affairs hopes to retool the program to make it easier for first-time buyers to make a down payment on a new home. That program may be available in late April, officials said.
A victim of the credit crunch, the old program was suspended a month ago.
Typically, state agencies have been able to offer first-time buyers below-market mortgage rates because states could borrow cheaply by selling bonds. But when the market began to freeze last fall, interest rates on municipal bonds rose to a point where the agencies could no longer offer better rates than commercial lenders.
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"We still had some funds remaining under the program, but the interest rate available was unattractive at the time," said Eric Pike, director of the agency’s Texas Homeownership Division. "We were out of the market. A borrower could go down the street and get the same rate we were offering."
The changes that state officials are considering include making down-payment assistance available. Details on how the program would incorporate the assistance are not yet available. In general, officials are looking at monetizing the up-to-$8,000 refundable tax credit for first time buyers recently made available by the federal government. The state agency would advance the down payment and closing costs, then borrowers would repay the agency when they receive the tax credit from the federal government.
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