No-down-payment program offers hope for new buyers

Programs allow working people to buy a house with no money down.
NEW YORK (AP) -- Later this month, Maurice and Samantha Johnson will be moving out of a relative's house and into their own four-bedroom home.
The Johnsons were able to buy the house in the New York borough of Queens through a program that helped them get a mortgage with no down payment and no closing costs.
For thousands of Americans -- especially young couples, low-income working families and immigrants -- the biggest barrier to homeownership is their inability to save enough money for a down payment.
A number of nonprofit groups, community organizations and private companies are coming up with special grants and "no-down-payment" mortgages to help them over that hurdle.
Maurice Johnson, 27, who works in the insurance industry, got help from the Neighborhood Assistance Corp. of America. He attended a NACA workshop, then worked with one of the group's counselors to reduce his debt and improve his credit score so he could get a NACA no-down-payment mortgage. His 30-year, fixed-rate mortgage carries a manageable interest rate of 4.375 percent.
"They put you on a budget to make sure you're able to qualify for a house and can afford to handle the mortgage you're looking for," said Johnson, who has a 6-year-old son and a 11/2-year-old daughter.
NACA, a nonprofit group with offices around the United States, just got a $3 billion infusion from CitiMortgage, a subsidiary of Citigroup, to expand its no-fee, no-down-payment mortgage program.
Family expenses
"The reality is that many working people can't save a lot because it costs so much to raise a family and live day-to-day," said NACA executive director Bruce Marks. "But they're a good risk. Working people will do whatever it takes to stay in a home."
Karen Dailey, 41, a freelance graphic artist, said NACA counseling and down payment help gave her the confidence to buy a cooperative apartment in New York.
"I had been looking, but it was discouraging because I worried I just couldn't afford it," Dailey said. "But I got a 30-year mortgage with payments I know are manageable."
No-down-payment mortgages are not just available through nonprofit groups. Conventional lenders are writing them, too.
Jeff Kinney, a vice president at Fannie Mae, the Washington, D.C., company that buys and sells mortgages, said several programs have been started to help families who can't make the traditional 10 percent to 20 percent down payment.
Fannie Mae's "expanded approval" and "flex 100" programs cover mortgages up to 100 percent of the value of a home. People do have to come up with the equivalent of about 3 percent in cash toward closing costs, but that can be from a grant, Kinney said.
"We work through lenders all over the country, from banks with a national presence to local banks, savings and loans and mortgage bankers," Kinney said. He suggested that would-be borrowers "shouldn't be afraid to ask any lender if low or no down payment products are available."
Some lenders have come up with hybrid programs.
GMAC Mortgage, for example, offers what it calls a HomeStretch loan, and more than 6,800 have been written so far.
A family gets a Federal Housing Administration-insured mortgage to cover about 98 percent of the home's purchase price. GMAC then adds what amounts to a second mortgage -- to cover the down payment and closing costs. The second mortgage is forgiven starting in the sixth year if the family has kept up its payments.