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By Wes Bunch
While most potential homebuyers secure loans from banks, many are now looking to programs offered by government agencies and non-profit organizations to ease some of the financial burden of buying a house.
Government agencies such as U.S. Department of Agriculture’s Rural Development office and the Tennessee Housing Development Authority will often work with non-profit organizations, such as Eastern Eight Community Development Corp., to meet the needs of low- to middle-income families looking for homes in Northeast Tennessee.
Rural Development, started by the USDA to help low-income rural families purchase a home, is headquartered locally in Greeneville and has assisted about 50 families in Greene, Unicoi, Johnson, Hancock, Carter, Hawkins and rural Washington and Sullivan counties.
Although applicants are not allowed to live within city limits, everyone residing in Unicoi County is eligible for funding from Rural Development because of the county’s small population. To assist people looking to purchase a new home in these areas, Rural Development says it uses the section 502 loan, a 33-year, fixed-rate mortgage based on income. Applicants may also be eligible to receive assistance with their home’s monthly payments.
The 502 loan allows a home to be purchased with a monthly payment that rivals renting, says Diana Mitchell, area specialist for Rural Development. Owning a home instead of renting, Mitchell says, can build equity to become financially secure.
“A lot people we see were paying out rent,” Mitchell says. "Sometimes we can make them a loan and base their payment on their income so their home payment will be comparable to the amount of rent they are paying. That way they can get into a house they own instead of having to pay rent.”
Rural Development works with non-profits, such as Johnson City’s Eastern Eight, to assist low-income homebuyers with even lower interest rates, she says, and buyers can also receive down payment assistance if they qualify. Furthermore, if the house is new, often Rural Development will cover 25 percent of the home’s cost, allowing Eastern Eight to provide the remaining 75 percent with zero interest through its New Start program.
The New Start program is also income based and divided into a two-tier system. To be eligible for Tier One assistance and receive a zero interest loan, applicants must earn below $30,200 per year. The cutoff for Tier Two is $32,500.
Tier Two clients can secure up to a 30-year mortgage with a fixed interest rate of 5.5 percent. Those having a home built can even choose the lot for their new home. Eastern Eight also requires potential homebuyers to attend homebuyer education classes that teach the basics of home ownership.
“Your payments are made every month to straight principle right off the bat,” says Ani Boyd, special projects manager for Eastern Eight.
“It (the New Start) definitely helps leverage your buying power so you can afford more.” Eastern Eight aims to keep payments at 29 percent of their expected clients’ income, she says. To further offset bills, they work with THDA to help clients secure grants to cover down payment and closing costs.
THDA, located on Boone Street in Johnson City, can help Unicoi County residents with those costs through the American Dream Downpayment Initiative, a $5,000 grant for down payment and closing cost assistance.
While not explicitly for first-time homebuyers, ADDI applicants are declared ineligible if they have owned a home within 12 months of applying. Like Eastern Eight and Rural Development, THDA requires ADDI applicants to successfully complete a homebuyer education course.
The guidelines that go along with THDA assistance, while worth it, can be strict, says Sherry Trent, director of housing for THDA’s First Tennessee Development District.
“The program for Unicoi County does have limited funds, so they have to either get a loan through Rural Development or through THDA,” Trent says. “So if you receive the down payment money, you have to get one of those two loans. It might not work for some people because of the credit requirements for the THDA loans.”
Despite some stringent requirements, Trent says the assistance from THDA and other agencies can help people better their financial status by owning a home.
“There’s been study after study that [shows] being a homeowner improves their lives considerably.” Trent says. “You can also get a home and build some equity there and tap into it when you need it sometime.”
USDA/Rural Development
http://www.rurdev.usda.gov/ 214 N. College St., Suite 300 Greeneville, Tenn. (423) 638-4771
Eastern Eight Community Development Corporation
http://www.e8cdc.org/ 221 E. Unaka Ave., Johnson City, TN 866-750-5097 or (423) 232-5097
THDA First Development District
http://www.thda.org/ 207 N. Boone St., Suite 800 Johnson City, TN (423) 928-0224
