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Stimulus brings housing cash

Federal windfall makes home loans available to low-income families

April 10, 2009
By KIM HOYUM Journal Staff Writer and The Associated Press

MARQUETTE -Michigan is getting $358.2 million from the federal recovery act to help people buy houses in rural areas.

Vice President Joe Biden said recently the money will be released by the U.S. Department of Agriculture to help strengthen rural communities by supporting loan guarantees and loosening credit for small-town home buyers.

The money, for the Single Family Housing Guaranteed Loan Program, is part of the federal American Recovery and Reinvestment Act.

It comes from a nationwide $7 billion allotted to the program, and is intended to finance new or improved housing for very low- to moderate-income families and individuals in rural areas.

The loans are through the USDA's Rural Housing Service, and guarantee up to 90 percent of a private loan for low to moderate-income rural residents, according to the USDA.

All areas in the Upper Peninsula are included in the rural designation and are eligible for the loans, said USDA Upper Peninsula area director Don Gerrie.

"The whole U.P. is eligible as defined by rural in this program," he said.

The loans can pay for families to build new homes or buy existing homes, and they are on 33-year terms with no down payment required, Gerrie said.

Home repair loans also are available.

However, the requirements for borrowers depend on income and family circumstances. Interest rates on the loans could be as low as 1 percent depending on the borrower's qualifications.

"To qualify, they have to be under certain limits and have a good credit history," Gerrie said.

The loans can be made to those who meet specified annual income limits, which depends on the county or area median income and varies by family size.

The guaranteed loans can be made to those who meet moderate annual income limits, which is 115 percent of the area's median income.

For example, in Marquette County the USDA lists the median income for a single person as $49,550, while the median for a family of four is $70,750. So a single person would have to make more than $56,982 a year not to qualify, and a family of four could earn up to $81,362 and still qualify.

Direct loans - from the USDA directly, not through a bank -can also be made to low or very low income families. In Marquette County, the USDA lists low income for a single person as $30,050, while a low-income family of four makes up to $42,900. Borrowers with very low income can make up to $18,750 for a single person or $26,800 for a family of four.

The program does not compete with traditional mortgage services, partly because the loans are financed and administrated through existing lenders, and also because they are designed for people who cannot get approval for a traditional mortgage loan, Gerrie said.

"It's a fantastic program and helps people get into housing with no down payment and affordable terms," he said.

While specific figures for the U.P. were not available, in Michigan's 2008 fiscal year, $433.6 million was made in guaranteed home loans through the program, Gerrie said. An additional $31 million was loaned through USDA direct home loans.

"I know that we have provided home ownership opportunities to a lot of people in the Upper Peninsula," Gerrie said, adding that the existing program usually has some funding left over each year, so even more borrowers could be helped with the increase in funding.

"It looks like it will about double our funding for the year," he said.



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