Loan Programs to Buy Bank Homes

by on Finance Foreclosures

The Minnesota cities of Minneapolis and Brooklyn Center are offering forgivable-loans to buy bank homes. Under the loan programs, both cities will offer as much as $10,000 down payments and closing costs. And if the buyers remained in their properties for five years, they are not required to pay the loans.

The loan programs are provided to low-income families to help them buy bank homes. So far, about 200 families were helped by the loan programs to purchase foreclosure houses in Brooklyn Center and Minneapolis.

In Minneapolis, about 147 families have availed of the interest-free loans to buy properties in foreclosure-infested neighborhoods, mostly located in the northeast, north and south-central areas of the city.

In Brooklyn Center city, nearly 50 families purchased foreclosure properties since it started its interest-free loan program in March. After receiving positive feedback on the program, the city council of Brooklyn Center decided to extend it.

The Brooklyn Center loan program is funded by nearly $1 million in new taxes from the commercial tax increment. Mayor Tim Wilson said that other cities have shown interest on the program, particularly on the source of its funds. He said that the program is a good opportunity to attract homebuyers, especially first-time buyers.

Meanwhile, Minneapolis apportioned an additional half a million to its loan program after its initial $500,000 was distributed to 50 home buyers last year, during which, no income limit was set for participants.

The second installment of the Minneapolis fund requires home buyers to have 120 percent or less of the $81,000 median household income in the metropolitan area. An additional $1.5 million was added by the city from the Federal Home Loan Bank grant. Furthermore, eligible buyers may avail of the $8,000 funds per household provided by the Pohlad Family Foundation.

Meanwhile, in Brooklyn Center, a 2008 legislation allowed the city to fund the program using 15 percent of the new property taxes from a commercial tax increment. Only low-income, first-time buyers are eligible for the city’s ReNew Loan program.

Under the program, as much as $10,000 is given to buyers to use as down payments or closing costs for vacant houses that have been registered by the seller with the city. City officials noted that since the loan program to buy bank homes was launched, sale prices of foreclosed houses in the area increased by over $10,000.