The lavender areas denote neighborhoods where homebuyers can participate in the ARPA Mortgage Assistance Program.
New City program gives mortgage assistance in qualifying areas
COVINGTON, Ky. – The City is setting aside an additional $500,000 in federal funds to help people buy homes in certain neighborhoods where it wants to spur homeownership.
Homebuyers could receive grants of up to $15,000 under the new ARPA Mortgage Assistance Program approved by the Board of Commissioners on Nov. 15.
The new program is separate from but similar to the City’s existing Homebuyer Assistance Program, which has been used to help almost 400 families buy homes since 2014. The City is keeping the existing program, but because of federal regulations and differing goals, there are important differences between the two programs:
- Award amount/type: Under the new ARPA program, homebuyers can receive a grant of up to $15,000.
- Income restrictions: There are no income restrictions for the new ARPA program. The existing Homebuyer Assistance Program is targeted to low-income homebuyers.
- How used: The existing program is used for down payments and/or closing costs. While the new program can also be used for those costs, the City will prioritize working with lenders to buy down interest rates, essentially reducing a buyer’s monthly mortgage.
- Purchase price limits: Homes for sale up to $350,000 are eligible for the new program.
- Purchase-rehab: Under the existing program, a property needs to meet property codes to be eligible. Under the new program, homebuyers can purchase properties that need substantial rehab by utilizing a purchase-rehab mortgage loan from their lender.
- Geographic eligibility: Citywide for the existing program; only in certain neighborhoods under the new program.
The City is allowed by federal requirements to offer the new program only in what’s called Qualified Census Tracts, or QCTs. Generally speaking, in Covington that means these neighborhoods: MainStrasse Village, Westside, Historic West 15th Street, Eastside, Helentown, Austinburg, Peaselburg, City Heights, Monte Casino, and parts of Latonia. (See attached map.)
To see if an address falls within an eligible census tract, use this Eligible Address Search Tool and type in the address. The geographic restriction helps the program meet goals for the American Rescue Plan Act.
“The point of the existing assistance program is to help people of certain income levels, but the point of the ARPA program is to rejuvenate vulnerable areas,” said John Hammons, the City’s CDBG/HOME program coordinator for Neighborhood Services. “The bottom line is if you’re buying a house in those neighborhoods, you need to check this program out.”
Only owner-occupied properties or vacant dwellings are eligible. Properties currently occupied by tenants are not.
Technically, the money can be used for down payment and other closing costs, but the program will prioritize working with lenders to buy down interest rates, essentially reducing a buyer’s monthly mortgage, said Covington Federal Grants Manager Jeremy Wallace.
“We’ve seen a large increase in mortgage interest rates recently,” Wallace said. “Interest rate reduction can greatly increase home affordability, especially for the long term.”
As an example, a $250,000 mortgage with a 7 percent interest rate would cost a homebuyer $1,663 per month. Reducing this rate by 1 point to 6 percent would lower this cost to $1,498 per month. That’s a savings of $165 per month and $59,400 over the life of a 30-year loan. Reducing the rate even further to 5 percent would save a whopping $115,560 over the life of the loan.
People can apply for the program online through the City’s Neighborly portal. The link for the portal and instructions for its use are on the City’s website on the Federal Grants page, under “Initiatives.” As indicated, you have to create a free account before you apply, and you will need an email address to do so.
Contact John Hammons at email@example.com if you don’t have a computer or need help applying.
Note that program funds won’t be reserved for an applicant until they submit an accepted purchase contract.
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