New teacher loan program: Why only a few qualify
Seattle Times staff reporter
Seattle Mayor Greg Nickels announced last November a new loan program to help public-school teachers buy a home.
Nickels said the program would "bring homeownership within reach for many teachers," and his office sent out a press release proclaiming it would help as many as 70 teachers in the first year.
Nine months later, only five teachers have received loans.
Why? Many teachers make too much money to qualify for the loans, and those who qualify can't find many houses or condos in Seattle they want and can afford. The low number of loans seems to show just how hard it is for young professionals, particularly singles, to become homeowners in Seattle's hot housing market.
"I don't know anybody my age that owns a home in Seattle unless they have a spouse that made it possible," said Kim Christiansen, 32, a science teacher at Ingraham High School in North Seattle, who recently used the city loan program to buy a $199,500 West Seattle condo.
Christiansen, who is single and just finished her third year of teaching, said she could swing a deal under the city program only through extraordinary circumstances.
At first, her $41,470 salary was too high to qualify until the program's income ceiling was revised upward this spring. Then, when she found the condo, she had just a 10-day window to close on a mortgage before her summer-school pay would start to kick in and put her over the income threshold again.
Meanwhile, she didn't have enough for a down payment until her car was totaled in an accident and she received a $4,000 insurance payment.
"The only reason I could do it is because I was in a car accident," said Christiansen, who wanted to live on Capitol Hill but couldn't afford a 500-square foot condo in the neighborhood. Her 800-square foot West Seattle condo is on the ground floor of a busy street and has few windows.
Seattle's $1.8 million teacher program is funded by federal home buyer aid and a housing levy approved by voters in 2002. The start-up fund could be refreshed from several sources.
The program's income limits come from federal and state rules that prohibit loans and subsidies to those making more than 80 percent of the area's median income. For a single person, that translates into a maximum income of $41,700.
The program provides 3 percent loans of up to $45,000. It requires no payments for 30 years or until the home is sold. Interest payments are forgiven if the buyer lives in the home for 30 years. If the home is sold within eight years, the city gets a share of the proceeds it would then reinvest in the program.
Full-time public-school teachers and instructional assistants enrolled in teacher certification programs are eligible if they are first-time home buyers, or haven't bought a home in three years. They cannot buy a house that costs more than $335,800 under the program rules.
Because of its income limits, the program is likely to help teachers buy condos or houses that cost less than $215,000, according to city housing officials.
And it's hard to find those in Seattle's market — at least ones that are desirable. "My neighbor is a teacher, and what he could buy on his income he'd rather not, because he'd be looking at a 350-square-foot studio," Christiansen said.
City officials say they're not surprised by the program's early results. They say it took awhile to publicize the program and for eligible teachers to find potential homes and arrange financing and inspections. And although the mayor's prediction of helping as many as 70 teachers this year appears dramatically overstated, city housing director Adrienne Quinn maintains the program could do so if more teachers were to apply and they didn't all take the maximum $45,000 loans.
Wendy Kimball, president of the Seattle teachers union, said she wasn't surprised by the low numbers either. As Kimball explained, a Seattle teacher's starting salary is about $33,780 — and about $7,000 more if they have a master's degree. Less-experienced teachers tend not to have much disposable income for a mortgage and down payments, after student loans, car payments and other living expenses, she said.
Teachers with a master's degree and six or seven years of experience are above the program's income limits and ineligible. Teachers with a summer job or a working spouse are also likely to find themselves above the income limits.
Seattle's program is modeled after one San Jose, Calif., created in 1999 that so far has helped 540 teachers. San Jose has been more successful, in part, because it offers more assistance — about $3 million a year — to teachers earning higher salaries than those eligible for Seattle's program. In San Jose, teachers earning up $88,600 can receive city loans to buy houses that cost up to $650,000.
A similar home-buying program for teachers and other public employees in the Puget Sound area is available through HomeStreet Bank. That program, begun in 1994, has helped 28 Seattle teachers, who were first-time home buyers, make their down payments, according to Dianne Wasson, assistant vice president at HomeStreet. Ten other city employees have received low-interest, deferred-payment loans from HomeStreet.
Quinn said she'll look at increasing the amount of city loans to help more Seattle teachers buy homes — a change that would require City Council approval.
"This is not an overnight solution. This is a long-term investment in our teachers," said Nickels spokesman Marty McOmber. "If after a couple years we can say we helped 100 teachers that would be an incredible success."
Bob Young: 206-464-2174 or firstname.lastname@example.org
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