By Raymund Lee Flandez
ANNAPOLIS – Enrico Esposito of White Marsh never thought he could afford to buy a house.
But when his older brother, Giuseppe, told him about a low-mortgage rate incentive program introduced by the state last month, he took notice. His big brother participated in an earlier program, but it turned out that little brother could get an even better deal.
On Monday, Esposito, 29, a Johns Hopkins University security guard, became one of the more than 100 first-time home buyers taking steps to obtain a state- guaranteed home loan with a 5 percent interest rate, good for the life of the loan.
The state’s plan to increase home ownership comes at a time of historically low interest rates, which have fueled a home-buying spree in the state. Although demand for houses has skyrocketed, low inventory, coupled with higher-priced houses, has kept the frenzy in check.
Since the state Department of Housing and Community Development dropped the program’s rate on Aug. 16 from 5.875 percent to 5 percent, the number of people reserving money for the mortgage loan jumped 37.7 percent from 77 to 106.
The state’s reserved funds for the program grew from $7.4 million in the five weeks before the change to $10.4 million last month, the DHCD said.
With new money announced by the state Thursday for people to use in down payments and settlement costs, officials hope more people sign up.
The Maryland Mortgage Program provides these discounted loans statewide through private banks to eligible homebuyers, most of whom have incomes between $70,000 to $100,000. Applicants must have been unable to obtain a mortgage through conventional methods and must not have owned a home within the last three years. They must be at least age 18 and have established an acceptable credit record.
“It’s scary buying a house,” Esposito told his brother before this week. “I don’t think I can afford it.”
Yet his bank loan officer, Suki Deaver, told him he could be eligible for the 5-percent package, plus a second loan of $3,000 if he was willing to pay for a higher mortgage rate of 5.5 percent.
The state unveiled that double-barreled plan Sept. 12 to encourage more people to buy their first homes during this period.
Esposito couldn’t believe it. His brother received a rate of 5.75 percent just a few months ago.
“Right there, I was really happy,” Esposito said. “It helps a lot of people.”
Esposito is one of the lucky ones who came at the right time for this two- for-one bargain, said Deaver of Classic Mortgage. She said she expects to process five loans at the end of this month, even though most will be waiting for an available house in the hot market.
Still, that hasn’t dampened the desire for people to own a home right now.
“We have a lower interest rate than they could get at a private market,” said Ed McDonough, DHCD spokesman. “The lower the interest rate, the more money you could borrow. The bottom line is you could get more home for your dollar.”
Mortgage rates are lower than at any time since the mid-1960s as the economy continues to stumble, according to Bankrate.com’s national survey of large lenders.
This week, Freddie Mac dropped rates to 6.05 percent, down from 6.18 percent. The last time rates were that low was in May 1966, when the 30-year Federal Housing Administration rates stood at 6 percent.
“Five percent? That’s like giving it away,” said Dennis Busky, loan officer at Key Bank & Trust.
A percent difference like this would help a buyer purchase about $15,000 “more house,” said Bill Parisi, loan officer for First Preference Mortgage Corp.
“That means a $100 less a month depending on the sale price of the house,” Parisi said. “And that’s for 30 years.”
The state, being able to borrow money in the bond market at a special rate, offers these home ownership incentives to build stable neighborhoods and to bring people, such as young couples, back to the state’s cities and counties, McDonough said.
“It’s good public policy to encourage home owners to reinvest in the community,” he said.
Esposito can’t wait. He already has an eye on a house near where he lives in White Marsh, and is just waiting for bank approval.
“I hope I get it,” he said. “I’m pretty sure I can.”