Alabama housing stimulus

MOBILE, Ala. - Buying a home these days is difficult. You're credit score better be high, and a big down payment is a must. Alabama State Senator Lowell Barron told FOX10 News, "Today companies are just not buying mortgages. Banks are not loaning."

Senator Barron is sponsoring a bill that he says will help ease the mortgage crunch. It would create a mortgage guarantee fund to give lenders an incentive to loan. Tuesday the bill passed the Senate unanimously.

"It will have an impact on helping families to finance a house with a low interest rate and with a low down payment," he said.

Taxpayer money totaling $6 million would be used to start the program. After that, the home buyers in the program will pay 1-percent of closing costs into the the fund.

Russell Davis, President of The Alabama Home Builders Association said, "It makes a more efficient mortgage for the homeowner and it makes it a great mortgage for the mortgage holder because there's some protection for foreclosure in it."

To set off the cost to the home buyers, when they pay the 1-percent fee they'll no longer need to purchase mortgage insurance.

"We think this will be the catalyst to really get that enthusiasm and confidence back here and elsewhere around the state," Davis said.

If the bill passes the house, and is signed by Governor Riley the program could take effect by early summer.

There is a list of criteria you would have to meet to be eligible for this program:

• Total borrower income cannot exceed $98,230.
• Must have a minimum credit score of 620.
• Total debt ration cannot exceed 45 percent of gross monthly income.
• Buyers must complete a pre-purchase home buying counseling course.

Loans would be offered as 30-year, fixed rate, 101-percent loan-to-value loans. Loans can be used to buy new or existing homes.