Detroit Mayor Mike Duggan has announced a new program designed to make buying a home in the city easier.
The program, Detroit Home Mortgage was unveiled today. It was created with the support of the Obama Administration's Detroit Federal Working Group and the Clinton Global Initiative and is designed to work with local banks, foundations and nonprofits.
"This is a game-changer for Detroit," said Duggan in a press release. "We are confident that Detroit Home Mortgage will increase homeownership in the city of Detroit. This initiative is critical to rebuilding Detroit's neighborhoods. With an opportunity to get a home mortgage, qualifying homeowners and homebuyers have a real opportunity to buy and renovate a house in the city and make it a home."
Under the program banks will now be able to lend qualified homebuyers enough to purchase a renovated home or buy and rehabilitate a home anywhere in Detroit.
Before this program was put into place it was not clear, under lending guidelines, if banks could lend enough money to cover repairs, because the amount that could be loaned was connected to the appraised value of the home.
That is a problem in the city of Detroit, because appraisers often have difficulty finding similar homes nearby with comparable sales prices.
Under the program, buyers will receive a first mortgage for the appraised value of their house and a second mortgage of up to $75,000 to fill in the gap between the appraised value and the sale price and/or the cost of any renovations.
As part of their application, borrowers must complete classes in homebuyer education and the financial risks involved in borrowing more than the appraised value of a home.
The effort is a collaboration between Huntington Bank, Flagstar Bank, Talmer Bank and Trust, FirstMerit Bank, Liberty Bank, the Ford Foundation, The Kresge Foundation, and the Michigan State Housing Development Authority.