The Affordable Housing Trust is considering how to use funds set aside by the town to support lower-income homebuyers.
WILLIAMSTOWN, Mass. — The town's affordable housing trustees last week discussed how they can use money in the trust to help working families buy homes.
Williamstown Savings Bank mortgage originator Mary O'Connell joined the Affordable Housing Trust to talk about how Williamstown might replicate a program under way in Lenox that offers town money to assist income-qualified home buyers.
In Lenox, would-be residents making 80 percent of the area median income are eligible for a grant of up to $10,000 or 5 percent of the purchase price on homes priced at $290,000 or less (whichever is less), trustee Thomas Sheldon reported to his colleagues.
O'Connell told the trustees there are a number of ways such a grant program could be structured in Williamstown, and she recommended one option that the town may want to consider.
"The piece that gets people is the monthly private mortgage insurance," she said, referring to the insurance borrowers are required to purchase if their down payment is less than 20 percent of a home's value.
"You have to pay that mortgage insurance for about five years, until you have 20 percent equity built up. With this private mortgage insurance, you can pay this upfront at the closing table ... It would be between $4,000 and $5,000 for a $150,000 loan. You could get more people qualified [for a mortgage] by using this grant to pay upfront private mortgage insurance."
According to usmortgagecalculator.org
, a homebuyer putting 5 percent down on a $200,000 home with a conventional 30-year mortgage would pay $172 a month for the next 10 years in PMI.
The trustees seemed intrigued by the idea that the town could help decrease that monthly burden and make home ownership more affordable for working families.
"The [Lenox] program, as we described last time, is intended to enable families to purchase relatively low-cost homes, and in order to qualify, they need two things: One, they need to be be below certain income levels. ... On the other hand, people need to be able to afford to buy a home," Sheldon said. "It's a dual dial situation where we have to find the sweet spot that accommodates both those needs."
An advantage of working with lenders, like Williamstown Savings Bank, is that it is the bank that will determine whether the prospective buyer can afford the mortgage being considered. The town would make a grant to put the borrower "over the hump" to make a down payment.
O'Connell likened the potential town grant money to a gift.
"There's such a thing as a gift in the mortgage world," she said. "With a gift, there are rules and regulations you have to follow. But there are gifts from your church, gifts from your employer, gifts from parents. Why wouldn't there be gifts from towns?"
It remains to be seen exactly what form that gift would take. The PMI payment is just one option, and the trustees plan to continue to explore how best the town money could be used.
And they recognize that anything they create would be a pilot program that could be refined in the future.
"We could make five grants available this year — when they're gone, they're gone," Stanley Parese said. "Either they get snapped up or we're twiddling our thumbs next year wondering why people haven't taken advantage."
Williamstown Savings Bank's Mary O'Connell participates in a discussion with the Affordable Housing Trust on Wednesday.
Sheldon recommended the trust board move quickly but cautiously to utilize the Community Preservation Act money the town has allocated to the trust at the last two town meetings.
"I'm sure [Lenox] went through a thoughtful process to arrive at their numbers, but we need to do likewise," he said.
"I'd like to to keep us moving apace and take advantage of the summer real estate market rather than waiting until February."
"If we have the capacity to get a young family into a house, that's great," he said.
In other business on Wednesday night, the trustees recognized the fact that it was the body's first meeting since the resignation of Affordable Housing Committee Chairwoman Catherine Yamamoto, who represented the AHC on the trust board.
"I would like to express our extreme respect and gratitude for all Cathy Yamamoto did last year," said Parese, who served as the trust's first chairman. "It was a very intense year, and she was many time right in the eye of that storm and handled herself with incredible grace and tenacity for the cause of affordable housing in town."
Interim AHC Chairman Van Ellett attended Wednesday's meeting and told the trustees the committee looks forward to working closely with the trust board. On Monday, the Board of Selectmen confirmed the housing committee's selection of Craig Clemow to fill its seat on the Affordable Housing Trust board.