First-time homebuyers in Turlock can now receive even more financial help thanks to updates made to the city’s secondary financing program.

By a 5-0 vote, the city council voted to modify the program’s interest rate from 3 percent simple interest over 30 years to zero percent interest for the initial 15-years, followed by 2 percent interest over the final 15-year chunk of a loan.

“What we’re hoping to do is incentivize first-time homebuyers to pay off their loan early, instead of having that big deferred ballot payment at the end,” said Jennifer Figueroa, the city’s housing program manager.

Also, the city boosted the maximum loan amount from 4 percent of the purchase price up to $50,000, providing “gap” financing up to $100,000.

Other modifications include shifting the front-end loan ratio — the percentage of a borrower’s gross monthly income that goes to housing costs — from a maximum of 35 percent to a minimum of 35 percent.

“This gives the potential homeowner more room,” said Figueroa. “Currently, if the new payment is at 36 percent, they don’t qualify; we have a lot of potential homebuyers who have really good credit. So, maybe their home prices are at 36 or 37 percent, but their back-end ratio (the percentage of the borrower’s gross income that goes to outstanding debt) is at 40 percent. So, they can actually afford more home, and that’s the reasoning behind that.”

Right now, the city’s back-end ratio is situated at a maximum of 38 percent; it will now be a maximum of 46 percent.

The program, as Figueroa described to the council, works like this: a borrower that qualifies for a $325,000 loan may want to purchase a home with an asking price of $400,000. When you factor in the required $5,000 borrower contribution, that leaves a “gap” of $70,000. Coupled with closing costs estimated at about $16,000, the total loan from the city — under the previously mentioned terms — would be for $86,000.

In a companion vote, the city council also voted unanimously to authorize interim city manager Sue Borrego to sign off on loans up to $100,000 for first-time homebuyer and housing rehabilitation loans.

In other matters Tuesday, the council voted unanimously to remove outdated street- and sidewalk-vending regulations from the municipal code, and adopt a regulatory framework for door-to-door vendors only. 

The meeting started with finance director Isaac Moreno giving the council a presentation on the city’s expiring contract with the city of Modesto for fire administrative services, and scenarios for the new contract.