House Key Federal Way pays off for first-time homebuyers

Charlene Smith stands in front of a mirrored mural that came with her newly bought 1950s home in Federal Way. Smith received down payment assistance to purchase her home through the House Key Federal Way program. - Jacinda Howard, The Mirror
Charlene Smith stands in front of a mirrored mural that came with her newly bought 1950s home in Federal Way. Smith received down payment assistance to purchase her home through the House Key Federal Way program.
— image credit: Jacinda Howard, The Mirror

Federal stimulus money helped place 11 families into Federal Way homes that were previously foreclosed.

In 2008, the federal government awarded Neighborhood Stabilization Program (NSP) funds to several states in an effort to stabilize communities that suffered from foreclosures and home abandonments. Federal Way was awarded $651,688 in early 2009. In November of that year, the city, in partnership with the Washington State Housing Finance Commission, used the NSP funds to create House Key Federal Way. The down payment assistance program was available to first-time homebuyers looking to buy homes that were foreclosed, bank owned, abandoned or delinquent for 90 or more days.

Filling foreclosures

As of the program's conclusion in September, 11 homes had been purchased and another 20 homebuyers were in negotiations to purchase Federal Way foreclosures. The City of Federal Way estimates the home values average $250,000. All of the homes are in areas of the city considered at medium or medium-high risk for foreclosure.

"It stabilizes the community," human services director Lynnette Hynden said of the purchases. "It helps fend off the deterioration of the housing stock."

High foreclosure rates

Per capita, Federal Way is highly affected by foreclosures. This has a lot to do with the number of homeowners who took out subprime loans prior to the housing market’s collapse, Hynden said.

Many homeowners also took advantage of the ability to borrow against the equity in their homes and fell victim to the economic recession. Their homes were subsequently foreclosed upon. The phenomenon left Federal Way with 150 to 300 homes involved in the foreclosure process at any given time, Hynden said.

First-time homebuyer

But it also opened the door for first-time homebuyers like Charlene Smith, 31. Smith was the first person to purchase a home through House Key Federal Way. In June, she bought her 1950s six-bedroom, three-bathroom rambler near the Federal Way 320th Library.

"Charlene's story is a perfect happy ending to this horrible (housing) situation," Hynden said.

Smith, a single mom of two, wasn't looking to purchase a house. She and her family were renting a place in Northgate and the lease was due to expire. When her cousin told her about the Neighborhood Stabilization Program, Smith began contemplating purchasing a home instead of renting. She considered Federal Way because she lived in the area a decade ago and it's closer to her employer in Tukwila.

The thought of owning her own home was exhilarating, but Smith didn't think she could afford it. Her annual salary is below $40,000.

"I never thought it would be possible," she said.

With assistance, she was able to secure a place of her own. An $8,000 credit from the federal government and a House Key down payment assistance loan made owning a home possible for Smith. She bought her place, which had been on the market for some time in a neighborhood dotted with foreclosures, for $190,000.

The mortgage is lower than Smith expected from homeownership. Many people are finding they can purchase in the current economic climate for less than the cost of renting, said Angela Cohen, Network Home Loans loan officer. Smith pays just over $1,200 for her mortgage payment.

"You don't have to be rich to buy a house," Smith said.

House Key applicants met eligibility requirements and demonstrated their ability to pay a mortgage. The down payment assistance was available to buyers making less than the area's median income of $90,000 for a household of up to two people, and $97,000 for a household of three or more. It came in the form of a $30,000 to $50,000 second mortgage loan, with deferred payments and 0 percent interest.

The loan accompanied a 30-year Fixed House Key First Mortgage. The homebuyers were required to contribute a minimum of 1 percent of the home's sale price and attend a seminar on first-time home purchases.

"Everyone has to qualify for the credit," said Linda Keylon, a buyers agent with Coldwell Banker Danforth in Northgate.

Gradual recovery

Though the city succeeded in filling some vacant homes, the process was slow and frustrating at times, Hynden said. The government didn't allow the Neighborhood Stabilization Program to run nearly as long as would have been ideal, she said. Many of the foreclosed homes that were purchased were not move-in ready. Working with banks to negotiate prices and conditions took valuable time.

"The timing was too short; the restrictions were huge," Hynden said.

Learn more

• Citizens may still seek down payment assistance on a home from the Washington State Housing Finance Commission. Restrictions will vary from those presented by the House Key Federal Way program.

• Check out listings of foreclosed homes in the area by visiting or

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