Program to help home buyers with down payments nears end

— -- Builders are always trying to sell homes, but these days, they have an extra incentive — beating the clock.

In a few weeks, a financing option used by nearly 20% of new home buyers to build a down payment will go away, making it harder for many people to afford homes. It's a loophole in the Federal Housing Administration rules that let builders and other home sellers channel money through a charity to help buyers cover their down payment.

But lawmakers killed the programs, effective Oct. 1, because nearly 40% of FHA borrowers who went into foreclosure since October had received down payment assistance.

For borrowers who don't have money for a down payment, there "is a big incentive to buy now vs. later, when you most likely won't have that option," said Robert Curran, an analyst at Fitch Ratings. "It makes a lot of sense (for builders) to do a lot of promotions on that."

For builders, losing the down payment aid comes at a tough time. Despite months of price cuts, free kitchen upgrades and the like, builders have seen business slow to a crawl. Sales of new single-family homes rose 2.4% from June to July, yet they're off more than 35% compared with July last year, the Commerce Department said Tuesday.

While some builders have dismissed the loss of down payment aid, others are acting to alert would-be buyers that they should buy now while the programs remain available.

"We're trying to let everyone know, 'Hey, this is going away,' " said Brent Urban, a salesman for Lennar, referring to a sales promotion running for one of the builder's developments in Santa Clarita, Calif.

Pulte Homes and Hovnanian Enterprises are both urging visitors to their websites to take advantage of the down payment assistance programs before they expire.