FIRST STEPS WITH THE RIGHT PLAN AND A LITTLE KNOW-HOW, HOMEOWNERSHIP'S STILL POSSIBLE.

Byline: Barbara Correa Staff Writer

With median Southern California home prices hovering above $320,000, becoming a first-time buyer can be an extremely frustrating process.

But thanks to relatively low interest rates stimulating lending activity and the proliferation of first-time buyer programs, more people are buying homes than at any time since 1989, according to real estate tracker DataQuick Information Systems' latest housing report.

Here, four success stories reveal how a mixture of patience and luck will eventually pay off for the persistent - and open-minded - first-timer.

The initial hurdle for most first-time buyers in California is coming to terms with what homes cost in this market.

When Trina Woods, a single mother from Monrovia, started looking for a home three years ago, she quickly realized her under-$100,000 budget put her well north of the Cajon Pass.

``I started looking for town homes in Monrovia, but I couldn't afford anything,'' said Woods, who teaches fire prevention for the Los Angeles County Fire Department in Santa Clarita. ``Then I went looking east but couldn't find anything.''

A friend at work suggested she look in Palmdale and introduced her to a Realtor who took her to see Department of Housing and Urban Development homes there.

Finding one that was in decent shape took several months, but she finally bid on one. A developer with a competing bid beat her out, but then decided to drop it. So Woods bought a three-bedroom, two-bath house for $88,000, putting $5,000 down.

There are some downsides to buying directly from HUD. Chiefly, the homes can require major repairs. ``Mine didn't look like it needed work,'' said Woods, who is now considering ways she can finance the landscaping of her dirt back yard.

When HUD homes are purchased by developers or nonprofits, they refurbish the houses before putting them on the market.

Genevieve Shenton, a member services worker at the Automobile Club of Southern California's Ontario office, bought a HUD home in Ontario late last year with her husband through the Inland Valley Economic Development Corp. She said the agency must have poured about $20,000 into it, for all the work it did.

``Before we bought it, they didn't have a permit for one of the bedrooms so they took it off and converted it to a garage,'' said Shenton. Even with the repairs, the two-bedroom, two-bath house sold for $149,000, way within the Shentons' $200,000 budget.

Unlike a direct HUD purchase, however, buying through a nonprofit comes with income restrictions. In Los Angeles County, a family of four must make less than $63,365 to buy a HUD home through a nonprofit, and in San Bernardino County, it's less than $57,845, said Lisa Padilla, housing division manager at the Inland Valley Economic Development Corp., which runs homeownership seminars and programs.

On the financing side, most government homeownership programs come with some restrictions, which vary from program to program.

Under a first-time home-buyer program through Wells Fargo, Trina Woods says she can't refinance her 8.25 percent mortgage because she would pay a prepayment penalty. The fee, which applies for five years after the purchase, would cost six months of interest on the outstanding balance, said Kevin Dillard, a consultant who helped her arrange the financing.

But, adds Woods, ``I didn't want to go anywhere anyway.''

Buffy and Russell Armantrout of Long Beach looked into a city down- payment assistance program for first-time buyers, but decided against it because of timing.

``My bank I got the loan through discouraged me from the program become it takes too long to get the grant,'' said Armantrout, a State Farm Insurance sales agent. Then, last May, a raise boosted her income to about $60,000, eliminating them from qualifying for a loan through the California Housing Finance Agency.

After looking for almost two years, the Armantrouts will close escrow this month on a two-bedroom, one-bath house in north Long Beach for below $250,000. In the end, they did what many first-time buyers are doing: zero down, 30-year financing that leaves them paying only the closing costs up front.

Indeed, the most important thing for the first-time buyer to keep in mind is that financing options are more abundant now than ever, said Noel Pacheco, a former community lending specialist at CitiMortgage Inc.

``When I got into this back in 1980, there was no such thing as down-payment assistance. Interest rates were (more than 20 percent). In those days, to close an FHA loan would take six to nine months. Now, I've done it in 14 days.''

Pacheco urges people with bad credit or a bankruptcy not to assume they can't get a loan. ``You might get a higher interest rate, but we're talking about a point or a half-point, which isn't going to break anybody,'' he said.

FHA loans are mainly geared toward people with no credit history or bad credit, because credit scores are not required for lending, he said. A good reason to use a CalHFA loan, which is frequently used together with a down-payment assistance loan from FHA, is that they usually offer lower interest rates.

The downside to using CalHFA is that the owner is subject to potentially hefty taxes if the property is sold in less than nine years.

The pros and cons of each financing structure can be confusing, so buyers - especially first-timers - are advised to take a course through a local housing department or economic development agency.

Some lucky buyers manage to avoid a lot of the red tape.

For Danielle and Eric Brown, becoming homeowners didn't even require a change of address.

The Browns had been renting a three-bedroom, one-bath house in Northridge for the past four years. Just before Thanksgiving, the owner called, said he wanted to sell the house for $239,000, and was offering them first dibs. They had a week to answer.

The Browns - who have two young daughters - initially balked, assuming there was no way they could make a monthly mortgage payment based only on Eric's income as a software engineer at DirecTV. They were wrong.

``We thought, well, maybe this is our opportunity to move to the East Coast or maybe we could move to the beach,'' said Danielle Brown. ``We went online and started looking for places to rent - and everything was so expensive.''

They called a real estate friend and started seeking financing. Despite Danielle's personal bankruptcy in 1994, the Browns made a zero-down deal with Countrywide in less than a week for a first loan at 6.25 percent and a second at 9 percent. Plus, they asked the owner to cover the closing costs and raise the price, which he agreed to. ``We had been really good tenants and took care of the property; he had no problem with it.''

The only out-of-pocket expense was a $7,000 good-faith deposit, which Brown took out of her IRA under the first-time homebuyer distribution. ``It was losing money in the stock market anyway,'' she said. Six months later, the Browns have already refinanced once and seem to have avoided buyers' remorse. ``Houses here are going for $325,000.'' said Danielle.

Barbara Correa, [phone]

barbara.correa(at)dailynews.com

CAPTION(S):

4 photos

Photo:

(1 -- 2 -- color) Above, first-time homebuyers Buffy and Russell Armantrout admire the home that'll be theirs just as soon as escrow closes. At right, Trina Woods, right, with daughter Necia Howard, 17, live in this Spanish-style home on the outskirts of Palmdale.

Carl Hidalgo/Staff Photographer

John McCoy/Staff Photographer

(3 -- color) Danielle and Eric Brown, with daughters Imani, 1, and Maia, 3, rented this Northridge home for three years before buying it.

John McCoy/Staff Photographer

(4) In a few more days, Buffy and Russell Armantrout will own this north Long Beach home for $250,000, with no down payment.

Carl Hidalgo/Staff Photographer