The Sacramento Bee reports on the new 40 year loan. "Today, first-time buyers trying to stretch financially to purchase that house with a 40-year mortgage, instead of the standard 30-year loan, must turn to the private sector. Not to be outdone by the private mortgage market, the California Housing Finance Agency says it plans to offer its own 40-year home loan this spring with a fixed, below-market interest rate."

"Residents won't even need a down payment, though they will have to qualify as first-time buyers and meet CalHFA's income requirements and other criteria."

"An example: A household using a zero-down, 30-year CalHFA mortgage would need to earn about $72,500 a year to buy a $355,000 house. The same family using a 40-year loan could qualify with an income of about $68,400."

"Though they're new for CalHFA, 40-year loans are old news among private lenders, who last pushed them in a big way during the height of the previous real estate cycle in the late 1980s and early 1990s. And many lenders are simply searching for something different to attract borrowers amid the recent slowdown in refinancing and home purchases."

"'It's safe to say that in mortgage originations..desperation breeds innovation,' said Keith Gumbinger, vice president of a mortgage research firm in New Jersey."

"Someone buying a $355,000 home with no down payment could shave about $150 a month off the mortgage payment by using the CalHFA 40-year loan, compared with a 30-year loan, agency figures show."

"But CalHFA's 40-year loan does have real drawbacks. Borrowers won't pay down the principal nearly as fast when compared with a traditional 30-year mortgage. Someone paying the full $355,000 asking price with no money down and using the 40-year mortgage would pay about $168,000 more in interest over the life of that loan, compared with the agency's 30-year mortgage."

"Leslie Gordon has been trying to sell her house since August. She started at $393,000, dropped it to $375,000 within about six weeks, then took it off the market in early December. She put it up for sale again three weeks ago at $355,000."

"Gordon is rooting for today's first-time buyers. Several have shown interest in her home, but none has made an offer. 'It wasn't because the people weren't interested, or because of the price,' Gordon said, 'it was qualifying' for the loan that held them back."