SAN FRANCISCO – Skyrocketing home values are great news for homeowners, but in many metro areas eager first-time buyers are being priced out of the market.

Yet there is help out there for those who know where to look.

While many homebuyers are taking on added risk by using interest-only loans to stretch into their first homes, they should first consider the range of down-payment assistance and low-rate loan programs offered by cities and states nationwide.

And do not assume you earn too much money to qualify: In San Francisco, a person earning up to $66,500 is still eligible for down-payment aid, while another program offers low-interest loans to those earning as much as $113,000.

“When someone thinks of income limits for (homebuyer assistance) programs, if they’re in a city (with rising home values) like San Francisco, they shouldn’t discount it,” said Rick Harper, director of housing at the Consumer Credit Counseling Service of San Francisco.

“There’s a good chance they’ll fall in the range that’s permissible,” he said.

Of course, income limits and program availability vary widely by locale. Consumers can expect to see assistance programs with higher income limits in cities where home prices have skyrocketed.

Price vs. salary levels

Still, the difficulty of getting into a house has little to do with the median price in any given area and everything to do with how that median price compares to median salary levels.

“Homeownership costs are at high levels and increasing faster than wages are increasing,” said Barbara Lipman, research director at the Center for Housing Policy, a nonprofit research group. “Lower interest rates don’t automatically solve that problem.”

Thus, there is a growing need for affordable housing, and homebuyer-assistance programs, which can provide substantial help. Freddie Mac offers a no-down-payment loan through Wells Fargo Bank, called the National Homeownership Program, to residents earning up to 120 percent of an area’s median income.

Get to know Freddie and Fannie

Freddie Mac also offers a product called Lease Purchased Plus through lenders in certain areas, providing a 95 percent loan-to-value mortgage paid off with lease payments in lieu of a down payment for up to 39 months.

And Freddie Mac provides no-interest-bearing housing contracts through participating lenders, aimed at observant Muslims, forbidden under Islamic law to pay interest.

Under that program, “the financial institution and the buyer become joint owners in the property. Over a term of 10 to 30 years, the buyer purchases the institution’s equity interest by making monthly payments. The buyer also pays a fair market rent to the institution,” Freddie Mac said.

Through Fannie Mae, participating lenders can offer My Community Mortgage, which lets borrowers earning up to 100 percent (in some cases 115 percent) of median income into houses for as little as $500 down.

And Fannie Mae offers a SmartCommute product, which lets lenders consider homebuyers’ savings from commuting on public transportation (vs. driving) to be counted as income.

More lenders are considering alternative employment histories, including regular cash income, and credit histories when reviewing borrowers’ applications.

“We can assemble a record of online payment of utilities, of rent, things that would normally not show up on a credit report but that we can construct to prove the borrower has a good track record of repaying debt,” said Brad Blackwell, an executive vice president at Wells Fargo Home Mortgage.

Getting it down

States and local governments often sell mortgage revenue bonds to finance low-interest mortgages, and agencies like United Way and others offer Individual Development Accounts, which encourage buyers to save for a down payment by offering a matching grant for a set period of saving.

“You start saving money, it may only be $20 or $100 a month, but if you commit to saving and within five years you decide to buy a home, there is the opportunity for a 5-to-1 return on what you saved,” said Chris McElroy, a realtor and chair of the National Association of Realtors Housing Opportunity Advisory Board.

Still, many of the aid programs offered by lenders are limited to the conforming loan amount, $330,700 in 2004, set by Fannie Mae and Freddie Mac.

Until more affordable housing is built, consumers need to leg down financial aid. The problem is, it is not always easy to find.

“There are thousands of programs. People know, in general, about just a few of them,” McElroy said.

To find all the various programs, stop by your city’s housing department and ask about homebuyers’ assistance programs offered by the mayor’s office or any other local housing authority.

Ascertain any income limits, and ask about rules requiring borrowers to buy homes in certain neighborhoods. Then go to your county’s housing office and ask the same questions.