Jason Arney-O'Neil, a Woodbury firefighter and paramedic, thought long and hard about buying a house before settling on a prospect just two blocks from where he grew up. He combined a $25,000 loan from the city with his own cash to pay 20 percent down on the foreclosed house.

"It's saving me a lot of money right now," he said of the city loan, which requires monthly payments of $62.50 to pay back 3 percent interest.

Arney-O'Neil, 23 and single, is one of eight takers so far in the city's four loan programs designed to reduce the number of foreclosed properties and stimulate the city's housing economy.

"We're actually investing from a city point of view in our own housing stock," city housing specialist Karl Batalden said. Woodbury has set aside $350,000 this year to help residents buy foreclosed and first-time homes, to improve energy efficiency and to improve existing properties.

For first-time buyers such as Arney-O'Neil, a city loan could mean a savings of $75 to $100 a month in payments, Batalden said. The $25,000 principal borrowed from the city -- usually coupled with loans through banks or other financial institutions -- doesn't have to be paid back for 30 years unless the homeowner can afford to do so, he said.

"I kept a little cash in my pocket for repairs," said Arney-O'Neil, who replaced windows and bought a new furnace and an air conditioning unit for his 1977 house, which he bought for $190,000. Two years ago the house sold for $270,000, he said.

Without the city loan, buying the house "would have drained my account," said Arney-O'Neil, whose monthly payments will be about $1,200.

Woodbury, an east-metro city that experienced a huge home-building boom in the 1990s, expects even more foreclosures this year. The city had 295 of them through Aug. 18. By year's end, Batalden estimated, that number will exceed 400, compared with 335 in 2008.

A few years ago, he said, many properties went to foreclosure because of bad financial decisions when they were purchased. That has changed. Now, more residents are losing their homes after losing their jobs and exhausting their savings on mortgage payments.

Woodbury faces a steep budget deficit this year and will trim spending for next year to balance the city budget. Batalden said he is confident the loan programs will remain intact.

"We have a long-term commitment to affordable housing," Mayor Bill Hargis said. "These [loans] are really targeted to the people who need help getting started."

Programs are available through the city's Housing and Redevelopment Authority (HRA). They are:

• Home Improvement Fund. Homeowners earning less than $49,200 a year, which is 80 percent of the area's median income, can borrow as much as $25,000 in a 15-year loan at 3 percent interest.

• Woodbury Goes Green. Homeowners who earn $90,000 per household or less can borrow as much as $5,000 to increase the energy efficiency of their homes in a 15-year loan at 3 percent interest.

• First-time Homeownership. Prospective buyers can borrow as much as $25,000 on a 3 percent deferred-payment arrangement to assist with closing costs, down payments or write-downs on a first mortgage.

• Foreclosure Purchase. This program aims to decrease the number of foreclosed properties in Woodbury by offering buyers as much as $25,000 for closing costs, down payments or the write-down of a first mortgage. To be eligible for a 3 percent deferred loan, households can't earn more than $90,000 a year.

Residents who want to apply for loans can contact Batalden at 651-414-3438, or go to the city's website, at tinyurl.com/nazpvx. .

Kevin Giles • 612-673-4432