First-Time Homebuyers: Opportunities in 2010

For those of you who are looking to purchase your first home in 2010…with a little extra work, you could find yourself with $15,000 in down payment assistance. Newtown Community Development Corporation (CDC) is a nonprofit corporation begun in the 90s to address concerns about housing, neighborhood preservation and sustainable development. The vision of CDC is to increase affordable housing and support homebuyers through innovative programs.

Today I want to hone in on the down payment assistance CDC has to offer. It is called an Individual Development Account. Essentially, eligible homebuyers can receive $15,000 toward the purchase of a home, matching up to $3 for each $1 saved by the participants.

Now…the key with this program, as with any assistance program, is to read the fine print. To know if you should even consider applying, you must know the specific requirements of the program.

So, with that said…here are the guidelines:

•You must be a first-time homebuyer! (Remember, this means that you haven’t owned a home in the past 3 years)

•You must earn 80% or less of the HUD Area Median Income (1 person family: $36,900; 2 person: $42,150; 3 person: $47,450; 4 person: $52,700; 5 person:$56,900; 6 person:$61,150)

•As a part of the program, you must complete an approved homebuyer education and counseling program.

•Funds may only be used toward down payment or closing costs on a primary residence. (So…this means funds can’t be used for remodeling or for an investment home.)

•Your debt-to-income ratio cannot go above 43%. (This means that the total payment on the mortgage…principal, interest, taxes and insurance and home owners association fees…cannot exceed 43% of your total income)

•The funds are not a grant, but a forgivable loan. You must live in the home for 5 years. If you live in the home less than 5 years, the repayment will be prorated.

•The assistance money can be used for any property in Maricopa County.

•Your mortgage must come from a participating financial institution.

•There is a $435 administration fee, a $35 enrollment fee and a $400 closing fee.

•In order to receive matched funds, you must open an IDA savings account with a participating bank, make regular monthly deposits of $20 for a minimum of 10 months and you must open escrow on a home purchase within five years of enrolling in this program.

Since its inception, the IDA Program has provided more than $1.8 million in IDA match funds to first time homebuyers. There is, however, one issue! This money runs out fast! According to a Newtown representative I spoke with on the phone recently, in 2009 the money didn’t actually get released until about April and completely dried up by August. If you want these funds, you have to be on the ball! This means you apply for the program now , begin saving now , get pre-qualified now, find a realtor asap and be ready to put in offers come next April when the money is hot off the press. This program is for the diligent, for the planner, for the go-getter!! And if that is what you are, I have no doubt that you will be the recipient of these funds in 2010.

Home Mortgage Interest Rates

It has been a while since I last provided an interest rate chart on this blog. Plus I was curious to see what the graph would look like. I knew rates were lower than earlier this year, but it’s always nice to see it plotted out.

As you can see in the chart below, after peaking at about 5.60% in the first week of June this year, the 30 year fixed rate has been hovering very close to 5.00%. The 15 year mortgage is also on a similar trend but at a slightly lower rate.

Home Mortgage Interest Rates

The good news is rates remain at historically low levels. The graph above is based on an average weekly mortgage rates provided by Freddie Mac. Of course the exact rate you receive is dependent on many factors.

FHA: Some Facts and Tidbits

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Now that subprime loans are a faint memory of the past, we often look to the FHA loans to fill in the void. Not that we miss those ugly sub primes all that much. But alas, FHA does provide a hearty loan for those who may have had a shaky credit past.  So, here are a few fun facts and figures on the famous FHA loan.

1)  You do not have to have perfect credit to qualify for an FHA loan! Yes, this is great news. In fact, even with a bankruptcy or a mortgage late, it is easier for you to qualify for an FHA loan than a conventional loan.

2)  FHA loans have a low 3.5% down payment. This money can come from a family member, an employer or even from a charitable organization as a gift. Most other loan programs do not allow this unless you have a much larger down payment or 5% of your own money invested.

3)  FHA rates are competitive! Believe it or not, because the Federal government insures these loans, they offer comparable rates. Your rate won’t be sky high if you opt for FHA instead of a conventional mortgage. The government makes sure of this!

4)  FHA helps you stay in your home. This may have sounded funny a few years ago. But today this is extremely relevant! The FHA has been in place since 1934. They want to protect the folks who have bought. FHA has various options to help keep you in your home should you run into difficulties and to help you avoid foreclosure in the long-run.

5)  You can buy or refinance various types of new or existing homes on an FHA loan: A one-unit, single family home; a duplex, triplex or four-plex; a condominium unit or even a manufactured home (provided the manufactured unit is on a permanent foundation). Sorry, no houseboats as of yet!

6)  Finally, for qualified buyers FHA mortgages are assumable!  This means a buyer of your home may take over your existing mortgage if they qualify.  This may help you sell a home with an FHA mortgage down the road if interest rates have gone up.

So, there you go. A few little details on the famous FHA loan.  Most likely tidbits you have heard before, but worth remembering for the day you may choose to use an FHA loan.

HUD’s internet site provides plenty of additional information. I also suggest talking to your realtor about their experience with FHA clients.  And, if you want to see if you qualify for the FHA loan, just give Mike or me a call. We can let you know in no time!

Creative Commons License photo credit: Kamal H.

This site is for informational purposes only. It is not sponsored or in any way affiliated with the government. If you are in need of a mortgage loan, consult with a licensed mortgage professional. All fair housing and equal housing opportunity laws apply when applying for a mortgage or buying a home. Copyright 2012.