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.

Update on Home in Five Program

I receive a lot of questions from readers on the current status of the Home in Five down payment assistance program. I  might as well answer these questions here. The long and short of it it is that currently I am unable to work with the Home in Five program.

From what I currently know the program is not funded, meaning there is no money available for down payment assistance. If things should change I will update this blog accordingly.

For those not familiar with the Home in Five program provides 5% down payment assistance to any homebuyer who meets the income and acquisition price limits. The household income requirements range depending on the area within Maricopa county. The program targets borrowers with moderate to lower incomes. The other factor that plays a significant role in the program is the area where the property is located.

UPDATE Summer 2013

Here is more information about the Home In 5 Advantage program along with some lenders who can help you.

Summary of Recent Changes in the FHA Loan Program

Over the past few weeks we’re received a lot of questions regarding the recent changes to the FHA loan program. I might as well address some of these questions and concerns publicly. The changes are due to the recently signed Housing and Economic Recovery Act of 2008.

Changes to the down payment requirement: The minimum down payment requirement will increase from 3% to 3.5% starting October 1, 2008. To take advantage of the 3% down payment contracts must be dated before September 15th, underwriting approvals must be made before the 22nd and loans must fund by the 30th. Now, not only is the down payment requirements increasing, but H.R.3221 eliminates down payment assistance programs all together. I personally, don’t understand the reasoning behind this but then again it’s the government.

Status of the Upfront Mortgage Insurance Premium: HUD had recently made the FHA Upfront mortgage insurance risk-based. Meaning you paid more if you had worse credit. Now with the new bill H.R. 3221, there is a one year moratorium on these changes. In the mean time FHA will revert back to the single 1.5% premium charge.

New FHA loan limits: The new FHA loan limit will be the lesser of 115% of median sales price for your area or $625,500 but no lower than $271,050.  The median sales price this will be based on will not be published by HUD until November. We do know that if your loan limit since March has been higher than $271,050, the only way your loan limit will not be lower starting January 1 is if your area home prices have been having a significant rise (not true of hardly any area).  However, we don’t know what the new loan limit will be for sure until FHA does their math, only that it will be somewhere between the floor of $271,050 and the cap of $625,500.

Bottom line is that if you are planning a home purchase and would need a FHA loan, then you need to be aware that the loan limits will most likely be falling and the down payment amount will be rising after the first of the year. In essence, might as well purchase before end of the year.

$7500 tax credit: The recently signed bill provides a $7,500 tax credit for first-time homebuyers that will expire July 1, 2009, must be repaid over 15 years — making it, in effect, an interest free loan. First-time home buyers are defined as those who have not had an ownership interest in a real estate property in the past three years. North Phoenix Agent, Heather Barr, has a great post on her blog with details on this tax credit.

As you can see there are lots of changes in the industry. If you are in the market for a FHA loan, my best advice is ask lots of questions.

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.