June 8th, 2015 9:12 AM by Jackie A. Graves, President
Many homebuyers have
become overwhelmed by all the questions to ask before jumping into
homeownership — especially first-time buyers and those who have stayed put
since the recession. Questions arise such as, “Am I ready? Is this a good
investment for me? Can I afford it?”
Perhaps the biggest
concern is how to pay for such a large purchase.
first-time buyers often cannot afford a large down payment. According to data
from the National Association of Realtors Confidence Index, about two-thirds of
first-time buyers made a down payment between zero and 6 percent.
In 2009, 77 percent of
down payments were in the zero to 6 percent range. The number of small down
payments today is lower than in 2009, but it’s higher than this time last year
when 61 percent fit that range.
One option for
homebuyers is down payment assistance (DPA) programs. These can be unpopular
because of all the hoops that the buyer has to jump through.
DPA requires separate
applications, separate loan approval and, because these typically require
outside approval, they take time. At closing, they will result in a separate
lien on the property and must be repaid at the point of resale or refinance in
Also — as
with Georgia Dream, for example — the homebuyer must take a class on
homeownership prior to qualifying and getting approval for DPA, and qualifying
income has a small maximum amount.
wanted to share some information regarding a down payment assistance program
that seems to work well whether or not your client is a first-time buyer.
The program, called NHF Platinum, is through the National Homebuyers Fund,
and it’s offered through participating mortgage lenders.
We receive a lot of
requests for info on DPA from buyers, and prior to this program, the only
option we had available was through Georgia Dream. Georgia Dream limits a buyer
to those who have not purchased a home in the past three years. The
National Homebuyers Fund guidelines apply to all buyers — whether they
have owned a home before or not.
information on NHF Platinum
5 percent for FHA and
3 percent for
conventional and USDA
Funds provided are in
the form of a grant that never needs to be repaid. The program has one
application, based on standard underwriting with no outside approval required.
The closing time frame is the same as with a standard program. The lender
provides funds at closing then is reimbursed by the servicer, which means no
delay in closing. The most interesting thing is that the buyer does not ever
have to repay the grant.
Now, if it sounds too
good to be true, it must be, right? What’s the catch?
I think the hardest
part of this that might be understanding the interest rate. The rate is half to
three-quarters of a point higher. Personally, I think, the FHA version would be
the only reason to consider it unless the buyer didn’t have the funds to cover
their closing costs and the seller will not negotiate those into a contract.
Does it make sense?
For most buyers I work with, the goal has always been to have the absolute
lowest interest rate they can get.
If it is true that
most people on the average sell about every five to seven years, what is the
breakeven in this scenario? Does it make good financial sense to get into a
home rather than wait until you can save the down payment?
Looking at the
Down Payment Source
So depending on loan
amount, in these two examples there is roughly a $75-$100 per month increase on
a house payment, so it would take about six or seven years, depending on the
scenario, to get to a breakeven point.
There are more
benefits than this, and the breakeven is further out because this rate is based
on a 5 percent grant. This means our buyer would have another 1.5 percent of
the grant to use toward closing costs, which would save them $2,250-$3,000 at
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To view the original article click here - Written by Hank Bailey