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Down Payment Assistance Going Away? Not Without A Fight… And Maybe A Few Videos.
I received an email today with this video about what is going on with the down payment assistance programs… Remember, we are officially “neutral” on this topic. Maybe *slightly* in favor of the down payment assistance programs, but they are not without their problems.
Either way — it is interesting to see a campaign go viral like this.
Are you a Veteran or Active Military? A VA Mortgage Might Be Right For You.
VA loans were designed to help veterans of the armed services, either currently serving in active duty or in the reserves, as well as their spouses. In order to qualify for a VA loan, a veteran must meet the eligibility guidelines set by the Department of Veterans Affairs. VA Loans enable veterans that qualify to put no money down on a mortgage loan up to $417,000.
VA Loans are guaranteed by the Department of Veterans Affairs (the maximum guaranty is equal to 25% of the Freddie Mac conforming loan limit for a single family home. In 2008 this limit is set at $417,000 for all states except in Hawaii, Alaska, Guam and the U.S. Virgin Islands where the limit is set for 2008 at $625,500).
Some quick information about VA loans:
- VA loans do NOT have a prepayment penalty and MAY be assumable in certain situations.
- Full income/asset documentation is required
- You can get a VA loan for a new single family residence home, condominium or manufactured home (with or without the lot)
- A VA loan requires a funding fee that can either be paid by the borrower or may be allowed to be financed into the loan. This funding fee may also be waived under disability guidelines established by the VA.
2008 Funding Fee Schedule:
|
Loan Category |
Active Duty and Veterans Rate |
Reservists and National Guard Pay |
|
Loans for purchase or construction with down payments of less than 5%, refinancing, and home improvement. |
2.15% |
2.40% |
|
Loans for purchase or construction with down payments of at least 5% but less than 10%. |
1.50% |
1.75% |
|
Loans for purchase or construction with down payments of 10% or more. |
1.25% |
1.50% |
|
Loans for manufactured home. |
1.00% |
1.00% |
|
Interest rate reduction loans |
0.50% |
0.50% |
|
Assumption of VA-guaranteed loans. |
0.50% |
0.50% |
|
Second or subsequent use of entitlement with no down payment |
3.3% |
3.3% |
VA Loan Eligibility
- For the official service requirements and periods of eligibility, go here to see if you qualify.
- Good credit (doesn’t have to be perfect credit, but your credit score is a factor)
- Sufficient income to support a monthly mortgage payment
- Valid Certificate of Eligibility (COE)
- Purchase must be your primary residence
With the many upcoming changes to the FHA programs, it makes more sense than ever to find out if a VA loan can save you money when buying your new home. Call me anytime!
The Housing and Economic Recovery Act of 2008 — Down Payment Assistance Programs Eliminated
I have been traveling this week and am just now playing “catch-up” with the current housing bill that was passed. I blogged about some of the highlights here, but thought I would go into more detail for people who are interested in what this means if they looking at buying a home with “no money down”.
What the bill means to you If you are looking at buying a home using down payment assistance money
With the passage of the bill, effective 10/1, down payment assistance programs are going away. This means that if you were planning on using a program like AmeriDream or Nehemiah to buy your home, you need to make sure that you close before 10/1.
As Jamie Geiger pointed out here, it is up to the lenders if they would like to discontinue this program prior to 10/1, so be sure to double-check with your lender to make sure they are still offering the program if you are planning on closing before 10/1.
With the seller-assisted down payment assistance programs gone, some people will still be able to use the Maricopa county bond money programs or other rural county bond money programs for down payment assistance, but as Shailesh pointed out — it is available on a first-come, first-serve basis and these funds are usually gone fast.
Lastly, I received an email from the rep at AmeriDream today that said:
Congress to REAUTHORIZE Down Payment Assistance
August 1, 2008
Last night, Congress introduced bipartisan legislation, H.R. 6694 that would reauthorize and reform charitable downpayment assistance. This bill would remedy a harmful provision in the new housing law which limits homeownership opportunities for low and middle-income Americans. The legislation, sponsored by U.S. Reps. Al Green (D-TX), Gary Miller (R-CA), Maxine Waters (D-CA), and Christopher Shays (R-CT) reauthorizes and reforms charitable downpayment assistance funded in part by sellers, which has helped over one million families and individuals become homeowners since 1999. The program was eliminated by legislation signed by President Bush on July 30, 2008.
The Green-Miller-Waters-Shays plan would re-authorize and reform non-profit downpayment assistance and secure it as an allowable source for FHA borrowers. The bill seeks to ensure that providers of the downpayment assistance operate in a transparent manner to guard against conflicts of interest. The bill also includes language to ensure that FHA maintains its financial stability by permanently authorizing the Secretary to assess higher premiums to higher risk borrowers.
It is important that you contact your elected officials in Congress and tell them that you support downpayment assistance and urge them to support H. R. 6694. To reach your elected officials, please call the US Capitol Switchboard at 202.224.3121.
To learn how you can support it, visit http://www.supporthomeownership.com.
AmeriDream continues to be your trusted advisor, bringing timely and accurate information when you need it most.
Will down payment assistance come back? I don’t know. But if you are planning on buying a home and getting a loan, either close before 10/1 or plan on having at least 3.5% of the purchase price for a down payment.
Oh, one last thought on this topic — someone asked me the other day — “Can I get a gift from my parents for my down payment?”
Yes.
And if your parents need to adopt another kid, I am available.
Lender Conditions 2008 vs Lender Conditions 2006 — Income Related Conditions
Over the last 5 or 6 years, approximately 70-80% of all of the files (a few thousand if my math is right) we have worked on were FHA files so we have developed a pretty serious competency around the ins and outs of FHA. We were doing FHA before FHA was cool!
When I was compiling the list of income-related conditions for this post, I noticed that the conditions that we see over and over again may not apply to the borrowers who make $150,000 per year and trying to purchase a $750,000 home – so as you review these, just remember that these are the main income-related conditions that we see in 2008 that we didn’t see in 2006 within our target market.
In 2008…
Lenders are requiring completed form 4506T (the document that allows UW to verify the social security numbers of the borrowers and confirm with the tax information about the borrower directly from the IRS). They still require a 4506T on each file and confirm income with the IRS regardless if you provided the borrowers copy of their W2’s and/or tax returns.
In 2006…
They used to take the borrowers W2’s or the borrowers copy of their tax returns.
In 2008…
You can no longer do an average of the previous year’s income and the YTD of this year with no further documentation. For example, if your borrower made 50k in 2007 and has made 60k through the first 6 months of 2008, you cannot just get a W2 for 2007 and the most recent pay stub for 2008 and come up with $55,000 in income.
The lender will most likely require that you get a full written VOE (Verification of Employment) from the employer and have it break down the income. It is amazing how many times an HR department can’t calculate/break down how much someone made – and it all adds up to quite a bit of time that a processor must spend on a file that they didn’t have to in 2006.
In 2006…
You could just average the previous year’s income with the YTD of this year as proven by W2’s and current pay stubs.
In 2008…
If your borrower has Social Security income or Disability income, you must get a 1099 from the IRS (borrower cannot provide it) and get the borrower to give you 3 months worth of bank statements showing 3 deposits to prove they are getting Social Security income.
In 2006…
You could just get an awards letter and a 1099 provided by the borrower.
In 2008…
It is very common for an UW to ask for “the most recent paystubs” – as in if your borrower got paid yesterday, get those.
In 2006…
You could provide income documentation where the borrower was proving W2 income with paystubs that were within the last 30 days.
These are some of the most common income-related conditions that we are seeing in 2008 vs. 2006. Did we miss anything? I am sure we did — Lenders, be sure to leave your comments as to what you are seeing out there!
Lender Conditions 2008 vs Lender Conditions 2006
This week, I have spoke with more than one person who is involved with the Arizona Real Estate market who has made the comment “my best lenders are saying they have never seen conditions like the ones they are getting recently from lenders!”
The first time I heard it, I kind of shrugged my shoulders and went about my business. The second time I heard it (from a different person), I made a mental note. The third time I heard it (again, from another different person), I thought to myself “hey, this may be a good blog topic”. The reason for this next series of posts was actually the FOURTH time in ONE DAY that I heard someone mention this and she actually said “hey, that would be a great blog topic!”
Hat tip Dru. Way to make me go to work and start talking about this kind of stuff!
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