First Time Homebuyer Assistance Program

Down Payment and Closing Cost Assistance Program for First Time Homebuyers

Begin a lifetime of homeownership through the Texas First Time Homebuyer Program (FTHB). This program allows qualified Texans access to down payment and closing cost assistance. Homebuyers who have not owned a home within the past three years, who meet program income guidelines and who do not exceed the program's purchase price limits are eligible to apply for a loan under the program. 

Program Highlights:

• $10,000 for down payment and/or closing cost assistance
• 0% interest loan
• 5 or 10 year loan term
• First payment will be deferred for 5 years from closing date
• Payment amount $83.33 OR $166.67 monthly, depending on term
• Borrower must be a First Time Homebuyer (excludes qualified Veterans)
• First Time Homebuyer counseling required
• Minimum credit score 640

Borrower Requirements:

• Income: May not exceed 80% area median family income regardless of family size
• Liquid Assets: May not exceed $15,000 (excluding retirement and/or 401K accounts)
• Home Value Limits: Total contracted purchase price of the single family mortgage limits under Section 203(b) of the National Housing Act
• Combined Loan-to-Value: Must not exceed 105%

Eligible Properties:

• New and existing single family homes, townhomes, and condominiums

Can you qualify for an FHA loan?

FHA loan programs have become popular again as a reliable option for home buyers since the revival of the mortgage industry the past few years. It is a loan program that offers easier qualification and the least amount of down payment. So what do you need to know about it? Here are a few key guidelines:

Down Payment
Minimum 3.5% of the sales price is required from buyer's fund or gift from family member.

Seller Concession
Seller can pay up to 6% of the sales price for closing cost. This does not have to include owner title policy, survey, and home warranty.

Minimum Credit Score
To qualify with 3.5% down payment, your minimum mid credit score has to be 580 or higher. If buyer has 10% down, then the credit score to qualify will be even lower. (We can qualify most buyers down to 580 with 3.5% down payment versus many major banks who cannot due to their own requirements.)

Assets
Most buyers do not need large amounts of assets showing in their bank or retirement fund. Just enough for the down payment will be sufficient.

Appraisal
All properties must pass HUD standards, but that doesn't mean the house has to be perfect. The major items to look for are roof, structure, and foundation. Minor safety hazard items may have to be addressed too, but often are very workable.

Previous Foreclosure or Bankruptcy on Record
ANY previous foreclosure or bankruptcy history on your credit record has to pass at least 3 years from foreclosure date or 2 years from bankruptcy discharged date for consideration.

Purchasing a HUD Foreclosure Home
HUD foreclosure homes are simple and easy to finance with an FHA loan. HUD already has an appraisal for the buyer and, if any repairs are needed, HUD will allow escrow repairs. Not many lenders will work with it, but we do.

Time to Close
Buyers with good solid credit history and income can close their loan as fast as 3 weeks (1 week for option period and 1 week for appraisal and 1 week for underwriting).

DEAR JENNY: Can I use funds from my 401(K) as a down payment?

You've finally found the home of your dreams. There's just one thing standing between you and your new house: the down payment.

Hardship withdrawals

Many home buyers today opt to use funds from their employer’s 401(K) program to come up with the down payment on a house. Ordinarily, you can't take money from your 401(K) plan unless you retire, leave the company or become disabled, but many company plans permit certain “hardship withdrawals” when there is an immediate and heavy financial need, including the purchase of the employee's principal residence.

The drawback to a hardship withdrawal is that you will pay taxes and penalties on the amount withdrawn from your plan, which often must be paid in the year of withdrawal. And while hardship withdrawals are allowed by law, your employer is not required to provide them in your plan. Check with your employer’s human resources department if you're not sure if your 401(K) plan allows hardship withdrawal.

Borrow against your 401(K) 

Another approach may be to borrow against your 401(K) – often as much as 50 percent of your account balance. You pay interest on the loan, but the interest goes back into your account. The money you receive is not taxable as long it is paid back and plans can give you anywhere from five to 30 years to pay back your loan.

There are risks involved in borrowing from your 401(K). If you lose your job or leave your employer, you must pay back the loan in full within a short period, sometimes as little as 60 days. If the money is not paid back in that time, it is considered a withdrawal from your plan and subjected to the same taxes and penalties. And while 401(K) accounts can usually be rolled over into a new employer’s 401(K) without penalties, loans from a 401(K) cannot be rolled over.

In addition, because the funds withdrawn from your account are no longer earning compound interest, your account will be smaller when you retire. And you’ll be replacing pretax money with after-tax money.

Some lenders will count the money you borrowed from your 401(K) as an additional debt that will go along with your car payments, student loans and credit cards. While it may seem unfair since you are borrowing your own money, most lenders view it as a payment obligation that affects your debt-to-income ratio in qualifying for a home loan. It may be a factor in whether you decide to make a hardship withdrawal from your 401(K) and pay tax penalties or borrow against it.

Consult your financial advisor before making any decisions regarding your 401(K).

JENNY'S TIPS: How much can you afford?

Deciding how much house you can afford is a personal decision.  Many factors come into play.  How much can I borrow?  How much can I put toward my down payment?  What size monthly payment can I afford? 

There are no black and white answers to these questions.  It's a matter of give and take.  If you plan on a 30 year mortgage, you can probably make a lower down payment and still manage the monthly payments.  If, on the other hand, you plan on a 15 year mortgage, you'll probably want to make a larger down payment to keep your monthly payments in line with what you can afford. 

How large a down payment can I make?

Many buyers look at their cash on hand as their only source for their down payment.  This simply is not the case.  One way to fund or partially fund a down payment is by using a gift.  Parents, grandparents and other family members are often eager to help by making a cash gift toward the purchase of your home. 

There are also down payment assistance programs that can help you.  And, of course, if you are selling a home, the equity you've built up can be applied to your down payment.

What size monthly payment can I afford?

When determining what size monthly payment you can afford, you'll want to consider what other monthly expenses you have.  Tangible expenses such as car payments, day care, and utility bills all play a role in how large a monthly payment you can afford. 

There are also the intangible expenses or lifestyle expenses that you'll want to consider.  Things such as dining out, travel, and when you buy your next car can effect how much you can afford.  Are you willing to curtail or delay some of these expenses in order to afford a larger monthly payment? 

How much can I borrow?

This is a question you'll want to get answered before you begin your home search.  This is something that we're here to help you with.  Our mortgage calculators will help you see how your down payment, monthly payment, and the amount you borrow are all interrelated.

JENNY'S TIPS: How to deal with a Bankruptcy

A bankruptcy filing delivers a devastating blow to your credit and FICO score, but it doesn’t mean you have to wait 10 years before you can qualify for a mortgage. Many consumers who have filed for bankruptcy have been able to obtain a mortgage, although it is often at a higher rate than someone qualifying for a prime or "A-paper" loan.

While credit card companies may care about what happened before you filed for bankruptcy, many mortgage lenders are more interested in your recovery — what you’ve done since your filing. It won’t happen over night, but here are some tips and things to keep in mind when you inquire about a mortgage with a tarnished credit past:

Give explanations

No mortgage lender is going to ignore the fact that you’ve filed bankruptcy and he or she will likely want to know the cause of the filing. Your lender will be particularly interested in whether the same situation could happen again. Your chances of being qualified are much better if your bankruptcy was caused by a single event such as a loss of employment or a death in the family, than if it was the result of “just spending too much.”

If the bankruptcy resulted from a single event, it is important to show your lender paperwork describing the incident, such as the layoff notice or death certificate. You may also want to bring in court documents to indicate when the bankruptcy was filed.

Demonstrate good money habits now

Many people who file bankruptcy swear off credit altogether, however, it is important to re-establish your credit rating. Get a secured credit card or take on some sort of loan — furniture, a car or a major appliance — to demonstrate that you are able to make timely payments. Make sure you are making other payments (utility bills, cell phone, etc.) on time as well. You won't turn things around in a year but your credit score will improve over time.

Dispute any credit report errors

There’s no need to add to your troubled credit history with errors on your credit report. Get a copy of your credit report from each of the three major credit reporting agencies: Equifax, http://www.equifax.com; Experian, http://www.experian.com; and TransUnion, http://www.tuc.com. If you encounter any errors, inform the CRA in writing what information you believe to be inaccurate and request deletion or correction.

Save your money

Lenders may be more willing to loan you money if you’ve saved up a considerable amount of money for a down payment.

Live within your means

Think small when the time comes to look for a home. Smaller homes often mean smaller mortgages.

Tarrant County: Homebuyer Financial Assistance for First Time Homebuyers

As a leader in the effort to make quality, affordable housing accessible to all, Tarrant County Housing Partnership administers a number of programs that provide down payment, closing cost or principle reduction assistance for low and moderate income individuals and families.

Each program varies: in some instances, assistance is only available for specific properties, in other instances, assistance is open to homebuyers in specific communities. A brief overview of each program’s key components and eligibility requirements follows.

Important note: You must at least attend a TCHP Orientation Class in order to be considered for assistance. Attending TCHP’s other homeowner classes is strongly encouraged, and in some instances, may be required in order to receive your funding. Your counselor can provide additional information. View a class schedule.

Arlington Homebuyer Assistance Program (AHAP)

• For first-time homebuyers purchasing a home in Arlington only.

• This program provides up to $7,500 in down payment/closing cost assistance. Up to $10,000 of assistance is available for qualified Social Security Income recipents OR for purchase of properties located in the NSRA target area.

• The home purchased must meet minimum property standards.

Development Corporation of Tarrant County (DCTC)

• This program provides up to $14,999 in down payment/closing cost assistance and principle reduction for first-time homebuyers who are purchasing DCTC-owned properties, which are located throughout Tarrant County.

To learn more about these programs, contact Jenny or visit http://www.tchp.net/programs_services/financialassistance.html

DEAR JENNY: Should I get pre-qualified before house hunting?

Absolutely! Even if you haven't so much as picked out houses to visit yet, it's important to see your mortgage professional first. Why? What can we do for you if you haven't negotiated a price, and don't know how much you want to borrow?

When we pre-qualify you, we help you determine how much of a monthly mortgage payment you can afford, and how much we can loan you. We do this by considering your income and debts, your employment and residence situations, your available funds for down payment and required reserves, and some other things. It's short and to the point, and we keep the paperwork to a minimum.

Once you qualify, we give you what's called a Pre-Qualification Letter (your real estate agent might call it a "pre-qual"), which says that we are working with you to find the best loan to meet your needs and that we're confident you'll qualify for a loan for a certain amount.

When you find a house that catches your eye, and you decide to make an offer, being pre-qualified for a mortgage will do a couple of things. First, it lets you know how much you can offer. Your real estate agent will help you decide on an appropriate offer, but being pre-qualified gives you the confidence to know you can follow through. More importantly, to a home seller, they won't have to wonder if they're wasting their time if you don't qualify for a mortgage to finance the amount you're offering for the home.

If you don't qualify right now due to income or credit issues, its best to know as early as possible so we can work with you to improve your situation.  Purchasing a home is a step-by-step process and preparation is the key.

FHA 203(k) Loan Program - Turning “Fixer-Uppers” into Dream Homes

What is the Section 203(k) Loan Program?

If you want to buy a home that needs repair or finance needed repairs to your current home, the Section 203(k) loan program by the U.S. Department of Housing and Urban Development (HUD) may be a good option for you. This program allows you to finance the purchase of a house—or refinance your current mortgage—and include the cost of its repairs through a single mortgage.

The Section 203(k) loan program is HUD’s primary Program for the rehabilitation and repair of single family properties. Section 203(k) loans are provided through HUD-approved mortgage lenders nationwide and insured by the Federal Housing Administration (FHA), which is part of HUD. “Section 203(k)” refers to the law, part of the National Housing Act, which allows FHA to make this mortgage insurance available.

The loans are beneficial for low and moderate income individuals or families since the loan down payment can be as little as 3 percent. While individuals, local governments, and non-profit organizations may participate as borrowers in the program, the property must be used as a principal residence by an individual or family.

How the Loan Works

You can take out a Section 203(k) loan as a 15 or 30 year fixed-rate mortgage or as an Adjustable Rate Mortgage (ARM) from a HUD-approved lender. The total amount of your mortgage will be based on the projected value of your home after the renovation is completed, taking into account the cost of the work. A portion of your loan is used to pay for the purchase of the home, or in the case of a refinance, to pay off any existing debt. The remainder is placed in an interest-bearing account on your behalf and released in stages as rehabilitation is completed.

FHA requires that you use a minimum of $5,000 toward eligible repairs or improvements and that you complete the repairs within six months after the loan’s closing depending on the extent of work to be completed. This first $5,000 primarily covers eliminating building code violations, modernizing, or making health and safety-related upgrades to the home or its garage. You may add minor or cosmetic repair after this requirement is satisfied, if applicable. You cannot include improvements for commercial use or luxury items, such as tennis courts, gazebos, or new swimming pools.

McKinney Grant Program Offers Up to $10,000

The City of McKinney’s Community Services Department is helping first-time homebuyers fulfill their dreams of owning a home. The Homebuyer Assistance Program provides down payment and closing costs assistance up to $10,000 for first-time homebuyers purchasing in McKinney with low to moderate income. Funds are made available through a grant from the Texas Department of Housing and Community Affairs' HOME Investment Partnership Program.

Some requirements of the program include:

• First-time homebuyers. A first-time homebuyer is an individual or household who has not owned a home in the last three years or is a displaced homemaker.

• Proof of U.S. citizenship or permanent legal resident alien status.

• Qualifying for a mortgage loan with a private lender.

• Income that does not exceed 80 percent of the Area Median Income.

• The home purchased through the program will be the principal residence.

• The home must be located within the city limits of McKinney.

• Completion of a HUD and City of McKinney approved homebuyer counseling workshop.

Contact Jenny today for more information or to see if you qualify for this grant program.

JENNY'S TIPS: FHA vs Conventional Loans and VA Loans

One of the most popular questions I get asked by my home buyers is "What is the difference between FHA loans, conventional loans (Fannie Mae and Freddie Mac) and VA loans?"  VA loans are available for qualifying Veterans only. 

Here is a general comparison:

                                                                                                                                                

FHA                                 Conventional                     VA Loans

 

3.5% Down                     5% with high                        0% down
Payment                          credit score                     

6% Maximum                  3%                                         6%

Contribution

for closing cost                  

Up Front Mortgage         No Upfront MIP                Varies depends

Insurance Premium                                                 on Veteran's status

(MIP) Financed into

the Loan                                                                                     

 

 

Monthly Mortgage         Monthly Mortgage                 None

Insurance                        Insurance with 20%

                                       Down

580 minimum                 Higher credit score               620 typically

credit score                     required                           

                                                                        

Max 1 FHA Loan            Max 4 Loans:                        Depends on

per person on                  1 Primary Residence           Veteran's entitlement  

primary residence           3 Investment Properties

These are general guidelines. Borrowers should be reviewed on a case-by-case basis. In today's market, mortgage guidelines are constantly changing as regulators try to "fix" the industry. The trend is that mortgage qualifications will only get tougher.  Best to talk to an experience loan professional and do a pre-qualification analysis. 

TIPS FOR REALTORS: Tax Refund as Down Payment

Right now is the perfect time to call all your clients and encourage them to use their tax refund as down payment to purchase a home! From an underwriting perspective, tax refund is an accumulated income from buyers and is perfectly acceptable to use as down payment.

Some buyers are locked in with an apartment contract for as long as 12 months, and may not be ready to buy now. They should be referred to an experience loan officer to help get them ready. Preparation is vital when comes to getting a home loan approved. Let me help your clients today!

City Grant for Down Payment Assistance

For many years, I've worked with several cities in the Dallas Fort Worth area to provide down payment assistance through block grant programs for first-time homebuyers (or anyone else who has not owned a house in the last 3 years.)

Here is information you need know about the different city programs currently available in the market (Call me if you don't see the city you're wanting to purchase a house from):

McKinney: Must purchase house under $130,000. McKinney will pay 1/2 of your down payment and all of your closing cost up to $7,500.

Grand Prairie: Must purchase house under $160,000. $5,000 grant will be given without any repayment terms.

Plano: Must purchase house under $140,000. Plano will also pay 1/2 of your down payment and most of your closing cost or NSP program for purchasing a foreclosure home.

Lewisville: Up to $7,500 will be given to the first time homebuyer. Lewisville will pay 1/2 of your down payment and most of your closing cost. They are great to work with. The City of Lewisville will even offer improvement dollars after your house is purchased.

Irving: $10,000 grant will be given to first time homebuyers.

Frisco: Applicant must work within the city limits or be an employee of the city (i.e. police, fire fighter, teacher, or city administration employee.)

Garland: up to $10,000 for first time buyer.

Other cities with grants available: Arlington, Fort Worth

Other cities in Collin County may qualify for the USDA Rural program, which offers 100% financing and allows the seller to pay up to 6% of closing cost. Essentially, you will have to pay very little up-front money. USDA Rural program is one of the best programs available. YOU PAY NO MONTHLY PMI WITH 100% FINANCING.

Need Down Payment? Check Your 401(K)

You've finally found the home of your dreams. There's just one thing standing between you and your new house: the down payment.

Many home buyers today opt to use funds from their employer’s 401(K) program to come up with the down payment on a house. Ordinarily, you can't take money from your 401(K) plan unless you retire, leave the company or become disabled, but many company plans permit certain “hardship withdrawals” when there is an immediate and heavy financial need, including the purchase of the employee's principal residence.

The drawback to a hardship withdrawal is that you will pay taxes and penalties on the amount withdrawn from your plan, which often must be paid in the year of withdrawal. And while hardship withdrawals are allowed by law, your employer is not required to provide them in your plan. Check with your employer’s human resources department if you're not sure if your 401(K) plan allows hardship withdrawal.

Another approach may be to borrow against your 401(K) – often as much as 50 percent of your account balance. You pay interest on the loan, but the interest goes back into your account. The money you receive is not taxable as long it is paid back and plans can give you anywhere from five to 30 years to pay back your loan.

There are risks involved in borrowing from your 401(K). If you lose your job or leave your employer, you must pay back the loan in full within a short period, sometimes as little as 60 days. If the money is not paid back in that time, it is considered a withdrawal from your plan and subjected to the same taxes and penalties. And while 401(K) accounts can usually be rolled over into a new employer’s 401(K) without penalties, loans from a 401(K) cannot be rolled over.

In addition, because the funds withdrawn from your account are no longer earning compound interest, your account will be smaller when you retire. And you’ll be replacing pretax money with after-tax money.

Some lenders will count the money you borrowed from your 401(K) as an additional debt that will go along with your car payments, student loans and credit cards. While it may seem unfair since you are borrowing your own money, most lenders view it as a payment obligation that affects your debt-to-income ratio in qualifying for a home loan. It may be a factor in whether you decide to make a hardship withdrawal from your 401(K) and pay tax penalties or borrow against it.

SUCCESS STORY: Home Buyer with Low Credit Score Buys $284,000 House

A JENNYLOANS.COM SUCCESS STORY
Home Buyer with Weak Credit but Strong Rental History Buys House

One of our clients closed a mortgage loan today, even though his credit score of 619 is 21 points below most lenders' standards. This client is a perfect example of how planning, strategizing, and taking action helped him reached his goal of buying a new home. The process started 3 months ago when I evaluated his income, assets, and credit. They were living in a rental house with $1,400 rent and $400 utility bill. Even with a low credit score, we found several positive traits (lenders would call it "compensating factors"):

-Low debt-to-income ratio

-12 months verifiable rental history through cancelled checks

-401K available for down payment

-Good employment history

With all this considered, he purchased a house for $284,000 and is moving in today! Is your credit good enough to purchase a house? Not every situation is the same, but contact me and we can evaluate your options.

NEW YEAR, NEW HOME! Tips for Buying A New Home in 2011

If your New Year's Resolution is to buy a new home this year, then you need to follow these five steps to help you qualify for a mortgage.

The past few years have been rocky times for the real estate industry, and most lenders have tightened their lending standards. Is it still possible for most people to own a home? Absolutely! Mortgage and real estate industries are ever changing, especially in today's economy and era of government compliance, but you can prepare yourself with the right information. And get help from a loan officer who understands the new rules.

Many realtors and home buyers often call me and ask how to qualify for a mortgage. Well, the process has changed drastically over the last 2 years. I have to honestly say I am glad for the change in order to bring stability back to the market. We are now back to common sense lending. Getting a mortgage and borrowing a huge amount of money should not be a one day process. Buying a home should be planned. It is not complicated or difficult. It is simply the right planning with help from an expert. So what should a home buyer plan for? Here are the basics:

1. Take the time to talk to a Licensed Mortgage Loan Officer. A 20-minute consultation will map out a good plan of action to help you purchase a new home. A good loan officer should not take more than 1 day to get back with you.

2. Evaluate your credit with a Loan Officer. All lenders have certain fico score requirements. Although most lenders require a minimum 640 fico score, there are some lenders who will accept a score as low as 580 as long as you have a documented rental history. If your score falls below 580, a good loan officer will offer advice in what you need to do to improve your credit score.

3. Evaluate debt-to-income ratio with a Loan Officer. Most lenders can only accept no more than 50% debt-to-income ratio. This means all minimum monthly payments listed on the credit report plus projected new mortgage payment with PITI (principle, interest, taxes and insurance) should not exceed 45% to 50% of your income. Utility bills are not included.

4. Money for down payment. All FHA loans require minimum 3.5% down payment. The money can be from your savings and checking account, 401K, retirement, gift from relatives, and tax refund. The money should be traceable and documented. A good loan officer will evaluate 2 months of recent bank statements and inform you of any red flags.

5. Ask the Loan Officer about all the costs involved in purchasing a home. In most situations, home buyers should plan to pay for the inspection fee, appraisal fee, and earnest money when making an offer. When it comes to home buying, never under-estimate the power of preparation.

Of course not everyone's situation is the same. Self employed business owners are different than W-2 paid employees. You may have spotless credit. Some people have foreclosures on their credit, and others have bankruptcies. Anyone can qualify for a mortgage but planning a strategy and setting a realistic time frame will be different for everyone, so it is very important to work with an experienced loan officer who can help you plan and guide you through the home buying process.