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.

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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.

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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.

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Hat tip: Arizona Mortgage Team

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A little after 5pm we received a call stating that one of these buyers had an accepted contract. Aimee quickly jumped on the Home in Five website (lenders only) to reserve funds. She was stunned! There was only $229,000 left at about 5:25PM. This is a depletion rate of about $585,000 per hour! Wow.

Moral of the story is that these funds go fast. With 100% loans scarce everyone is looking for down payment assistance. There are still programs like the Home in Five out there which are available to needy borrowers, it’s just that there are lots of restrictions attached to them and oftentimes its only available on a first come first served basis.

Fortunately our borrowers loan size was smaller than fit under the available funds, so we were able to reserve the money for their purchase.

Read more on the Home in Five Down Payment Assistance Program.

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What does this mean to you then?

This means that money is now available for down payment assistance on properties that are outside the designated targeted zones but inside Maricopa county. Just so everyone is clear here are some quick facts:

• Borrower must be fully approved for a loan program which allows the use of down payment assistance (such as FHA)
• Borrower can use funds to purchase anywhere in Maricopa county.
• The borrower does not need to be a first time home buyer (for these funds).
• Have a property in escrow, appraised and underwritten – since the money runs out quick.
• The rate on this program is 6.3% and the assistance is 5% of the purchase price.
• Funds are disbursed on a first come first serve basis.

This program allows up to 5% down payment assistance.  Funds can be used to pay closing costs as well, it just depends on how you end up structuring the loan with your loan officer.

Just a reminder that these funds are HUGELY popular and go fast, so if you are anywhere close to finding a property…this is a SUPERB time to take the plunge!

Read more on the Home in Five Down Payment Assistance Program.

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