What homebuyer programs are available in my region?

There are a number of homebuyer programs available at the state, regional, and community level. In southwest Florida, for example, the Pinellas County Community Development Department (PCCDD) is just one group that helps match up buyers with homes and financing. To promote home ownership in the region, the PCCDD offers the following services (see www.pinellascounty.org):
❑ Low-Interest Mortgages: The purpose of the low-interest loan program is to preserve the existing housing stock and encourage neighborhood improvement efforts. The program provides home repair loans to low-income and moderate-income home owners at interest rates ranging from 0 to 5 percent, depending on household income and family size.
❑ First-Time Homebuyer Program: The Housing Finance Authority provides financing for the rehabilitation, construction, and/or purchase of new and existing housing for moderate-, middle-, and lower-income families.
❑ Down-Payment Assistance: This program assists low- and moderateincome households to purchase homes that will serve as their principal residence. It provides financial assistance in the form of interestfree second mortgages with repayments deferred for up to five years.
❑ Special Lender Programs: Low-, moderate-, and middle-income buyers who have the desire and capacity for home ownership often lack the financial resources to purchase housing that meets their needs. According to the PCCDD, such individuals and families may be qualified for one of the programs offered by local governments or nonprofit corporations.
In Los Angeles, the Community Development Commission offers similar services, targeted at helping first-time home buyers through its Home Ownership Program (HOP), which provides loans of up to $60,000 (or 25 percent of the home purchase price) in designated target areas of the city, or $50,000 (or 20 percent of the purchase price) in nontarget areas. The loans are ‘‘shared equity loans’’ with no monthly payments and no interest. There are income guidelines to meet, and all information is on the city’s Web site at www.lacdc.org/programs/homebuyer/ownership/index.shtm.
Whether you’re looking for first-time homebuyer counseling programs, down-payment assistance, or low- to zero-interest loans, a phone call to your city or county offices should be able to get you pointed in the right direction. You can also use a search engine like Google.com to find such programs. Try combining your city or county name with words like ‘‘firsttime homebuyer program’’ or ‘‘homebuyer assistance’’ for the best results

What is a Federal Housing Administration (FHA) loan?

FHA loans are a popular choice for home buyers, although the program isn’t reserved only for first-time buyers. A wholly owned government corporation, the FHA has been around since 1934, with the goal of improving housing standards and conditions and providing adequate home financing through insurance of mortgages. Its loans feature reduced down-payment standards, lower mortgage insurance charges, and an approval process that’s more relaxed than conventional mortgage loans.
The FHA loan program requires only 3 percent down and is typically more forgiving of past credit issues, but it requires that borrowers not have a bankruptcy discharged within the last two years; that they not have a foreclosure within the last three years; and that any outstanding collection amounts, judgments, or charge-offs be paid in full before closing. The advantages of using an FHA loan include the following:
❑ A lower down payment is required.
❑ FHA loans are assumable (transferable to a new buyer) with a qualified borrower.
❑ Higher qualifying ratios of 29 percent for housing and 41 percent for total indebtedness are allowed on existing construction; 31 percent for housing and 43 percent for total indebtedness are allowed on new construction.
❑ The underwriting (approval) standards are more flexible.
❑ Gift funds for down payment and closing costs are allowed.
❑ The up-front mortgage insurance premium can be financed.
❑ Less cash is required out of pocket.
❑ The down-payment requirement (as low as 3 percent and never more than 5 percent) is the lowest of any nonsubsidized financing program.
❑ Nonoccupant coborrowers are allowed for qualifying purposes.
❑ The seller is allowed to pay prepaid expenses (closing costs) and can pay up to 6 percent of the purchase price toward closing costs and discount points.
❑ Charges on conventional loans such as tax service fees, underwriting fees, copy fees, and courier fees are not allowed to be charged to the buyer.
Find out more about how FHA loans work from your lender or mortgage broker, or visit HUD’s Office of Housing Web site at www.hud.gov/ offices/hsg/index.cfm.

What is Fannie Mae’s Community Home Buyer’s Program?

This is an income-based community lending model, under which mortgage insurers and Fannie Mae, the nation’s largest supplier of home mortgage funds, offer flexible underwriting guidelines to increase a low- or moderate-income family’s buying power, and to decrease the total amount of cash needed to purchase a home. Borrowers who participate in this model are required to attend prepurchase homebuyer education sessions. With this program, you can use a greater portion of your monthly income toward housing costs compared to other standard mortgage products.
The program also

• Requires a 5 percent down payment
• Does not require one month’s mortgage payment (or cash reserves) in your savings account at closing time
• Provides expanded debt-to-income ratios (you can use up to 33 percent of your gross monthly income for housing expenses each month, rather than the standard 28 percent, and 38 percent for your total monthly debt expenses, instead of the standard 36 percent To be eligible for Fannie Mae’s Community Home Buyer’s Program, you must attend a homebuyer education session offered or approved by your lender.

You can’t earn more than your area’s median income (this varies by your location), and the loan can be used to buy single-family, principal residences, including condos, planned unit developments, and manufactured housing. Learn more about Fannie Mae’s program at the group’s Web site: www.fanniemae.com.