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When I wrote about the HomePath loan program that enabled the purchase of certain homes with a small down payment and no mortgage insurance, I said that this was probably the best thing since sliced bread. The only minor drawback might be the limited number of eligible properties. Today, I'll profile one of two outstanding government-sponsored Down Payment Assistance programs that also require little money down and accommodate a broader array of eligible homes. These programs are funded by federal and state grants for the purpose of increasing home ownership. It's unlikely that we'll ever again see such a convergence of truly low interest rates, low home prices and generous DPAs. This is the time to buy and the city's DPA program is one of the best tools to help you.
The city of South Lake Tahoe's “Homebuyer Assistance Program” offers a deferred-payment “silent” second mortgage (city second) that fills the monetary gap between the loan amount for which the buyer can qualify and the price of the home. The city second is financed at 2 percent interest with a 45-year term, and must be re paid if the home is sold or transferred (unless the new buyer qualifies for the program) and the homeowner would share proportionately in any gains realized upon sale of the property. If you held the loan long enough (45 years), the deferred interest would actually be forgiven. The city second cannot be greater than one-fourth of the value of the home and the program requires a minimum 3 percent down payment, though the non-recurring closing costs (one-time fees associated with the purchase) may be paid (up to a $5K max) by a public grant. By using the right loan product, you can avoid mortgage insurance, saving you $750 in closing costs and over $700 per year in monthly mortgage insurance. There are some other provisions, too, such as the home must be within city limits, the sale cannot displace an existing renter, the home must meet the building codes and be inspected for lead paint (if built before 1978), the homebuyers must attend a city-approved homebuyer education program and the maximum purchase price is $362,790. There are also guidelines pertaining to income limits and the percent of income that can be dedicated to housing expense and general debt, so it's advisable to work with a lender who is fully familiar with the program and to ideally be pre-approved, even before making an offer on a home.
As an example, let's imagine a couple with no children would like to buy a home — though you don't have to be married nor do you even need to have a co-borrower to qualify for the program. In this instance, the family income cannot exceed $46,800 and their house payment cannot exceed $1,443 per month (including taxes and insurance). So if they buy a home for $290K the city second would be as much as $72,500, so they would need a $8,700 down payment, plus the funds to pre-pay their hazard insurance, property taxes, interest and to set up their impound account (altogether, about $3,900). Depending on the decision the automated underwriting system spits out they may need to have a couple of months of house payments in “reserve.” So they need about $13K to move into a truly nice home. Better yet, the payment is only about $1,443 per month including property tax and hazard (fire) insurance. Theoretically, this couple could still qualify with about $500 per month in consumer debt (i.e. student loans, auto loans, credit card debt) though I would advise against this much consumer debt because you'll still have to pay the water, sewer and garbage services in addition to the usual home maintenance.
The City's DPA program is just the assistance that you may need to get into a home for about the cost of renting. And the benefits of home ownership are many, but one of the coolest elements of home ownership is the freedom to “fix up” and personalize your home. Our homes are our nests, our safe havens, and our place to create in the garden or the kitchen. Hokey but true; “Be it ever so humble, there's no place like home”.
— Mark Treiber works with RPM Mortgage located in Roundhill Center. Call 775-586-1130 for more details. To find out more about the City of South Lake Tahoe's Homebuyer Assistance Program contact Lisa Watson at 530-542-6021.
The city of South Lake Tahoe's “Homebuyer Assistance Program” offers a deferred-payment “silent” second mortgage (city second) that fills the monetary gap between the loan amount for which the buyer can qualify and the price of the home. The city second is financed at 2 percent interest with a 45-year term, and must be re paid if the home is sold or transferred (unless the new buyer qualifies for the program) and the homeowner would share proportionately in any gains realized upon sale of the property. If you held the loan long enough (45 years), the deferred interest would actually be forgiven. The city second cannot be greater than one-fourth of the value of the home and the program requires a minimum 3 percent down payment, though the non-recurring closing costs (one-time fees associated with the purchase) may be paid (up to a $5K max) by a public grant. By using the right loan product, you can avoid mortgage insurance, saving you $750 in closing costs and over $700 per year in monthly mortgage insurance. There are some other provisions, too, such as the home must be within city limits, the sale cannot displace an existing renter, the home must meet the building codes and be inspected for lead paint (if built before 1978), the homebuyers must attend a city-approved homebuyer education program and the maximum purchase price is $362,790. There are also guidelines pertaining to income limits and the percent of income that can be dedicated to housing expense and general debt, so it's advisable to work with a lender who is fully familiar with the program and to ideally be pre-approved, even before making an offer on a home.
As an example, let's imagine a couple with no children would like to buy a home — though you don't have to be married nor do you even need to have a co-borrower to qualify for the program. In this instance, the family income cannot exceed $46,800 and their house payment cannot exceed $1,443 per month (including taxes and insurance). So if they buy a home for $290K the city second would be as much as $72,500, so they would need a $8,700 down payment, plus the funds to pre-pay their hazard insurance, property taxes, interest and to set up their impound account (altogether, about $3,900). Depending on the decision the automated underwriting system spits out they may need to have a couple of months of house payments in “reserve.” So they need about $13K to move into a truly nice home. Better yet, the payment is only about $1,443 per month including property tax and hazard (fire) insurance. Theoretically, this couple could still qualify with about $500 per month in consumer debt (i.e. student loans, auto loans, credit card debt) though I would advise against this much consumer debt because you'll still have to pay the water, sewer and garbage services in addition to the usual home maintenance.
The City's DPA program is just the assistance that you may need to get into a home for about the cost of renting. And the benefits of home ownership are many, but one of the coolest elements of home ownership is the freedom to “fix up” and personalize your home. Our homes are our nests, our safe havens, and our place to create in the garden or the kitchen. Hokey but true; “Be it ever so humble, there's no place like home”.
— Mark Treiber works with RPM Mortgage located in Roundhill Center. Call 775-586-1130 for more details. To find out more about the City of South Lake Tahoe's Homebuyer Assistance Program contact Lisa Watson at 530-542-6021.
