Out with the Old, In with the New

In August, MN Housing retired one of their popular MN first time homebuyer programs – Home Help. This program was very beneficial for borrowers with lower incomes and allowed a borrower to get a larger amount of down payment assistance – up to $10,000, as a deferred loan. Home Help had some obstacles making it a little more difficult to obtain, such as a special home quality housing inspection. Though the borrower qualified for the program, the home may not have.

Fortunately, MN Housing didn’t leave us hanging without a replacement – one that’s similar in terms of assistance, but different in that the previous obstacles are now gone!  As of October 1, 2014, MN Housing is now offering the Deferred Payment Plus program (DPP for short). This is a secondary alternative to the current Deferred Payment Loan program.

For some clarification, a deferred payment loan is just that – deferred. There is no interestID-100246872 rate tied to it and no monthly payments are required. Full repayment of the loan is due upon sale of the property, or when it’s no longer your primary residence, or if you were to refinance the home without using a new MN Housing loan.

The current Deferred Payment loan allows a borrower to get up to 5% of the sale price with a maximum assistance amount of $7,500. For a household of 1-3 people, the maximum household income is $60,000. Larger households have higher income limits depending on the number of members. Household income is defined as ANY income derived from any of the borrowers on the loan, whether consistent or not, as well as any spousal income from a spouse NOT on the loan.

You could qualify for more than the $7500, depending on your need, with the Down Payment Plus program. To qualify for more funds, which go up to $10,000, there are some additional parameters that must be met. At least TWO of the following items must apply to your situation in order to be eligible for the higher assistance.

  • You’re a single head of household with dependents
  • You have a household of four or more people
  • One of your household members is disabled
  • Your front end ratio is over 28%

The first three are pretty simple to understand. The fourth parameter, the “front end ratio,” may need some explanation. As lenders, we look at how much of your GROSS monthly income is used toward your house payment, which we call the front end or “housing” ratio. We also look at how much you spend toward your housing AND other monthly obligations, this we call the “debt” ratio. For the “front end ratio” to be one of the two items for you, the proposed housing payment must be higher than 28% of your gross monthly income. Your approved MN Housing lender will help you determine this.

The DPP loan with MN Housing is a wonderful opportunity to help you and your family make homeownership attainable. With all the MN Housing programs, there are other qualifying parameters. You can find further information about these requirements on their site or allow us to go over those guidelines with you. We’d love to help determine your eligibility to make your home buying dreams a reality!

Image compliments of Stuart Mills – freedigitalphotos.net