Tag Archives: first house

What to Expect when You’re Expecting to be a Homeowner

A little play on a book title, but if you’re like me, you feel better about taking on something new when you’re prepared –whether it’s going to college, starting a new job, becoming a parent or buying your first home. When you understand the process, the task itself isn’t so daunting.

The first thing to realize, as you leap into home-ownership, is the need to get pre-approved for financing. The lending industry is under scrutiny in an effort to protect you, the buyer.  Due to this, lenders are required to prove you have the ability to repay the loan.  This means you will be required to provide supporting documents.  This can become quite cumbersome, and frankly, frustrating.  We understand – believe me!  Our goal is the same as yours … help you get a loan.

The first step is the loan application. To make this convenient, we can gather this

courtesy of Stuart Miles|freedigitalphotos.net

information over the phone, on our internet site or in-person, whatever is best for you.  We need information such as your name, contact information, addresses and employers for the last two years, income, assets and your debts.  The application enables us to obtain credit to determine if you meet today’s credit guidelines, which vary by program and financing type.

From there, if all looks good, we gather supporting documents, such as paystubs, bank statements, etc. This information will initially be reviewed by the loan officer for validity and to determine if income matches what’s on the application, among other things.  It’s important to meet with your loan officer to discuss your options, the costs of buying a home, and most importantly, your comfort level in terms of a payment.

Once pre-approved, you’ll look at houses, and hopefully, will find one you want. At this point, you and your Realtor will draft a purchase agreement stating the terms of your offer – price, closing date, what you may want the seller to pay toward closing costs, earnest money amount and any contingencies you desire, such as having a home inspection.  Assuming you get the “your-offer-was-accepted” call, we move on to the next steps.

You may have chosen to do a home inspection. You will pay the inspector directly; this is not part of the closing costs the lender would have gone over with you.  The inspection will help you determine if you want to move forward on the purchase or not.  Hopefully, you are full speed ahead!

Now that you have a property address and aren’t just a TBD (to be determined) anymore, there will be disclosures that are generated for you to sign. Your lender may mail these, email you a link or sit down with you to sign depending on their process.  At this point, you will receive a loan estimate, which will outline all your costs, including down payment and seller paid costs or down payment assistance, if applicable to your situation.  Your lender most likely went over a similar type estimate at your pre-approval meeting so you had an idea what your costs would be.  The loan estimate is still an estimate but is much closer to actual figures now that we know the price, taxes, rate (if you locked) and closing date.

 

At this point, you can lock in an interest rate. Your loan officer will check to see what rates are for the program you’ve decided to use.  Keep in mind, if using a first time buyer program, they publish their interest rates right out on their sites – so the rate is the same with any lender.  Rate locks have expiration dates – that means we must lock the rate long enough to cover you through your closing date.  And something very important – once locked, you’re locked.  If rates go down after locking, you cannot get a better rate and if they go up after locking, the lender must honor that rate.

Depending on how long the time-frame was between your initial pre-approval and the accepted purchase agreement, the lender may ask for updated paperwork – items that get old, like paystubs and bank statements. Eventually, when your earnest money clears, we will prove that left your account.  And, if your credit report has, or will, expire before your closing date, new credit will need to be pulled.  The life on the report is 120 days.

The lender will process your file, order verifications of income, flood certification, appraisal on the home and title work, among other things. Depending on the lender, the file may go directly to the underwriter, or may hang back while the ordered items come in.  The best advice here – if the lender needs any additional information from you, please provide it in a timely manner to keep your process going as smoothly as possible.

Once all documents are in, including an acceptable appraisal and title work, your loan will go back in for final approval. Either after this, or prior to this, the lender will provide you with a closing disclosure, which you must have in your hands three business days (includes Saturday) prior to closing.  Some lenders require you sign this to acknowledge receipt in that time frame.  This will give you the final figures for your closing.

Now the fun — going to closing and getting the keys to your home! You will sign a bunch of documents, get a check or send a wire for money needed at closing (dependent on your program, down payment, etc) and will possibly have a chance to chat with the sellers to find out more about your new home, and maybe the scoop on your new neighbors!

For most people, this process, starting with the application, will take you 60-120 days depending on your situation and motivation. And for some, it may take nine months or longer J  Either way, hopefully this has given you a little more information on what to expect when you expect to be a homeowner!

Need Money for Closing Costs?

Most of the first time buyer assistance programs require that the assistance you receive, for down payment and/or closing costs, is paid back. Usually it’s paid back over a period of time or the repayment of it is deferred until the house is sold or no longer your primary residence.  Either way, the entity providing the funds gets their money back to help the next home buyer in need.

MN Housing just announced a new grant program which doesn’t require any money to be paid back!  As with all MN Housing programs, there are eligibility requirements.  These vary depending on WHICH MN Housing program you use and there are three of them – Start Up, Step Up and MCC (Mortgage Credit Certificate).  The grant works with all three of their programs AND you can pair it WITH the assistance!

In any case, you still must meet guidelines set forth by the underlying loan type you are securing — FHA, VA, RD (Rural Development) or conventional. If you meet those guidelines, then we look to see if we can layer the loan type with the MN Housing program.

Generally speaking, they have income limits that your household must be under, and as with the underlying loan program, there are minimum credit score requirements. Being a first time home buyer is a pre-requisite for two of the three programs – Start Up and MCC.  And the definition of a first time home buyer is not having ownership interest in a principal residence in the last three years.

The grant is only available when using a conventional loan with your MN Housing program. It cannot be used with VA, FHA or RD.  The grant amount will differ depending on which guidelines your underlying loan is following – Fannie Mae or Freddie Mac.  Who are Fannie and Freddie you ask?  These are the agencies that provide the guidelines lenders follow for conventional financing.  Your lender will determine the best underlying loan for your needs and situation.

To be eligible for the grant, you must have annual qualifying income under $72,320. Qualifying income is the income your lender uses to determine your qualifications for your loan.  For instance, if you are the only one on the loan, but your spouse is not, then the qualifying income is just your income.  This limit is for the 11-county metro area, which encompasses Anoka, Carver, Chisago, Dakota, Hennepin, Isanti, Ramsey, Scott, Sherburne, Washington and Wright Counties.  Income limits are lower in the remaining MN counties.

If using Fannie Mae, the grant amount is a flat $1,500 to use toward your closing costs only.

If your lender determines Freddie Mac guidelines are your best fit, the grant will vary based on the loan amount you’re securing and qualifying income – (which still needs to be below the aforementioned limits).  The grant can be used for BOTH closing costs and down payment.  Minimally, you would be looking at ½% of the loan size, but you could be eligible for a larger grant if your income meets lower limits set for the program.  Any lender participating with MN Housing can give you further details.

As always, when working with a lender, make sure they offer these great programs with MN Housing and any other agencies to help you get into your house with as much assistance as possible. And who can say “no” to grant money!?!

Homebuyer Education that is an A+

Goodness – there is a lot of information available for homebuyers, especially for first time buyers. You can search online and find plenty of information, tips and opinions.  Your family, friends and co-workers are typically willing to give their advice too, not to mention all the books on the subject of home-buying.

With so much information from multiple sources, it can be a little overwhelming, not to mention daunting. There is a wonderful resource that we have in Minnesota that can help take the mystery out of buying your first home and give you the one-stop-shop of homeownership research.

It’s called Homestretch. The Minnesota Homeownership Center developed a required class for people who want to utilize first time buyer assistance programs.  This class, however, is not just for first time buyers.  It’s for ANYONE looking to buy a home.  And so much has changed in lending, that getting a refresher after being a homeowner for years isn’t a bad thing!

The class is eight hours long, but is well worth the time investment – not only for the education piece, but also it enables you, if eligible, to participate in many different assistance programs. Talking to your lender will help you determine the programs you might be eligible for.

Homestretch is taught in many locations which you can choose from and can be found by clicking their link on the right side of my blog. You can attend ANY class that’s convenient for you.  If you’re planning on doing any special assistance program, like Neighborhood LIFT or NSP, you will need to attend a HUD-approved Homestretch class.  Their website can direct you appropriately.  As of this writing, there are no more funds in the LIFT program.

During the class, you will learn about becoming a homeowner, how to prepare for this “move” financially, determine your comfort level for a house payment by completing a budget, learn about credit, different loan types, home inspections, the offer process and MUCH MORE! I know I sound like a commercial for Homestretch, but I truly believe in being as educated as possible about the BIGGEST purchase you will ever make.

The in-person class is really the way to go. Since there are other people in the same situation as you, others’ questions can help you learn more than you would from the manual you receive.  Typically, the class will have a few different presenters, possibly a loan officer, a Realtor or a home inspector, to name a few.  These experts can add more value to the printed material too since they know the ropes!

The Homestretch class does come with a cost and each agency that teaches it will charge a different amount ranging from $20 – $50 (typically per household). Also, there are classes taught in different languages, so if English isn’t your primary language, you may be able to find a live class that meets your needs.

But what if you don’t have time to share eight hours with new home-buying strangers? Then you may opt to take the Framework class which is the online version of Homestretch.  This probably won’t take you as long as the in-person class, but you will still learn the same information.  The fee for Framework is $75.  Depending on the program you end up using, as discussed with your lender, you may want to confirm Framework is an option over Homestretch.  Some programs do require the in-person class.

Regardless of what method of learning you choose, in-person or online, this class is the perfect “starting point” for your home-buying journey. It’s best taken prior to even starting your pre-approval process or shortly after meeting with your loan officer.

Being educated on what to expect, what questions to ask and things to avoid is priceless. Homestretch is definitely the way to go if you’re looking for the one-stop-shop for homebuyer education!

Why Buy?

“Why not?”  is my response to that!  I’ve seen a lot in the two decades I have been in this industry.   The market can change, which is out of our control.  Due to this, there are certainly better times to buy than others, but making an investment in a home is a positive step for most.

As you have seen in the news, rates continue to be near all-time lows.  This won’t last forever.  At a Minnesota Mortgage Association conference I attended, a chief economist from Freddie Mac spoke on predictions.  His prediction is that by this time next year, 30-year rates could be in the 5’s.  Relatively speaking, rates in the 5’s are still good.  Of course, for those of you who were able to take advantage of 30-year rates in the 3’s, this may seem “high.”  It’s all relative.  When I got in the business over 20 years ago, a 30-year was over 9.5% — sure makes the 4’s and 5’s look pretty good, right?

ID-10017957 (1)Appreciation is another great reason to buy.  I understand that since the fall of the market in 2006, our housing appreciation has not been a factor, but overall in the picture of homeownership, you will likely have home appreciation.  In the early 2000’s, home appreciation was obnoxiously high with double-digit value increases.  This isn’t typical and helped play a part in the fall.  That said, it’s quite normal to expect 2-3% increases each year and luckily for most homes in MN, that is currently the trend.

You can thank the federal government for another reason to buy – mortgage interest deductions.  There are discussions in Congress to take this deduction away, which will be a shame if that’s the case.  As of now, the interest you pay on your loan is tax deductible.  Depending on your tax bracket and standard deduction, you may have excess deductions above the standard deduction to reduce your taxable income – meaning less in taxes for you!

There are many programs available for first time and subsequent buyers to help with down payment and closing costs.  In years past, these assistance programs were limited to just MN first time homebuyers.  That is not the case anymore with the popular MN Housing program.  If homeownership is on hold so you can save money, you may want to talk to a lender versed in these programs to see if you are eligible.

Of course, the last reason I have (I am sure there are more)  – is pride in homeownership.  There is something to be said for owning your own home – having a place to call yours, a place you can improve or change at your discretion, a place of safety and a place you can be proud of.  It’s an accomplishment to own and quite a wonderful benefit to be working toward YOUR goals of building equity, versus helping your landlord meet their goals of YOU paying for their property.

Why buy?  Again, my response is, “why not?”  If I can assist in helping you determine how homeownership can benefit you, please let me know.  I am here to help!

Image compliments for jscreationzs/freedigitalphotos.net

No Credit = No Loan … or Not?

You hear all over the news and in advertisements how important your credit score is. I agree … your score is absolutely important and has become the first go-to thing lenders look at. We want to know what the score is, how long you’ve had credit and how well you pay your bills on time.

But what if you’re one of those people who don’t have a credit score? It happens, even to some people who have some credit established. Maybe the history isn’t enough for a FICO (Fair Isaac Corporation) score to be generated or there are just too few items on the report.

credit  cardI’m here to give you some hope. Not all loan programs require a credit score. The main criteria – you must meet the eligibility requirements of a Minnesota first time homebuyer program. In conjunction with this, we will use FHA financing which allows us to evaluate credit not necessarily reported to the credit agencies.

Really, what it all comes down to is what you have for debt obligations outside of a traditional credit report. It’s imperative that we review credit for the lending process. This means we’re looking for accounts that you pay on a monthly basis, ON TIME and over the last 12 months. Our goal is to analyze three accounts, but that’s not set in stone.

So, what do we look at? Are you renting? Are your payments on time? If it’s a management company or apartment complex you pay, we can verify directly with them your timeliness. If you pay a private party, such as a private landlord, or your parents, we want to see the last 12 months cleared checks, or auto withdrawal, from you to demonstrate you’ve paid on time. As a tip, if you’re living at home, it makes sense to pay something to your parents, EVERY month, for 12 months, always due the same time (say, the 1st of the month) and by check. This way, regardless of the amount, we can look at your history as a source of credit.

What about other sources? Here is a quick reference list of items that you may pay monthly that can be used to develope your credit history. This list isn’t all-inclusive, but a way to get you thinking about what you have out there and how it can help you get your first home! Remember, these items must be in your name.

Utilities, cell phone, car insurance, weight loss plans, lot rent for a mobile home, renters insurance, health club payments, child support/alimony paid separately from your work paycheck, Netflix, gaming sites, internet services, lay-away or monthly payments to a doctor

Not all lenders allow the evaluation of credit from these sources, so you’ll want to ask ahead of time. The main idea I want to get across is that having no credit doesn’t necessarily mean no loan. It’s best to find a lender you’re comfortable with and one that has the ability to walk alongside with you to make your dreams become reality! I am here to help if you so desire!

 

Pre-Approved for What?

If you’re a MN first time home buyer or are in the home buying market, it’s crucial to obtain pre-approval.  This terminology can mean different things to different lenders.  How much information are they gathering to determine your eligibility for financing?  Are they just asking some general questions via a website and going off what you entered?  What information are they looking at to confidently send you out looking for a home?   Again, this process varies from lender to lender.  Regardless of who you choose to work with, you want to make sure a few things happen.

Compliments Stuart Miles/freedigitalphotos.net
Compliments Stuart Miles/freedigitalphotos.net

First, you’ve provided an application.  The application provides the lender with the stepping blocks to dig deeper into your situation.  It gives them the keys to check credit — which helps them to know if you meet today’s guidelines for a loan.  For instance, are your credit scores where they need to be?  Do you have any derogatory credit that could prohibit you from obtaining financing?  Or even simpler, do you have enough credit established?

Second, they request supporting documents from you.  I’ve heard many people say that they were pre-approved just off of their credit and information they provided on the application.  My concern is nothing was verified.   Different types of income have different requirements on whether we can use it in qualifying or not.  Without seeing paystubs, W2s, bank statements, taxes, and possibly verifications of employment, we can’t really say if someone’s pre-approved.

Third, they’ve taken the time to go over your options and your comfort level.  It’s all good to be told you can buy a house for $250,000, but do you know what a payment looks like for that size home?  Is it even a payment you’re comfortable with?  What are the costs involved with buying a home?  Are you eligible for any assistance if you’re a MN first time home buyer?  Do you know where you will be getting the money from for down payment and closing costs?

Even more important, for “what” are you pre-approved?  Many people say they’re pre-approved for a certain house price.  And while that is partially true, it’s not really what the lender is approving you for.  Based on your income and debts, you will be pre-approved for a PAYMENT.  This will include principal, interest, taxes and insurance (both homeowner’s and possibly mortgage insurance).

Depending on the home type you want, this payment may also include association dues and if you’re using a first time buyer program, it may include a payment for the assistance you’re getting.  This payment will determine the price of the single family home, townhome or condo you may purchase, BUT, the interest rate, taxes and association dues will truly determine the actual purchase price while keeping you within the payment limit.

There’s a lot to know about getting pre-approved.  The most important thing is education.  Understanding what pre-approval means, knowing your options and being comfortable with these are key.  We’d love to help make sure your pre-approval is a “YES!”

You … from the Underwriter’s Perspective — The Final “C”

We’ve made it to the final “C.”  Thing about this “C,” is it really isn’t about YOU this time, as the title of this blog suggests.  It’s about the home you’re getting a loan on, lovingly known in our world as Collateral.

As lenders, we really want to make sure that the home we’re providing a loan on is a good investment.  Certainly, we don’t want to be left owning the home if anything goes south with your payments, but if it does, then at least we know we have a pretty good chance of selling it.

house dollar symbolIn order to determine the quality and value of the collateral, we order an appraisal on the home.  This is a third-party assessment in terms of value and marketability.  Since you paid a certain price for the home, we definitely want the house to at least be worth what you paid for it.

The appraiser will look at comparable properties to determine value.  They will look at like-styled homes.  If the home you’re buying is a 2-story, then they need to look at other 2-stories.  Comparing the home to a rambler, one-level, isn’t comparing apples to apples.  They’ll look at homes that have closed in the last 6 months or less and are located within a mile of the subject property.  If appraising a townhome, they need to find comparable homes in the same complex, if possible.  Similar size and amenities are important for comparison– number of bedrooms, bathrooms, etc.

Based on the comparables, the value could come in higher, which is great for you, but it doesn’t play at all into the loan.  For instance, if you’re doing 5% down and the appraisal comes in high enough to give you 10% equity, it won’t matter.  All lenders will lend on the LESSER of the appraised value or, in this case, the sale price.

If, however, the value comes in less than the purchase price, you may have to come up with more money.  In line with above, if you’re doing 5% down, the 5% is off the LOWER appraised value.  You’ll have to pay the difference between the price and appraised value.  More than likely, your Realtor will go back to the seller to re-negotiate the price down to the actual appraised value. Hopefully, this works out in your favor!

The appraiser is also looking at marketability.  They will look at the home style, location, as well as any concerning factors — like is the home backed up to an apartment complex or an active railroad?  These things won’t necessarily make it so you can’t get a loan on the home, but they absolutely affect the marketability of the home.

What about the condition?  Is the home in decent repair?  Does it have any major issues — foundation or structural concerns?  How about standing water or peeling paint?  Some of these things can be fixed and could become a “work order.”  The type of financing will determine what items are required to be repaired.

For instance, FHA financing will require any peeling paint, in or out of the home, to be scraped and repainted IF the home was built before 1978.  This is due to the possibility of the paint being lead-based.  FHA is all about safety.  If a work order is called, the work must be completed prior to closing in order to pass the FHA appraisal.  What if the seller won’t do the work?  You an check out the 203K loan we offer to help in this situation.

The appraisal is an opinion.  This is why we have the underwriter look at it as part of your file.  Of course, being that we’re placing a lien against the property, the collateral “C” is a big part of the underwriter’s decision.  But, as explained in the last three blogs, it’s not the only “C.”  As with the others, there is more that’s taken into account with Collateral and this is just a summary.

At least now you have a good idea of what goes into YOU from the underwriter’s perspective.  If I can help you navigate these waters, please give a shout.  It would be my pleasure!

You … from the Underwriter’s Perspective — The Second “C”

As I write this blog, it occurs to me that a borrower is being defined in these posts by what the 4 C’s are.   I want to be clear that I realize you’re a person too, just like the underwriter.  This is why we have underwriters,  people to hear the story, understand the reasons for things and bring the human element to making a loan decision.  No situation is the same, and though guidelines have to be applied to be fair in assessing risk, there is room for interpretation and common sense.

That said, they are still looking at those components that make up a decision.  Today’s blog looks at Capacity.  This has to do with your ability to repay the loan, your ability to afford the payment.  This “C” is two-fold, as it looks at your employment AND your income to see if you’re a good credit risk.

jobConsistency and stability are key with employment.  We need to demonstrate a two-year work history, at a minimum.  This doesn’t necessarily have to be at the same job/employer. Sometimes, if we’re trying to make a case for your line of work, we may go back further.  Some loan types will allow being a full-time student as part of your work history.

People often ask how long they have to be on a job after they’ve been off work.  Maybe they were laid off, had a medical situation or even stayed home with kids.  Whatever the reason, if you were unemployed for over 90 days, more than likely you’ll need to be back to work for six months.  The biggest thing to note, is that working in a temporary position or for an agency, even if full-time, doesn’t work for qualifying, because it’s just that — temporary.

And what about job-derived income?  Normally, we look at what your average hours per week are or your base salary is to compute income.  Some people get overtime, bonus or even commission.  In order to use this income for qualifying, there needs to not only be a two-year history of receipt, but it needs to be increasing or at least stable.

What if you hold two jobs?  The quick answer — it depends.  In most instances, to use income from both jobs, we need to prove you’ve worked two jobs for the last two years concurrently.  And what about the job your spouse has even though he/she isn’t on the loan?  Unfortunately, we cannot use their income unless they’re obligated on the loan with you.

What if you don’t work?  The question then becomes, where is your income derived from?  Do you receive pension, disability, retirement, social security, alimony, child support or even dividends from assets?  These can all be considered as income assuming a few things — we can show a history of receipt and can we determine that the income will continue for another three years (some of the above don’t have the 3-year rule). The length of history required varies on the type of income.  For social security, we may just want two months; but for support, we may need six months of on-time receipt.  Again, they all have different rules per type.

All income is looked at in relation to your monthly, recurring debts to determine the actual qualifications.  We look at “gross” income, before taxes, to calculate your ratios — the percentage the underlying program allows you to spend on a house payment.  A typical ratio is 45% of your gross monthly income can go toward your monthly debts AND the house payment.  These vary by program.

As with credit, there are certainly more things to know about this topic.  The main gist is everyone is different, as is their situation.  It’s best to chat about yours to prepare you for your homeownership journey.  Next up, Cash!

 

Dakota County Program Just Got Better!

MN first time homebuyers buying in Dakota County have a few new reasons to celebrate!  The Dakota County Bond program has made some great improvements to their popular MN first time buyer program with regards to their household income calculation, income limits and down payment assistance amounts!  This is fabulous news!!

As the name implies, this program is for homes purchased in Dakota County and is only available for first time buyers — meaning you haven’t owned a home in the previous three years.  The other MN first time buyer program via MN Housing, does have a down payment and closing cost assistance option for non-first time buyers, as well as MN first time home buyers.

courtesy of Stuart Miles|freedigitalphotos.net
courtesy of Stuart Miles|freedigitalphotos.net

Dakota Bond has three down payment assistance options, depending on your household income.  As shared in a previous blog, household income used to be defined as ALL income derived by ANY person, over the age of 18, who will be living in the new home.  They recently revised this to be in-line with MN Housing’s new definition — income is calculated from the person on the loan, any other person on the loan AND living in the home or the borrower’s spouse, whether on the loan or not.

Their assistance can be used with an FHA or VA loan (must be a Veteran to qualify for VA).  The amount of assistance was previously calculated off the loan amount, but is now calculated off the purchase price — offering MORE money to use for down payment and closing costs.

Here is the break down of their assistance programs — the one that changed was for those people in the higher income category — it went from 2.5% up to 3.5% and now has a higher max loan cap — currently $7500, as is the 5% option.  The max loan amount is $10,000 under the 10% option! (more household size info can be found on their site)

Household
Size
10% of Purchase Price
5% of Purchase Price
3.5% of Purchase Price
1
$28,850
$45,100
$83,900
2
$32,950
$51,550
$83,900
3
$37,050
$58,000
$96,485
4
$41,150
$64,400
$96,485

As with all MN first time home buyer programs, you must attend the Homestretch class.  This course is offered through the MN Homeownership Center.  There is an online version, but if you opt for this, you still need to do a one-on-one session with Dakota County.  Because I feel strongly about education and learning from your peers, I highly recommend the 8-hour,  in-person class.

The assistance from Dakota County is an interest-free, deferred loan.  When you refinance, sell your home or your home becomes non-owner occupied, you must pay the assistance back.  There is also a minimum investment of your own funds of $1000.

Also available with Dakota County is the MCC — Mortgage Credit Certificate.  This can create a $2000/year tax credit.  In a nutshell, 35% of the mortgage interest you pay each year can be used to offset a tax liability, up to $2000/year.  I am happy to explain this further, but an accountant is the best person to advise if this is a beneficial option for you.

We are very fortunate in Minnesota to have so many wonderful programs to help MN first time home buyers obtain their homeownership dreams.  It would be my sincere pleasure to discuss your options to see which programs best fit your situation!

Deferred Loan with MN Housing = MORE Assistance!

MN first time home buyers now have a better opportunity to get down payment assistance! MN Housing recently increased the available assistance on their Deferred Payment Loan program, making this down payment assistance program an option for many more MN first time home buyers!

Currently, there are three types of assistance with MN Housing via their Step Up program. The first, and most popular, is the Monthly Payment Loan.  Just as the name implies, there is a monthly payment tied to this assistance, but it offers the most money for down payment and closing costs.  The assistance is equal to 5% of the sale price with no maximum loan.  The monthly payment for this loan must be taken into account when your qualifications are determined.

my houseRates on the second loan assistance are the same as the first loan and the loan is amortized over 10 years.  As with all MN Housing loans, there are no pre-payment penalties on the first loan OR the second loan assistance.  This is the most used assistance because it has the same income limits as the general MN Housing program — household of 1-2 people is $83,900 in the 11-county metro area.

The new change, which is very exciting, has to do with the Deferred Payment Loan, which is the second type of assistance with MN Housing.  Again, as the name implies, it’s still a loan, which is interest-free, but it’s deferred.  That means, when you sell the home, or the home no longer is your primary residence, you have to pay the assistance back.  Ready for the new changes that will open this to more people?  First, the income limits have been increased from $50,000 to $60,000 for a 1-4 person household in the 11-county metro area.

Second, they raised the amount of assistance.  It used to be 5% of the sale price, with a max loan of $4500.  Though this is helpful, it just wasn’t enough.  The assistance is still 5% of the sale price, but now the maximum assistance is $7500!  This is HUGE.  The main reason — you can get more assistance and there is no monthly payment to consider when determining what you qualify for.

The last assistance program with MN Housing is Home Help.  This is also a deferred payment, interest-free loan which has a forgivable feature.  As long as you live in the home as your primary residence for six years, 50% of the loan amount will be forgiven.  Nice, right??

The Home Help loan has different income limits, lower than the the Deferred Payment Loan, which can be found on their site.  It also has a different calculation for the loan amount, which is determined by their online calculator, but it could be as much as $10,000!  There are some specific guidelines with Home Help which I would be more than happy to guide you through to determine if Home Help is the program for you.

MN Housing has many down payment assistance programs for MN first time home buyers.  For the most part, the appropriate program will be determined by your household income.  Since there are many factors that go into figuring household income, as well as whether the program works for your situation, you need to work with an expert and I can help!  I look forward to guiding you through the MN Housing programs and on your way to homeownership!