First Stop 4 Home Loans

The past few years have been sensational with first time buyer programs and rates. Recently, a few of the popular programs REDUCED their rates again, making this an even better time to “go all in!”

MN Housing, a program that is well known throughout the Minnesota area, has got a few programs. One of their programs offers no assistance, BUT, a low rate of 4.125%* That is incredible!  And, if you want, or qualify for, down payment assistance, you could be looking at 4.5%. All of these rates are subject to change, are 30-year fixed terms and have NO pre-payment penalty!  Keep in mind, they do have a recapture tax, which all subsidized bond programs have.  Don’t let this scare you though … most people don’t have to worry about this when they sell.

Another great change occured with the City Living Program. This is the program availalbe to homes in the cities of Minneapolis and St. Paul. They reduced their rate to 4.25% AND increased their down payment assistance from 2% of the loan amount up to 2.5%! Plus, you may be eligible for funds in certain neighborhoods making the pot even sweeeter!

The Dakota County program also dropped their rate — so 4.35%. They offer 3 different tiers of assistance depending on your household income. And speaking of household income — all the programs have adjusted these limits down just a tad, so please inquire if you’re interested in pursuing one of the programs.

Remember, you’re only a first time buyer once and if you can take advantage of a special program to reduce your rate and possibly help with costs, do it!!!
*Assumes an FHA or VA loan

For almost a year, we have been at historically low interest rates.  With 30-year fixed rates under 4.5% and 15-year rates under 4.25%, it’s no wonder people are refinancing their homes or buying new homes.  Though what is surprising is that there aren’t MORE people taking advantage of this. 

Rates are Grrrreat!

For the first-time buyer, the special programs have had LOWER-THAN-MARKET interest rates.  Not only do they offer these competitive rates, most have an option to get down-payment assistance.  The down-payment assistance, in most instances, is actually a second loan that is placed against the home.  The assistance is a zero-interest loan with no payments.  Because it’s a lien on the home, it must be paid when you either sell the home or refinance.  It will be due to a sale since there will be NO reason for you to refinance your loan, ever.  Rates are just too low.

So what about the first-time program rates?  Below is a listing of a few of the most popular programs and what their current interest rates are.  Please keep in mind, these rates are as of this post date and are subject to change at any time.  This is more to show you just how crazy-low rates are.  And yes, these are all 30-year fixed rates, no additional points being charged and no pre-payment penalties.

• Dakota County Bond:  for homes in the Dakota County area — 4.25% — FHA or VA loan
• City Living:  for homes in the city limits of St. Paul and Minneapolis — 4.25% with assistance or 3.99% with no assistance — FHA or VA
• MN Housing:  available in the 11-county metro area — 3.75% (FHA/VA) with no assistance up to 4.5% (conventional) with NO down payment and NO PMI (private mortgage insurance)

A few of these programs can also be used in combination with the FHA 203K rehab loans.  A great way to get into a home that may need some work or that may NOT meet FHA guidelines.  All of these programs have special requirements for owner-occupancy, household income limits and sales price limits.  Feel free to contact me with further questions or to see if you qualify for one of these great programs!

What is the Take Credit program?  It’s a great opportunity to save money yearly on your taxes.  And what a better time to think about taxes when we are so entrenched in them right now!! 

Take Credit is a Mortgage Credit Certificate program, not a loan – it gives you a credit EACH year in the amount equal to 20% of the mortgage interest you claim yearly to use toward your tax LIABILITY.  Okay, so that’s weird … who wants a tax liability?  Wouldn’t it be better to get money back?  Great questions!  You actually WANT to owe money at the end of the year.  To make this so, you would increase your W4 exemptions for federal withholdings.  This way, you’ll get more money back in your paychecks, pay less in for taxes to the government and then, will have a liability that you can use this credit against.

First time buyers can take advantage of this program in the city boundaries of Minneapolis and St. Paul.  You must be a first time buyer, which means you could not have owned a primary residence in the last three years.  We prove this fact by getting the last three years of your tax returns.  Here are some numbers to know for limits:

$83,900 – maximum household income for 1-2 people

$92,290 – maximum household income for 3+

$276,870 maximum sale price limit

There is no “special” rate for this program because again, it’s not a loan.  You will use this with an investor that allows for the MCC.  So I suppose you want a visual?    I can do that, but first, one thing to know if you don’t … 100% of  your interest on your mortgage as a homeowner is tax deductible.  With this program, that is reduced by the 20% credit, so now you can only write off 80% of that interest.  For example (finally, huh?):

$175,000 Loan Amount

5.5% Example Rate on a 30-Year Fixed

$994  Monthly Principal and Interest Payment

$9566 Total Interest Paid in Year One

$1913 — 20% of the Total Interest Paid, Mortgage Credit

That’s a pretty big number to be able to have as a liability.  Think about it.  If you were normally getting $2000 BACK, then you have $3900 to work on getting throughout the year by changing your W4s.  How do you even start determining what that W4 change should be?  You can certainly see your HR person or accountant.  Or, you can visit a great IRS website to run some scenarios.  Doesn’t it seem like you’re taking money from the government??  Let’s not go that far, but hey, I am sure they owe you something!!

A few things to note.  The MCC program cannot be used with a Mortgage Revenue Bond program, i.e. first time buyer program that uses interest-free bonds to give you a lower-than-market rate.  This program DOES have a recapture tax, which I will address in Tips & Tidbits post soon.  You can do a FHA, VA or Conventional financing and the loan must be a fixed rate.  With rates as low as they are on 30-year mortgages, it would be silly to do an Adjustable Rate Mortgage anyway.  Something you may be wondering … is it a “use it or lose it” kind of program?  Sort of.  You can carry over any unused portion for up to three years.  So let’s say in the example above you owe $1000 to the government.  Due to your credit, you owe NOTHING, but you still have $913 to use for next year’s taxes, which means you need to get on adjusting your withholdings up ASAP.  Let’s say your liability is actually $2000.  Then, you still owe the IRS money, but in that example, it’s only a mere $87.  Pretty sweet deal, huh?

One of the best parts??  If getting money toward your liability wasn’t enough, right?  If you do FHA financing, which so many people are doing these days, we can use that 20% as assistance to help you QUALIFY for more!  Yes, you heard me right.  So, using that same example of your $1913 credit.  If you divide that by 12 months, your credit PER MONTH for qualifying purposes is $159.  In real dollars, that means if you kept the same house payment, you could INCREASE your purchase power by about $20,000, depending on property taxes and homeowner’s insurance.

So why don’t people do this program or why haven’t you heard of it?  First, most lenders don’t do the MCC program and why, I don’t know.  There is a cost to you of $575.  You can see though, that one-time fee is WAY worth the financial benefits you will see yearly.  So, if you need help qualifying for more house in the cities of St. Paul and Minneapolis … I can help and would love to!

If it wasn’t great enough that we just got a new issuance of money in the Dakota County area; we now have NEW first time buyer money in the Minnapolis and St. Paul area under the City Living Program. This money is just available in the geographical limits of the Minneapolis and St. Paul area, so no other areas of Hennepin County or Ramsey.  Having this program available is such good news. 

How do you qualify for this?  First, you must be a first time buyer, someone who has not owned a primary residence in the last THREE years.  There are income limits you must fall under and HOUSEHOLD income is calculated off all members in the household over age 18.  Here are the limits:

83,900   1-2 person household

92,290   3+ person household

There is also a purchase price limit of $376,870.  You cannot go over $1 above this!  I don’t think you’ll have any problem since this limit is quite sufficient to handle any properties that are perfect for first time home owners.  The sale price/purchase price limit is $376,870.  Another thing to know is NO personal property can be included in your purchase agreement.  That means anything that isn’t attached to the home — applicances are the most commom.  Don’t panic though — you will still be able to get these things agreed upon.  You definitely want to make sure you’re working with a knowledgable agent in this area.  I have a few partners that I can highly recommend!

Want the REALLY, REALLY good news?  Rates … and it’s all about rates isn’t it?  It shouldn’t be; but again, that’s another post.  Please note that you still must qualify for a regular loan.  Here’s the way I like to explain this.  As a buyer, you need to qualify or meet the guidelines for an FHA, VA or conventional loan.  Let’s call this the “Cake” you’re dying to eat!  Once you’ve got this qualification, then we can see if you meet the guidelines for the City Living program, which we’ll call the “Icing”.  If you’re like me — cake is ONLY good with icing!  So, again, you have to qualify for the cake and then have to meet the qualifications to get the icing drizzled all over it.  Nummy.  The “Sweet” taste of this is a rate of 4.75% on a 30-year OR a rate of 4.99% WITH 2% of the loan amount to be used toward down payment or closing costs.  Another important point, you DO need $750 of your own  money into the transaction, which cannot be a gift. 

They will FORGIVE this second loan if you occupy the home for 7 years.  If you sell under this time, the full amount you got for the second loan is due.  Fortunately, this loan is 0% interest and NO payments are ever due during your loan.  It’s like getting a “loan” from Mom and Dad — “just pay us back when you’re done with it”.  So, you sell, you pay back.

Since this is a first come first serve program, you definitely want to make sure that you’re not only pre-approved with a lender that knows these programs, but also knows how to explain the important nuances of them.  I can help you navigate the waters and make sure you’re sailing strong  during your trip as a first time home owner!!!!!!!

Can you say FINALLY???  We have been waiting patiently, or maybe for some, impatiently, for more money to come available.  It’s here.  And a week later, you will see money come out in the cities of St. Paul and Minneapolis for the City Living program – very similar to this.

The skinny on this first time buyer program?  Well, you need to be one, which means you could not have owned a home in the last 3 years.  Because this is a bond program, you will be offered a lower than market rate and good news … it doesn’t change with market volatility.  The rate is 4.99% AND depending on your household income, you could qualify for up to $10000 in down payment assistance.  The first time buyer assistance isn’t forgivable, meaning you need to pay the zero interest, down payment money back when you sell.  If you get $7000, then you pay back $7000.  It’s pretty cool — here’s money to help and just give it back when you’re done using it.  Oh is this awesome!

There are sale price and income limits for this program, as with all bond programs.

$83,900 1-2 person household

$92,290 3+ household

Maximum Sale price is $276,683

This isn’t like the other first time program they had called Silver Lining.  It’s not as restrictive.  No crazy strings like the house needs to appraise at 1% higher than the purchase price and there is no requirement for a special home inspection.  One thing that IS required is you have to attend the Homestretch class where you can sign up at http://www.hocmn.org .  If you’ve taken this course, it’s acceptable to use your current certificate of completion pending it’s not over a year old from the date of closing on a house.

So, now you have the AFTER closing tax credit up to $8000 and you can get up to $10000 BEFORE your purchase to use toward down payment and closing costs.  By all means, please call if you have any questions or want to take advantage of this program.  It’s first come first serve, so get out there and buy some of those great deals in Dakota County.  Oh and one important point, you DO need $750 of your own  money into the transaction.  This cannot be a gift.

By the way, not all lenders have access to this program.  Make sure you’re working with an expert in first time buyer programs.  It’s important you’re educated on how the program works, what the recapture tax is and other parameters for the program.