Help for down payment on a home.
On this week’s Real Estate Insight from The Freund Group, we spoke with Clifton Saunders with Rapid Pro Mortgage about assistance programs to help buyers with the down payment and closing costs associated with buying a home. Clifton is an expert on these programs in our area and he knows them inside and out.
It is often that we talk with buyers who have credit that is good enough to qualify for a loan but have not been able to save enough money to cover closing and down payment costs. Often these buyers get discouraged because their dream of owning a home seems out of reach. If you are in this situation there are options out there to help get into a home.
There are many types of home buyer assistance programs available and qualifying for the grants and programs isn’t too terribly difficult. There are state level programs, county level programs and city level programs. Words of advice from Clifton “Always think of different programs .” Do your research and see what is out there and what you may qualify for. State bond programs allow buyers to get in fast and easier than City and County level programs. Generally, the State bond programs are through TDHCA (Texas Department of Housing and Community Affairs), SETH (Southeast Texas Housing Finance Corporation), TSAHC (Texas State Affordable Housing Corporation). Each program can be found online. Many of the programs are now offering a higher income bracket to qualify.
It’s simple to qualify for a grant program: you will need a credit score of 620 or higher and typically make less than $76,600 a year in Harris County (SETH is $79580 in Harris County and Galveston County and jumps to $95105 in Brazoria county). If you are a little over this range be sure to talk to your lender because your income may be able to be adjusted. You don’t have to be a first-time home buyer to qualify for these loans. First time homebuyers are those who have not owned a home in the last three years. For an FHA loan you will typically need to make below $76,600 and for a conventional loan with a credit score of 680 or higher, you can make up to $115,000 to qualify. As stated above, the income limit changes from county to county.
How much money is available to me for assistance?
The amount varies 3-6% of sales price based on your credit score and the type of financing. In most cases buyers will get about a 4% grant. This should be enough for the down payment but not enough for all closing costs. In some cases, with higher credit scores, a buyer can get up to 6% and this can be used for the down payment and a large part of their closing costs. If the seller is willing to pay closing costs, then with a grant program paying down payment, a buyer could go to closing without any costs. It is safer bet to start saving your money now so you can be ready if the seller doesn’t cover closing costs.
“I have had deals where buyers have put earnest money down and the grant programs will allow the grant to be used for the earnest and the buyer will get that earnest money back at closing and the buyer can in some cases they will get into the home with no money out of their pockets.” Clifton Saunders
If the property is priced right and can be pushed a little, then sometimes the buyer can get the seller to pay some of their closing costs. On a loan, every $1,000 you add to the sales price is only changing the payment $5 a month. To get a seller to pay closing costs in this market, buyers will most likely be paying asking price or above. Have your agent run comparable sales because the house will need to appraise for sales price.
The Tax Credit program can be used along with a grant program. The tax credit program has been around for years. It refunds 30-50% of the interest the buyer pays on the loan for the life of the mortgage up to $2000 a year. Home owners can pay off their home 7 years faster. A Tax credit is a dollar per dollar refund from the government. On the other hand, tax deductions lower your taxable income and they are equal to the percentage of your marginal tax bracket.
How long does it take to get the grant money and what does a buyer must do to get it?
The misconception is that all grant programs take 60 to 90 days to close. Some do take longer but those through SETH, TDHCA, and TSAHC are generally quicker. These take a much shorter time to process and receive than other programs. The program should be applied for at the time of mortgage application. The buyer will take a short 8 hour buyer education course that can be done online. This way, the course can be broken up in daily segments. Typically, a grant will only add 3-4 days to the contract process. Contracts still close in about 30-35 days.
Can I have a foreclosure and still qualify for a grant?
Absolutely you can still qualify with a foreclosure on your credit. Typically, you can qualify for a grant three years for FHA and seven for conventional after a foreclosure and waiting the three years qualify you to be a 1st time home buyer again. There are exceptions to the length of time after a foreclosure. An exception for less of a time span would be proof of a medical illness. In this case, you can qualify for a grant (if approved) in as little as 1 year after a foreclosure.
How does someone who is interested in applying for a program get started?
1.) First and foremost know if you qualify. Typically if you have a greater credit score than 620 and meet the income requirements you will quality.
2.) Next, contact a local, trusted lender such a Clifton Saunders with Rapid Pro Mortgage. Your lender will then take the steps necessary to get you approved for a program.
3.) Once approved with the lender contact your Real Estate agent and start looking at homes.
Also another thing to add, VA buyers can also apply for these programs.
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If you are ready to start your search for your dream home but need some guidance on the available programs offered for home buyers, please give us a call today! 281-479-6683.