Helping to make buying a home more affordable

Transcription

1 Helping to make buying a home more affordable

2 What we ll cover 1. Are you ready to be a homeowner? 2. Overview of programs to help make buying a home more affordable 3. Types of programs available to you 4. Homebuyer programs in action 5. What s next? 2

3 Are you ready to be a homeowner?

4 Let s find out! Ask yourself: - Can I afford to buy a home? - Do I have room to adjust my budget to allow flexibility? - If I bought a home, would I still be able to put money into savings? Determine how much you can comfortably afford to borrow To buy a home you will need: - Good credit - Employment and verifiable income - Money for upfront costs: Down payment - 3.5% to 20% of the purchase price Closing costs - 3% to 7% of the loan amount Please watch our "Preparing for homeownership" webinar for more details or download the summary here 4

5 Overview of programs to help make buying a home more affordable

6 Overview of affordable housing programs Bank of America participates in many programs that could help make home ownership more affordable. These programs are created and offered by state and local housing agencies, nonprofit organizations and employers. Together with an eligible loan, these programs can offer: - Cash to help you at closing - A reduced price in your property - Monthly payment assistance 6 Eligibility for these programs may depend on: - Your income - The location of the house you are buying - The price of the home - Being a first-time homebuyer

7 Types of programs available to you

8 Cash to help homebuyers at closing Down Payment Assistance Programs (DAPs) Down payment assistance programs are offered by government agencies and nonprofit organizations - They can be combined with most first mortgage loan types to help make buying a home more affordable Most programs have specific eligibility requirements, including income limits, purchase price limits, first-time homebuyer requirements and/or location restrictions Eligible borrowers sign a note or security document creating a second loan; the note explains the terms of repayment Second loan payments are usually deferred or forgiven, * giving borrowers more purchasing power since no immediate payment is required *Potential tax implications, consult your tax adviser. 8

9 Cash to help homebuyers at closing Grants Offered by government agencies and nonprofit organizations, and available for most first mortgage loan types Grants may be used for a portion of the borrower's down payment and/or closing costs There is no second loan created; repayment is not required 9

10 Cash to help homebuyers at closing Employer Assisted Housing (EAH) Programs Employers can provide their employees with down payment and closing cost funds. - These programs may be offered in the form of a second loan or a grant EAH programs are available with most first mortgage loan types EAH programs do not usually have income limits, purchase-price limits or first-time homebuyer requirements, but generally offer favorable terms, such as reduced interest rates or flexible repayment terms 10

11 Reduce the sale price of the property Deed Restrictions State or local government agencies may require builders to set aside a certain percentage of a new housing development as affordable housing units for modest income borrowers The affordability is secured by a Deed Restriction (also known as inclusionary zoning) Deed Restrictions limit the sales price of affordable homes, usually calculated to allow families at a specific percentage of area median income to qualify For all Deed Restriction programs, the calculation of the loan to value follows first mortgage guidelines, the lower of the sale price or appraised value Most Deed Restrictions include a resale price restriction and/or first right to purchase for the agency 11

12 Monthly payment assistance Mortgage Credit Certificate (MCC) Housing Agencies may issue Mortgage Credit Certificates (MCCs) to eligible homebuyers in their area, which permits eligible borrowers to claim a direct credit of a portion of mortgage interest paid each year borrowers can use this credit against their tax liability, which reduces their federal income taxes and frees up more funds to qualify The MCCs are issued directly by the agency to the borrower, MCCs are not issued by lenders The tax benefit is used as income when calculating ratios Most programs have specific eligibility requirements, including income limits, purchase price limits, first-time homebuyer requirements and/or location restrictions 12

13 13 Monthly payment assistance Section 8 Housing Choice Voucher Programs Known as Housing Choice Vouchers, this program is offered by Public Housing Authorities Existing Section 8 Rental Assistance recipients may have an opportunity to convert rental assistance to mortgage payment assistance The monthly mortgage payment assistance is used as additional income to help borrowers qualify for a first mortgage Section 8 Programs may be combined with most first mortgage loan types Most programs have specific eligibility requirements, including income limits, purchase price limits, first-time homebuyer requirements and/or location restrictions

14 Homebuyer programs in action

15 Example of how a homebuyer program can help you Kristina, a first-time homebuyer with modest income, is interested in purchasing a new home. 15

16 Example of how a homebuyer program can help you Kristina, a first-time homebuyer with modest income, is interested in purchasing a new home. Sale price: $174,000 16

17 Example of how a homebuyer program can help you Kristina, a first-time homebuyer with modest income, is interested in purchasing a new home. Sale price: $174,000 To help qualify for a mortgage loan, Kristina needs: Steady income Good credit Cash for down payment Cash for closing costs 17

18 Example of how a homebuyer program can help you Kristina, a first-time homebuyer with modest income, is interested in purchasing a new home. Sale price: $174,000 To help qualify for a mortgage loan, Kristina needs: Steady income Good credit Cash for down payment Cash for closing costs Kristina currently has: $49,000 steady annual income Good credit $5,220 in savings for closing costs 18

19 Example of how a homebuyer program can help you Kristina, a first-time homebuyer with modest income, is interested in purchasing a new home. Sale price: $174,000 To help qualify for a mortgage loan, Kristina needs: Steady income Good credit Cash for down payment Cash for closing costs Kristina currently has: $49,000 steady annual income Good credit $5,220 in savings for closing costs She does not have enough money for a down payment. Her lender is requiring 3.5% of the purchase price or $6,090 as down payment for an FHA loan. Note: This scenario is for example purposes only. Some lenders may have additional requirements. 19

20 Example of how a homebuyer program can help you Kristina might be ready to buy a new home sooner than she thinks. After confirming she has met all qualifications, Kristina is able to use a down payment program to provide her entire down payment on an FHA loan. 20

21 Example of how a homebuyer program can help you Kristina might be ready to buy a new home sooner than she thinks. After confirming she has met all qualifications, Kristina is able to use a down payment program to provide her entire down payment on an FHA loan. $167,910 loan from lender 21

22 Example of how a homebuyer program can help you Kristina might be ready to buy a new home sooner than she thinks. After confirming she has met all qualifications, Kristina is able to use a down payment program to provide her entire down payment on an FHA loan. $167,910 loan from lender $6,090 down payment assistance from nonprofit 22

23 Example of how a homebuyer program can help you Kristina might be ready to buy a new home sooner than she thinks. After confirming she has met all qualifications, Kristina is able to use a down payment program to provide her entire down payment on an FHA loan. $167,910 loan from lender * $6,090 down payment assistance from nonprofit $174,000 to purchase her new home *Upfront mortgage insurance (UFMIP) is required, 1.75% of the loan amount, to be paid at closing or financed into the loan amount. 23

24 What s next?

25 What to do next To learn about programs that can help with your down payment and closing costs, get in touch with a Bank of America mortgage specialist. Ask a mortgage specialist or housing agency about a program s eligibility guidelines and requirements: - Is homebuyer education required? - Is this program for first-time homebuyers only? - Are there income limitations? - Is there a purchase-price limit? - Are there location restrictions? 25

26 Resources Find a Nonprofit Housing Counseling Agency at HUD.gov; on the site select Resources, then select HUD Approved Housing Counseling Agencies Watch our consumer education webinar replays by clicking the "previous webinars" tab on bankofamerica.com/webinars - To learn more about homeownership, watch our "Preparing for Homeownership" webinar - To learn more about budgeting, watch our "How to prepare a budget and stick to it" webinar - To learn more about credit, watch our "Understanding and managing credit" webinar Online resources - Home Loan Guide at bankofamerica.com/homeloaneducation - Better Money Habits at bettermoneyhabits.com Have more questions about what you learned today? us at webinars@bankofamerica.com To find an experienced mortgage specialist: - Call us at Visit mortgage.bankofamerica.com 26

27 27 Questions?

28 Thank you We appreciate you joining us today. Please take a moment to complete our survey. Down payment and/or closing cost assistance programs may not be available in your area. Down payment and/or closing cost assistance amount may be due upon sale, refinance, transfer, or repayment of the loan, or if the senior mortgage is assumed during the term of the loan. Some programs require repayment with interest, and borrowers should become fully informed prior to closing. Not all applicants will qualify. Minimum credit scores may apply. Sales price restrictions and income requirements may apply. Homebuyer education may be required. Owner-occupied properties only. Maximum loan amounts may apply. Credit and collateral are subject to approval. Terms and conditions apply. This is not a commitment to lend. Programs, rates, terms and conditions are subject to change without notice. Bank of America, N.A. Member FDIC. Equal Housing Lender 2014 Bank of America Corporation. All rights reserved ART9DX55 PRES