Overcoming the Down Payment Hurdle. Course #: Provider #: 0001

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1 Overcoming the Down Payment Hurdle Course #: Provider #: 0001

2 Meet Ann & Doug Foxworth

3 About TSAHC The Texas State Affordable Housing Corporation (TSAHC) is a nonprofit housing corporation created at the direction of the Texas Legislature to facilitate the creation of safe, decent and affordable housing for low income Texans. TSAHC accomplishes this by:

4 BUY Homeownership Initiatives TSAHC s homeownership programs were created by the Texas Legislature. Two types of assistance are made available to home buyers. Loans with Down Payment Assistance 30 year fixed interest rate loan DPA is a gift to the home buyer No first time home buyer requirement Purchase & refinance options available Government & conventional loan types TSAHC sets rates daily Mortgage Credit Certificates Special annual mortgage interest tax credit Exclusive for first time home buyers Can be combined with TSAHC s DPA options Saves home buyer thousands of dollars over the life of the loan

5 Government Loan Options FHA, VA or USDA loans with either 3, 4 or 5 points of NET down payment assistance DPA is based upon total loan amount The lower the amount of DPA, the lower the interest rate Check TSAHC s website for current rates DPA is a gift that never needs to be repaid = No second lien You do NOT have to be a first time home buyer DPA can be used to cover down payment minimums, closing costs or reduce principal loan balances Perks of choosing our 5 point DPA option: Loans with 95% LTV or lower receive a MI rate of 0.80% compared to standard 0.85% with a FHA loan Lower funding fee of 1.50% compared to standard 2.15% with a VA loan

6 Conventional Loan Options HFA Preferred A special Fannie Mae conventional loan only available to agencies like TSAHC Provides 3, 4 or 5 points of NET DPA DPA is a gift that never needs to be repaid = No second lien Mortgage insurance can be cancelled when loan reaches 78% LTV It has all the benefits of a traditional conventional loan with some added perks: 97% LTV (only 3% down payment required) You do NOT have to be a first time home buyer Lower minimum monthly MI rates when compared to other loan types No Loan Level Pricing Adjustments (LLPAs)

7 Refinance Loan Options Homeowners have one low fixed rate FHA Streamline Refinance loan option to refinance their existing mortgages. Homeowner must currently have a FHA loan One interest rate option with closing cost assistance equal to 1.5% of the refinanced loan amount The assistance NEVER has to be repaid Homeowner must meet FHA Streamline Refinance loan seasoning, payment history and tangible benefit requirements No appraisal required

8 Mortgage Credit Certificate Special Mortgage Interest Tax Credit Exclusive for first time buyers Gives the homeowner the ability to take an annual tax credit of up to $2,000 Potential of saving the homeowner thousands of dollars over the life of the loan Must occupy the home as their principal residence Can be combined with our DPA assistance options Credit amount can be used as additional income when qualifying for a mortgage loan Unless combining with TSAHC s DPA options, the lender qualifies the home buyer and offers going interest rates Must be a fixed rate mortgage product no requirement on term or loan type Lender can sell loan to any investor/servicer

9 MCC Example 40% MCC Rate Loan Amount $125, Interest Rate X 4.50% Interest 1 st Year = $5,625 MCC Rate X 40% Amount = $2,250 MCC Tax Credit (max) = $2,000

10 MCC Example It s the home buyer s responsibility to take the mortgage interest credit The homeowner must have tax liability Must be filed with annual income tax The homeowner is able to take special tax credit of $2,000 annually Any amount over $2,000 can be rolled over into future years What s the difference between a tax credit and a tax deduction? While both tax deductions and tax credits can save you money on your taxes, they work in different ways. Tax credits provide a dollar for dollar reduction of your income tax liability. Tax deductions allow you to lower the amount of your taxable income by the amount of the deduction. A MCC allows you to take advantage of both forms of savings: Tax Credit = A $2,000 tax credit that reduces your taxes owed dollar for dollar by $2,000 Tax Deduction = A reduction of your taxable income by $3,625 ($5,625 $2,000 credit) resulting in $ in savings assuming a 25% tax bracket

11 How to Qualify 1. Profession and/or Income Level Homes for Texas Heroes: Classroom Teacher Teacher Aide School Librarian School Nurse School Counselor Nursing or Allied Health Collegiate Professor Veteran Firefighter EMS Personnel Peace Officer Corrections Officer (TDCJ or TJJD) County Jailer, or Public Security Officer Don t see your client s profession listed above? They may still qualify. Home Sweet Texas Loan: Not profession specific, but individuals must be at or below 80% of the Area Median Income

12 How to Qualify 2. Borrower cannot exceed income based on County Examples: Household size is not a factor for Texas Heroes utilizing TSAHC's stand alone DPA Program Household size requirements remain unchanged for Home Sweet Texas Loan borrowers regardless of program, and Texas Heroes utilizing the DPA/MCC or standalone MCC Programs Stand alone DPA Program (only qualifying 1003 income used) Area Home Sweet Texas Texas Hero Household Size N/A N/A Austin $61,440 $88,320 MCC or Combination DPA/MCC Programs (must consider entire household income) Area Home Sweet Texas Texas Hero Household Size N/A 1 to 2 3 or More Austin $61,440 $76,800 $88,320

13 How to Qualify 3. Underwriting/Credit Requirements: Borrowers are required to meet standard underwriting requirements with the following overlays: FHA, VA or USDA RHS Loans A minimum FICO score of 640 with a maximum DTI of 45%, or For those with a FICO score of 660 or greater, a maximum DTI of 50% will be allowed. FNMA HFA Preferred Conventional Loans For LTVs of to 97%: Minimum FICO score of 680 with a maximum DTI of 45% For LTVs of 95% or Lower: Minimum FICO score of 640 with a maximum DTI of 45% For those with a FICO score of 660 or greater, a maximum DTI of 50% will be allowed. FHA Streamline Refinance Loans A minimum FICO score of 680 for non U.S. Bank serviced loans A minimum FICO score of 660 for U.S. Bank serviced loans

14 How to Qualify 4. Home Buyer Education Purchase loan borrowers need to complete a home buyer education course prior to closing A homeowner is 33% less likely to fall behind on their mortgage if they ve taken a home buyer education course Home buyer education can help: Consumers understand, establish or rebuild credit; Consumers determine readiness, understand mortgage loans, locate assistance programs and avoid pitfalls; You spend less time educating potential buyers; and You work with better prepared clients Met by attending a session through TSAHC s network of housing counseling agencies Visit to find a course near your borrower There may be a cost associated with this course.

15 Type in city or county

16 How to Qualify 5. Home buyer must work with a TSAHC approved lender 6. MCC Requirement ONLY: Must be a first time home buyer No ownership interest in any principal residence in the past 3 years, purchasing a home in a Targeted Area, or be a Qualified Veteran Home buyers using the MCC Program could potentially be subject to Recapture Tax if ALL three of the following occur: 1. Sell the home within 9 years, 2. Make a net profit on the sale, and 3. Income increases 5% every year borrower lived in the home

17 How to Qualify Unsure if a client qualifies? Take the Eligibility Quiz under the Home Buyers & Renters section of our site at

18 Property Types A borrower may purchase a home anywhere in Texas Eligible property types include: Government Loans New or existing single family homes; A single unit in a condo, townhouse, or PUD; An entire duplex, triplex, or fourplex (one unit must be owner occupied); or Manufactured homes that meet HUD guidelines. HFA Preferred Conventional Loans New or existing single family homes, A single unit in a townhouse or PUD, A condo (LTV of 95% or less only) Not allowed: Rental homes, co ops, investment properties, vacation and/or second homes

19 Program Fees Lenders may not charge origination or discount points Lenders may collect all reasonable and customary fees and closing costs Lenders may not charge ancillary fees not collected from non TSAHC borrowers TSAHC specific program fees: $300 Funding Fee $85 Tax Service Fee $200 Compliance Review Fee 1% MCC Issuance Fee (if applicable)

20 Working with a Texas REALTOR TSAHC encourages Texas REALTORS to obtain the Texas Affordable Housing Specialist (TAHS) certification offered by TAR. The TAHS certification equips you with the knowledge to help home buyers and increase sustainable homeownership in Texas. The certification consists of 12 MCE hours, including the mandatory 4 hour United Texas: Housing Initiatives that Work course. TSAHC is a part of the course. TSAHC provides a link to TAR s website that allows home buyers to find a Texas REALTOR with this designation. Visit for more information.

21 The Process Borrower takes home buyer education course. Lender qualifies borrower & works with TSAHC. Borrower works with Texas REALTOR to find home/execute sales contract.

22 The Process Lender completes loan reservation in TSAHC Lender Portal. Lender underwrites the loan and confirms income and loan eligibility. Lender delivers the Pre Compliance Package to TSAHC. Pre Compliance Package is reviewed/approved by TSAHC. Lender submits the Funding Request to TSAHC. TSAHC wires DPA and lender closes the loan. Lender submits Post Compliance Package to TSAHC. Post Compliance Package reviewed/approved by TSAHC. For DPA loans, Servicer notified of compliance approval and loan purchased. For MCC loans, MCC certificate will be mailed to homeowner.

23 Important Takeaways You do not need to be a first time buyer to take advantage of our DPA options. DPA is a TRUE GRANT that does not need to be repaid EVER! Our programs can be combined with other down payment assistance and MCC programs. Home buyers are not required to stay in the home for any number of years. Borrower can purchase anywhere in Texas. We serve more than just Texas Heroes. Remember, anyone at or below 80% AFMI may be eligible. For our Texas Heroes, there is no minimum time on the job required prior to or after using the programs. Turnaround times are fast! We require loans to close within 45 days of loan reservation.

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25 Questions (877) Paige Omohundro Homeownership Finance Manager (512) Sarah Ellinor Homeownership Programs Coordinator (512)