California Down Payment Assistance

PROGRAM HIGHLIGHTS

PROGRAM SUMMARY

A Mortgage Credit Certificate (MCC) entitles qualified home buyers to reduce the amount of their federal income tax liability by an amount equal to a portion of the interest paid during the year on a home mortgage. This tax credit allows the buyer to qualify more easily for a loan by increasing the effective income of the buyer. The Riverside County MCC Program provides for a fifteen percent (15%) rate which can be applied to the interest paid on the mortgage loan. The borrower can claim a tax credit equal to 15% of the interest paid during the year.

Since the borrowers taxes are being reduced by the amount of the credit, this increases the take-home pay by the amount of the credit. The buyer takes the remaining 85% interest as a deduction. When underwriting the loan, a lender takes this into consideration and the borrower is able to qualify for a larger loan than would otherwise be possible. The following table illustrates how a MCC increases a borrower’s “effective home buying power”

PROGRAM DETAILS

Maximum Benefit:  Federal Income Tax Credit equal to 15% of mortage interest paid during year 

Maximum Purchase Price:  Outside Target Areas - $429,620 / Inside Target Areas - $525,090

Income Restrictions:  Based on Target Areas and Number of Persons in Household

Payments / Recapture:  The MCC is in effect for the life of the loan as long as the home remains the borrower’s principal residence. The MCC is not transferable to a new loan when refinancing, nor can it be assigned or transferred to a new buyer or another home.

In addition, the MCC Program includes a nine year recapture provision which provides for a return of tax credits taken if the property ceases to be the borrower’s primary residence within nine years from the close of escrow. The amount of tax recapture is determined by formula, and provided to the borrower at the time the application is taken.  After expiration of the nine year period, the borrower may dispense of the property without incurring penalty, but would lose the future benefits of the MCC.   

Eligible Properties:  The residence purchased in conjunction with a MCC must be the borrower’s principal residence and may not be used as a business or vacation home.  The home may be a detached or attached single family home, condominium unit, a co-op unit, or a manufactured home on permanent foundation (new or re-sale).   

Eligible Cities/Areas:  All Unincorporated Areas of Riverside County and within the City Limits of the following jurisdictions:

Ineligible Cities/Areas:   Please note that the following cities are not participating in the County’s MCC Program and MCC’s cannot be issued to purchasers of homes located within the City Limits of these cities:

·        Coachella

·        Palm Springs

·        Indian Wells 

·        Rancho Mirage

HOME BUYER COMMENTS -  If you are a home buyer that has experience with any of these programs.  Please post comments for the benefit of other First Time Home Buyers. 

PROGRAM SUMMARY

The Economic Development Agency (EDA) has a program called the First Time Home Buyer (FTHB) program which provides down payment and closing cost assistance that will allow qualified families to purchase a home.

What is the First Time Home Buyer Down Payment Assistance Program (FTHB)?
The Riverside County FTHB Program is designed to provide assistance to lower income persons in the purchase of their first home. Assistance may be provided for the downpayment in the purchase of a home. The amount of assistance available depends upon the buyer’s qualifications and the price of the home. In general, a buyer may only receive what they need, up to 20 % of the purchase price of the home.

What is the First Time Home Buyer Closing Cost Assistance Program?
The Riverside County FTHB Program is designed to provide closing cost assistance to lower income persons in the purchase of their first home. Assistance may be provided for the closing costs associated with the purchase of a home. The amount of assistance available depends upon the buyer’s qualifications and the price of the home. In general, a buyer may only receive what they need, up to a maximum of six percent (6%) of the purchase price or $10,000, whichever is greater.

 PROGRAM DETAILS

 Income Restrictions: 

Payments / Recapture: No payments due you sell or refinance to take cash out.  Loan is converted to a grant after 15 years and no repayment is required. 

Eligible Properties:  The FTHB program may be used to purchase any new or resale home that is: (1) permanently fixed to a permanent foundation, (2) has a minimum of two bedrooms, and (3) is currently occupied by the Seller or vacant (tenant occupied homes are not eligible).

Homes with in-ground pools or spas are not eligible. The home must be in sound condition and meet the Housing Quality Standard as determined by EDA. The purchaser must reside in the home as his or her principal residence within sixty (60) days of purchase and the home shall not be used as a business nor as a vacation (second) home.

Eligible Cities / Areas: (1) all unincorporated areas of Riverside County, such as Cabazon, Glen Avon, Jurupa, Highgrove, Mira Loma, Mead Valley, Mecca, Menifee, North Shore, Nuevo, Pedley, Quail Valley, Romoland, Rubidoux, Sun City, Thermal, Thousand Palms, Valle Vista, Wildomar or (2) within the City Limits of the following jurisdictions: Banning, Beaumont, Blythe, Canyon Lake, Cathedral City, Desert Hot Springs, Indio, Lake Elsinore, La Quinta, Murrieta, Norco, Perris, San Jacinto, and Temecula.

Ineligible Cities / Areas: Calimesa, Coachella, Corona, Hemet, Indian Wells, Moreno Valley, Palm Desert, Palm Springs, Rancho Mirage, and the city limits of Riverside

Complete Program Guidelines:  Down Payment Assistance Guidelines - PDF

HOME BUYER COMMENTS:  If you are a home buyer that has experience with any of these programs.  Please post comments for the benefit of other First Time Home Buyers. 

PROGRAM HIGHLIGHTS

PROGRAM SUMMARY

Second mortgage loans up to 25% or $105,000 (whichever is less) will be available to first-time home buyers with incomes up to 160% of area median income (AMI).

The 30-year amortized loans will have an interest rate approximately 1% below the market rate for first mortgages. (Current second mortgage rate is 5%.) The OCHT will work with a variety of financial institutions to provide the first mortgages and allow additional subsidies from city, county and state government or other programs that the borrower may qualify for to leverage OCHT funds

Down payment assistance loans of $8,000 will be made available to borrowers who are first-time buyers in Orange County or current Orange County homeowners who will reduce their commute to their place of employment by 30 miles a day. To qualify for this assistance the borrower(s) must have incomes at below 140% of the AMI. The down payment assistance loan carries a 1% interest and is payable in full on the maturity date of the first mortgage or upon any sale, transfer, assignment or refinancing of the first mortgage. There is no prepayment penalty.

PROGRAM DETAILS

Income Restrictions:  Family must meet Orange County income limits (160% of Countywide Median):

                              INCOME GUIDELINES

        Family size                                           Maximum Income

1                                                          $ 88,144

2                                                          $100,736

3                                                          $113,328

4                                                          $125,920

5                                                          $135,994

6                                                          $146,067

7                                                          $156,141

8                                                          $166,215

Eligible Properties:  Single-family detached homes, condominiums, and town homes are eligible

Eligible Cities/Areas: Family must purchase in Orange County

Program Flyer:  Down Payment Assistance Guidelines - PDF

HOME BUYER COMMENTS:  If you are a home buyer that has experience with any of these programs.  Please post comments for the benefit of other First Time Home Buyers. 

Program Highlights

Program Summary

First Time Home Buyer Down Payment Assistance is available for First Time Home Buyers within the city limits of Banning.  Down Payment Assistance is a silent second at 0% interest that is forgiven after 30 years.

Program Details

Eligible Buyers:  First Time Home Buyers - Can not have owned a home in past 3 years

Maximum Assistance:  $20,000

Income Limits:  120% of Area Median Income - Income Limits Here

Payments/Recapture:  If family rents, sells or refinance with cash-out before Tenure of Ownership, second becomes immediately due and payable to the City of Banning

Eligible Properties:  Family must purchase an existing single family detached home.  Condominiums, manufactured homes on a permanent foundation & town homes are permitted.

Eligible Cities/Areas:  City limits of Banning

Contribute Home Buyer Comments:  Please keep this site up to date and relevant by making comments if you have used this program or are in the process of using it now.  By sharing this information it helps all Home Buyers stay informed and up to day.

It seems lately that most properties listed for sale are short sales (short pays) or foreclosures.  There is a very big difference between these two types of purchases and how you approach making an offer to buy one of these homes.  Today’s post is about Short Sales - I will follow this up with Foreclosures in the next day or two.

Short Sales (Short Pay) - I have this conversation on a daily basis with potential home buyers looking for a great deal.  Usually it’s a call or an email that goes something like this:

“Can this be true?  There must be something really wrong with this property because this seems like it’s priced way too low”

The old addage that “if it sounds too good to be true, it probably is” is quite relevant in many of these cases.  It’s not that it’s too good to be true, in many cases it’s simply a matter of trying to attract attention to the property.  The Agent listing these homes rarely has any guidance or advice from the bank on what they would accept in lieu of what is owed on the property.

The definition of a Short Sale is a home that is selling for less than what is owed to the lien holder(s).  The banks are dealing with many distressed homeowners right now and have a huge workload when it comes to “settling” for less that what is owed on the money they have already lent to the current owner.

Many banks will postpone the foreclosure process while the current owner tries to sell this home.  On average, it will cost a bank upwards of $60,000 to foreclose on a home - and that doesn’t even take into account the price that they may have to sell it for to get it off thier books - more on that later.

When a Real Estate Agent takes a listing to list a short sale, they rarely have any idea of whether or not the bank will cooperate and sell the home for less than what is owed on it.  In addition to that, if there is a second mortgage on the property - many times they have to agree to completely forgive what’s owed to them.  If the first lien holder is settling for less than what is owed to them, there is obviously nothing left to pay for the second mortgage.

The Real Estate Agent’s Biggest Challenge is to list this home at a price that will attract buyers.  When there are buyers, the Agent has the ability to start negotiations with the lien holder(s) and get an idea of what they may settle for.  In addition to the purchase offer, the Agent is required to put together a hardship package showing that the current owners can no longer afford the home.

Once you submit a purchase offer on a short sale - the waiting game starts.  On average, it is taking 45 to 60 days to even get an answer from the bank on whether or not they will entertain the offer.  I have waited over 60 days just to have the bank say “No” with no guidance or direction on what it would take for them to consider an offer to settle.

The most important thing you need to know is that a bank will not settle for less than, or at least much less than, what the home is worth today.  Typically, before a bank considers an offer they will perform a Broker’s Price Opinion, or BPO.  This is advice from a third party real estate broker on what the current value of the property is worth.

Knowing what to expect is the most important message I am trying to get across here.  If you see a low asking price, it doesn’t mean that you will be able to buy that house for that price.  There is a fundamental communication gap right now between the lien holding banks, servicing companies and Real Estate Agents. 

I hear the frustration from both Agents and home buyers alike in dealing with Short Sales.  I believe this is primarily because Buyer’s Agents are not communicating with home buyers to set up thier expectations for this process of making an offer on a short pay home.

Perception is Reality.  If you’re a home buyer making an offer on a short sale property keep this in mind.  Ask your Agent to do some homework.  I can’t tell you how many times i’ve spoken to a listing agent and had them basically just break down on the phone because the bank will not respond to any offers they submitted as long as 60 to 90 days ago.

Your Agent should be doing a lot of homework before you make an offer.  Here is what your Agent should do FIRST if you are thinking about making an offer on a short sale:

1.  Call the listing agent.  A.  Find out if the hardship package has been submitted from the seller and if the bank has reviewed it.  B.  Find out if the listing Agent has had any communications at all with the bank or servicer.  C.  Find out if the Agent has dealt with this bank before and if they have any expectations of the time line for processing the short pay request.

2.  Check recent sales in the area.  If properties with similar amenities have sold in the past 1 to 3 months in close proximity to the home you’re interested in - how much did they sell for?  What was the average price per square foot?  Where they also short sales or foreclosures?  This is important because the bank will check this data before considering your offer.

3.  Lastly, and maybe most importantly - search the area for foreclosures that are for sale that are at or below comparable sales prices in the same area.  You can save yourself a lot of time and trouble if an equally valuable property is already priced to sell close by.

I am not trying to discourage you from making offers on short sales.  I am trying to educate and inform so that you are not surprised by the process.  This is not a “close your eyes and throw a dart” type of sale.

Move forward on your Short Sale offers with this infromation and you will not be disappointed!  There are two ways to approach making a short sale offer.

Short Sale Approach 1:  Make an offer that YOU CAN’T REFUSE.  Chances are, the bank will refuse it, but If the bank accepts your offer, Congratulations!

Short Sale Approach 2:  Disregard the “asking price”.  Many times this number is pulled out of the air and has absolutely no relevance to the actual “value” of the property.  Many times the Agent does the best they can to price the home such that it is consistent with recent sales in the area…..but that’s still no guarantee that the bank will agree.

If you really want a Short Sale property, you may want to seek the advise of your Realtor as to what a realistic value might be and make your offer at that amount.  Remember, the bank is going to do thier homework - I just doesn’t make sense that you wouldn’t do yours.

Finally, buying a short sale does not exclude you from using any Down Payment Assistance Programs, FHA or CalHFA loan programs and you can still always use Down Payment Assistance Grants like Nehemiah and Ameridream.

For more information on making offers on and buying short sale properties - feel free to contact me anytime by email at Scott@myporchlight.com, call or text my cell at 714-336-8286 or you can reach me on AOL IM or Yahoo IM @ PorchLightScott