Sunday, September 15, 2013

Home in Five Advantage loan program quietly helping Phoenix home buyers

Phoenix Morning Call                        
 

Feb 20, 2013, 10:00pm MST Updated: Feb 21, 2013, 3:36pm MST
Reposted September 15, 2013
By Joseph D'Ambrosio
West USA Realty 

Home in Five Advantage loan program quietly helping Phoenix home buyers.


Reporter- Phoenix Business Journal
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If you’re less than thrilled about the idea of putting a hole — or, in some cases, emptying — your savings for a down payment on a home, well, maybe you don't have to.
That’s right, qualified home buyers can get the Industrial Development Authorities, or IDAs, of the City of Phoenix and Maricopa County to pay 5 percent of the original loan amount to cover their down payment and closing costs.
For a home priced at $200,000, that’s $10,000 in down payment and closing cost assistance that the borrower would otherwise be responsible for.
And no, it doesn’t have to be paid back, ever.
The program — dubbed the Home in Five Advantage — launched last fall, but has apparently been keeping a low profile. I discovered it only recently due to my own personal quest to buy my first home. After some poking around, I learned it has been gradually stirring excitement among local home buyers and subsequently driving up business for participating mortgage bankers.
“This by far, in the past five years, has generated more business and leads for me,” than any other program of its kind, said Lisa Brown, branch manager of AmeriFirst Financial Inc. in Tempe.
That’s because mostly due to its non-repayable component and the more reasonable qualifications than past programs, it has opened the door to a broader genre of borrowers, Brown said.
Here’s the list of eligibility requirements:
  • Available to only 30-year FHA, VA, and USDA-RD loans
  • Home must be located within Maricopa County
  • Purchase price cannot exceed $300,000
  • Home must be professionally inspected
  • Home must be a primary residence
  • Minimum FICO credit score of 640
  • Maximum debt-to-income ratio (percentage of monthly income that goes toward paying debts) of 45 percent
  • Borrower income cannot exceed $90,000
  • All buyers must attend an eight-hour home buyer education course plus obtain a certificate of completion.
Seems pretty reasonable, right? Definitely. But as expected, there are always some caveats.
After talking to Brown and my own lender, I learned that just because you meet the requirements doesn’t necessarily mean it’s the best option.
That’s because one of the biggest caveats is this 2 percent administrative fee the program charges to each borrower. So that “5 percent” grant the program proudly touts is, in all actuality, only 3 percent when all is said and done.
Since the minimum down payment for an FHA loan is 3.5 percent, it’s then up to the borrower to cough up the remaining one-half percent plus the closing costs, which can be up to 3 percent of the total loan amount.
The other catch is that, while the program helps in the short term, borrowers will have higher monthly payments than those obtaining traditional FHA and conventional mortgages today.
That’s because the best interest rate you can get with the Home in Five program is 3.87 percent (although that rate can fluctuate), while traditional FHA loans were starting at 3.26 percent and conventional loans at 3.5 percent on Wednesday, according to Bankrate.com.
Also, expect it to take up to 45 days to close escrow versus the normal 30 days.
All things considered, this is why the lender my husband and I have been working with has cautioned that the grant, in many cases, makes fiscal sense only if the seller pays all or some of the closing costs — and in today’s market, good luck with that. Without divulging all the boring details, we’ve since opted for a conventional loan, although we can always change our minds.
But for others out there also weighing their options, it really comes down to what’s more important to the individual: less money up front or lower monthly payments?
While Brown agrees, she is remains more of a cheerleader of Home in Five.
“There are some people that would benefit more from a conventional (or traditional FHA) loan, and that’s where a loan officers’ expertise comes in,” Brown said. “But if you qualify for the program, why not take an extra 3 percent from Maricopa County versus not getting anything?”
For more information on the Home in Five Advantage Program,

 
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Joseph D'Ambrosio
Joseph D'Ambrosio Cell: 623-204-2138
Real Estate Consultant / REALTOR 
West USA Realty
Email: joseph_dambrosio@westusa.com
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