FIRSTHome is a first mortgage loan program for first-time homebuyers who have low and moderate incomes. A first-time homebuyer is someone who has not owned and occupied a home as their primary residence in the past three years. Here are some quick facts about the FIRSTHome program:
· May be used with either of MFA's down payment assistance second mortgage loan programs: FIRSTDown or HOMENow. Can also be used as a stand-alone first mortgage.
· Exclusively for first-time homebuyers.
· Borrowers must meet income guidelines. To see a list of income limits, click here.
· Works with FHA, VA, USDA and HFA Preferred Conventional mortgage loans.
· Borrowers must contribute $500 from their own funds. The contribution cannot come from any type of gift, grant or down payment assistance.
· MFA requires a minimum credit score of 620. All homebuyers must receive pre-purchase counseling through MFA's online program, eHome American, or through an approved counseling agency.
FIRSTDown is a fixed-rate second mortgage loan program that provides down payment and closing cost assistance for first-time homebuyers. Here are some quick facts about FIRSTDown:
Up to $8,000 to assist with down payment and closing costs.Must be combined with MFA's FIRSTHome first mortgage loan program.Borrowers are subject to the same income limits as the FIRSTHome program. To see a list of income limits, click here. An extended repayment term and affordable interest rate provides the homebuyer with a budget-friendly monthly payment.Credit score and homebuyer counseling requirements are the same as the FIRSTHome program.
Why is this a bad thing?... you ask. Let’s take a moment to consider the following reasons why this can create an undesirable situation for you as the buyer.
1. Very Bad Credit. With a credit score of 580-620 you have proven over time that you've had trouble managing credit in the past. You may have racked up high credit card balances, borrowed more than you could afford to pay, missed several payments, or possibly have had a foreclosure or repossession. A low credit score makes it more difficult to get approved for credit cards and loans. When you are approved, you may have a higher interest rate. Let’s be honest with ourselves, in the past you have had challenges paying down debt. What makes you think this situation is different? Will this truly add to your quality of life having additional debt and a large payment to consider EVERY month?
2. Income Limits. For a 1-2-person household the current gross annual household income may not exceed $64,624.00. This means that your income is relatively low when compared to your overall purchasing power. Again, putting you at a long-term disadvantage when it comes to debt paydown over time.
3. Mortgage Insurance. Mortgage insurance is an insurance policy that protects a mortgage lender or title holder if the borrower defaults on payments, dies or is otherwise unable to meet the contractual obligations of the mortgage. Mortgage insurance can refer to private mortgage insurance (PMI), qualified mortgage insurance premium (MIP) insurance or mortgage title insurance. Take for a moment to consider the fact that this insurance covers the BANK and NOT you as the borrower. You have at this point “hedged a bet” against yourself! Not only are you responsible for the additional payment, in the event that you default on the loan, the BANK, NOT YOU is covered by the policy that you paid for.
4. 100% Leverage. Loan to value is one of the key risk factors that lenders assess when qualifying borrowers for a mortgage. The risk of default is always at the forefront of lending decisions, and the likelihood of a lender absorbing a loss increases as the amount of equity decreases. Hence the need for Mortgage Insurance. As you equity position goes down threw excess debt the probability of you defaulting on the loan goes up!
5. No Money Down. FIRSTDown is a fixed-rate second mortgage loan program that provides down payment and closing cost assistance for first-time homebuyers. This effectively means that you CAN NOT afford a down payment. What makes you think that you will be able to afford repairs as something inevitably will need repairs in time. The unforeseen roof replacement or sewer replacement could lead to financial ruin.
At the end of the day it is very important to understand the pro’s and con’s of purchasing your first home and/or your 100th home. If you can anticipate the intrinsic issues with some of these programs you can begin to avoid the pitfalls. Take it from the licensed professional who is ACTUALLY on your side and not just in the business for a quick sale, “You may not be ready to buy your first home if your only have $500.00 down”- Evan Sanderson,
This could spell long term financial disaster. Choose your Mortgage company and your Real Estate Broker wisely. Do your due diligence and be realistic in your long-term goals and projections.
***Sited in this blog-