Tweaking Down Payment Assistance, Credit Insights and Other Mortgage Updates!

Empower Your Practice with Advanced Insights:

Join us for an interactive session aimed at empowering you updates on the latest tools used for down payment assistance, credit and more!

Important detail to check first on Downpayment Assistance Programs (DPA)!   

Uncover new DPA avenues and tips to assist your clients with their downpayments. Know these details before starting a Down Payment Assistance (DPA) loan. CHECK THESE THINGS UPFRONT on all DPA programs before combining your 1^st mortgage with an outside 2^nd mortgage or grant! 

• HUD and Fannie Mae/Freddie Mac Qualifying Income Levels for Down Payment Assistance Differ! Check Income Levels for Down Payment Assistance Programs Upfront! HUD income levels are calculated by size of family and are lower than Fannie Mae/Freddie Mac Most down payment assistance programs use HUD income levels so make sure to check with the DPA provider!

o  HUD Income Limits:  https://www.huduser.gov/portal/datasets/il.html#year2023

o  Fannie Mae Area Median Income Lookup Tool: https://ami-lookup-tool.fanniemae.com/amilookuptool/

o  Freddie Mac NEW Area Median Income and Property Eligibility Tool: https://sf.freddiemac.com/working-with-us/affordable-lending/area-median-income-and-property-eligibility-tool

• Prepare for DPA in your area UPFRONT! Some programs still require the client, realtor and loan originator to be “program approved” before the client looks for a home! More are not requiring this of the realtor or loan originator but do require this of the client. Some DPA programs allow any HUD approved housing counseling certificate while others are specific on where the HUD counseling must be done at.

• When a program is providing income based off of family size, this is usually your first clue that qualifying income levels are HUD Income levels that are lower than Fannie Mae and Freddie Mac income levels. (See above links to income levels.) Check this upfront!

• DPA2nd mortgages that don’t need to show in qualifying income can be forgivable at a certain point…. Or not!

• Grants are forgivable funds that do not need to be repaid.

• Some DPA programs now allow funds to be used for rehab, repairs and new construction in addition to down payment assistance and closing costs. Also, many allow DPA to be used on different property types like 2-4 units, manufactured homes, and condos in addition to single family residences.

• ALWAYS check with DPA program for available funds for your clients income level upfront! For state and some other DPA programs, funds may be a certain allotment that can run out. Independent loan originators (mortgage brokers) have the option to use wholesalers whose business IS DPA so funds usually never run out.

• In 2024, have noticed more DPA programs are lowering max. back DTI.

• Most programs don’t require 2^nd mortgage payment to be included in qualifying ratio but some do require for highest income levels.

• DPA programs commonly don’t allow a gross up of non-taxable income.  

• SHIP programs offer the most flexibility and usually offer the greatest dollar amount of DPA. SHIP funds can commonly be used to buydown rates and decrease loan amounts thereby reducing MI or deleting altogether.

• Make sure there are no geographical restrictions of the DPA you are checking into. Often, SHIP funds can be divided into county and then city allotments. Know where your client is able to purchase with funds you’ve investigated.

• Loan originator comp is commonly less and other costs like max. processing costs are restrictions to check.

• Check max. purchase price DPA allows and also if there is a max. dollar amount of assets the client can have (commonly 401K’s are not included).

• Some DPA 2^nd mortgages allow layering where a conv. Fannie Mae HomeReady First or Freddie Mac BorrowSmart can be considered a 3^rd DPA GRANT. (available with some wholesalers.)

• Check into Down Payment Connect, the backend program for Downpaymentresource.com that provides a comprehensive down payment assistance directory of every DPA program in the U.S.! https://downpaymentresource.com/dpc/

• Pay attention to the maximum combined loan to value on all DPA programs!

• There are a few DPA programs where:
• There is no max. income to qualify
• The client does not have to be a 1^st time homebuyer
• Where ratios can be whatever the automated approval states but these are often confined to a 50% back DTI.
• Min. credit scores can be as low as 580 and can be approved with a manual underwrite
• Will allow co-borrowers

2 Conventional Down Payment Grants

1. Fannie Mae Conventional Special Purpose Credit Program (SPCP) also known as HomeReady First (based on the client’s CURRENT ADDRESS AND WITH NO INCOME RESTRICTIONS)

Eligible borrowers receive:

• Up to $10,000 grant (no repay)

Additional:

• $500 credit towards the cost of an appraisal.
• $500 credit towards the cost of a home warranty, if purchasing one.
• All the benefits of the HomeReady product.
• Not all mortgage wholesalers have this program.
• Dollar amount and underwriting guides can vary per lender.

Qualification is determined as follows in addition to current HomeReady guides:

• 97%LTV and 80% Max. AMI Income found here: https://ami-lookup-tool.fanniemae.com/amilookuptool/
• At least 1 borrower must be a 1^st time homebuyer.
• The loan must use the Home Ready loan program. NO INCOME RESTRICTIONS. AMI cap is waived.
• DU feedback with eligibility for geographic flexibilities must be received.
• Homebuyer Education from non-profit HUD counseling agency (HCA) required (check with lender re: available HCA)

The SPCP applied to eligible census tracts within the following metropolitan statistican areas (MSA’s):

Input clients address into the Fannie Mae - Area Median Income (AMI) Lookup Tool: https://ami-lookup-tool.fanniemae.com/

If client’s current address is in eligible area, will see highlighted below.

2. Freddie Mac BorrowSmart (based on borrowers income level)

Eligible borrowers receive:

• $1500 up to to $2500 grant (no repay)

Additional:

• $500 credit towards the cost of an appraisal.
• $500 credit towards the cost of a home warranty, if purchasing one.
• All the benefits of the HomePossible product.
• Not all mortgage wholesalers have program.
• Dollar amount and underwriting guides can vary per lender.

Qualification is determined as follows:

• Up to 97% first mortgage LTV
• Up to 105%CLTV with permitted Affordable Seconds!
• As low as 50% AMI and up to 80% Max. AMI Income found here: https://sf.freddiemac.com/working-with-us/affordable-lending/area-median-income-and-property-eligibility-tool
• LPA result will provide amount of assistance.
• At least 1 borrower must be a 1^st time homebuyer and CURRENTLY reside in an eligible metropolitan statistical area (MSA). Residency must be documented.
• Homebuyer Education from non-profit HUD counseling agency (HCA) required (check with lender re: available HCA)

• Leverage CreditXpert Tools: Elevate your advising capabilities by mastering CreditXpert tools. Know when to use Wayfinder or What-If Simulator and how to get the best pricing on credit reports where CreditXpert tools are needed!
• Mortgage Product Updates: A variety of changes that can affect an approval through automated underwriting systems, differences in qualifying income for down payment assistance and more! You’ll even get an update on what mortgage industry trade groups are working on to help mortgage loan originators and their clients!

Why Attend?

• Interactive Q&A Session: This casual open session is your platform to engage with industry experts. Bring your questions, share your experiences, and join the conversation on navigating today’s mortgage landscape.
• Networking Opportunity: Expand your professional network with individuals who share your commitment to excellence.
• Enhance Your Client Service: You can save time learning what others have recently found out with the latest tools and be able to confidently navigate the complexities of the mortgage process with confidence.

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We look forward to welcoming you to an enriching experience that promises not just to inform but to transform the way you assist your clients in realizing their homeownership dreams. See you there!

Input clients address into the Fannie Mae - Area Median Income (AMI) Lookup Tool: https://ami-lookup-tool.fanniemae.com/

If client’s current address is in eligible area, will see highlighted below.