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2% Downpayment Option with the Rural Housing Program

November 3, 2009

Last week I discussed the 100% Rural Housing program.  Here is another program which does not depend on the home location but only needs 2% of the buyers own money and can get a small loan for closing costs!

HOME 97, Home Ownership Made Easy, is a unique affordable housing product. This product is designed for borrowers whose income is at or below 80% of the HUD median income level.   In Erie and Niagara County the maximum household income is limited $48,720.  Household income is defined by the income for each “household member” occupying the subject property.  A “household member” is defined as the Mortgagor, the Mortgagor’s spouse, any person signing the Mortgage Loan and/or Note, fiancé, domestic partner, and any person age 21 or older, and who expects to occupy the subject property on the closing date.

Read AlsoBuffalo’s Making Houses Homes Program

The program is underwritten utilizing flexible underwriting guidelines to help potential borrowers who are a good credit risk, but may not qualify using standard underwriting parameters.  The program is for OWNER OCCUPIED, PRIMARY RESIDENCES ONLY and they may purchase 1, 2, 3 and 4 unit detached and attached (including row houses).  Condominiums can be purchased, but must be Fannie Mae-approved

The program only requires a 3% down payment.  If buyer funds are limited then they may incorporate the 2/1 option: The 2% must come from the borrower’s own savings (not community savings), 1% must be documented via bank statements and be on deposit for a minimum of 30 days at the time of application while the other 1% may be accumulated prior to commitment. The remaining 1% may come from the borrower’s own savings, a gift, grant, or may come from an unsecured loan from the lender.  The loan payment for the unsecured loan, if used, must be included in other obligations when determining the qualifying ratios. The mortgage underwriter will approve the personal loan simultaneously with the mortgage approval.

If an unsecured loan is used, it must be at an interest rate not to exceed the mortgage note rate and level payments with a term up to 60 months. A term of 61 months up to a maximum term of 120 months is available at an interest rate 2% above the mortgage note rate. The minimum loan amount is $1000 up to a maximum loan amount of $25,000. At no time may the unsecured loan exceed 5% of the lesser of the sales price or the appraised value. The monthly payments for the loan must be considered as debt in the total obligations-to-income ratio when qualifying the borrower. The total combined unsecured loan can be applied towards down payment, closing costs and/or prepaids may NOT exceed 5% of the lower of the sales price or appraised value.

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