MFA continues to promote HomeNow down payment assistance program3 min read
The New Mexico Mortgage Finance Authority is continuing to promote the use of HomeNow, which is a down payment assistance loan available to lower-income first-time homebuyers. HomeNow is a zero-percent interest rate loan that is non-amortizing, meaning that there are no monthly payments required.
According to Teri Baca, MFA homeownership representative, the program provides homebuyers who earn no more than 80 percent of the area median income with a second mortgage loan equal to 8.0 percent of the sales price of the home, or $8,000, whichever is less. Doña Ana County’s income limit is currently $43,700 for a family of four. Income limits are based on household size and county.
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The funds may be used to help cover the minimum down payment requirement plus some of the closing costs. Here’s how the program works.
Let’s say that a first-time buyer contracts to purchase a home for $150,000 and opts to finance it with an FHA loan. The down payment required for an FHA loan is 3.5% of the sales price, which in the case of our $150,000 purchase would be $5,250. Add to that amount roughly $4,000 in closing costs and the cash required to complete the purchase rises to around $9,250.
In this example, the HomeNow loan would cover $8,000 of the up-front costs. The buyer is then required to bring in their own funds to complete the down payment and closing cost requirements. In a nutshell, $1,250 is all they’d need to complete the purchase. The 0 percent HomeNow second mortgage then sits dormant for the buyer’s entire term of occupancy, with no monthly payments or interest required. The loan is required to be paid off when the home is sold, refinanced, title transferred or the borrower vacates the home.
According to MFA’s website, HomeNow will be forgiven after the 10th-anniversary date of the purchase. Borrowers who continue to occupy the home as their primary residence and don’t refinance, transfer title, sell, rent or otherwise vacate during the first ten years of ownership will be eligible to have their HomeNow second mortgage forgiven in its entirety.
Buyers who have a credit score of at least 620 and invest a minimum of $500 of their own funds into the purchase of the home may be eligible for the program.
“MFA will finance most single-family property types including detached site-built, condominiums, townhomes, homes in planned unit developments and multi-wide manufactured homes that are on a permanent foundation and assessed as real property,” Baca said.
To be eligible, a property must be located in New Mexico.
The HomeNow program works hand-in-hand with MFA’s FirstHome program, which is a 30-year, fixed interest rate first mortgage for first-time buyers. First-time buyers with incomes above 80% AMI have another down payment assistance option, with a program known as FirstDown.
FirstDown is a second mortgage of up to $8,000 that helps buyers cover down payment and closing costs. FirstDown offers three-term options, including 10, 15 and 30 years.
“Borrowers choosing a shorter-term option will receive a lower interest rate”, explained Baca.
Baca goes on to explain that a shorter loan term means that the borrower will gain home equity more quickly and save on overall interest costs. She adds that borrowers who do not need down payment assistance may want to use the FirstHome program by itself simply because of the attractive interest rates.
“An MFA-approved lender will help borrowers make an accurate comparison between MFA programs and other available loans,” said Baca.
So how would someone find out if they qualify for one of these MFA programs?
“The good news for any potential homebuyer is that our eligible lenders will make the process as convenient and easy as possible for an applicant,” Baca said. “MFA-approved lenders will sort through the program options and help determine which program or programs will best serve each individual borrower”.
To find an MFA-eligible lender simply visit MFA’s website: http://www.housingnm.org/homebuyers/find-a-participating-lender.
“Some MFA borrowers may also qualify for a special Fannie Mae conventional loan which requires a down payment of only 3% and allows for reduced mortgage insurance for lower-income borrowers,” added Baca.
So, there you have it. If you’ve been waiting on the sidelines wondering when you should become a homeowner, now may be the time to act.
See you at closing!
Gary Sandler is a full-time Realtor and owner of Gary Sandler Inc., Realtors in Las Cruces. He can be reached at 575-642-2292 or [email protected].