Q: What is the
First Place Loan program?
A:
First Place Loan program is a homebuyer program that provides a pool of money
at below-market interest rates that lenders can access to provide loans
to first-time homebuyers and qualified veterans in the state of Missouri. One part of the
program also provides down-payment and closing cost assistance. These
loans are 30-year, fixed-rate, first mortgages. MHDC releases
funds periodically throughout the year.
Q: How many types
of loans does MHDC offer under the First Place Loan program?
A: Two types of
funds are available, depending on the borrower's needs.
- Cash Assistance loans provide the homebuyer with an
interest free, forgivable second mortgage loan equal to 3% of their
loan amount, and a below-market interest rate first mortgage. This type of
loan is best for buyers that need assistance paying the down
payment and closing costs. Cash Assistance loans can be used for both existing
and new homes.
- Non-Cash Assistance low rate loans are offered at a
somewhat lower interest rate, usually .25% to .50 % below cash
assistance rate.
These loans are best for buyers that have adequate funds to pay
their own down payment and closing costs. Low rate funds are
available for existing and new homes.
Q: Can I apply for
an FHA loan and still use First Place funds?
A:
Yes. MHDC
allows the use of FHA, VA, USDA Rural Development and Fannie Mae
MyCommunityMortgage® loan
programs.
Q: What parts of
the state are eligible for the program?
A:
Home purchases
in all parts of the state are eligible for the program. Please see the
purchase price and income limits for
income and sales price limits.
Q: How do I apply
for a First Place Loan?
A:
Loan applications are accepted by
Certified Lenders. You may also
pre-qualify here.
Q: Does it matter
which lender we use?
A: No, MHDC sets
the interest rates for these loans and limits the type of closing
costs that may be charged by the lender. There should be almost no difference
in cost among lenders.
Q: Will this
program help me if I have poor credit?
A:
Applicants for loans under the First Place program must meet the
same credit requirements as any other homebuyer. Potential borrowers who
have credit issues to address are urged to participate in a financial
management program to work their way to an improved credit status. This
is not a “credit-repair” program.
Q: If the
qualifications for this loan are the same as any other loan, what is the
advantage of this program?
A:
There are two primary advantages to the homebuyer:
- The interest rates
offered through the First Place program are usually lower than market rates being offered at the time funds are
issued. The interest savings for a buyer borrowing $100,000 for 30
years at 6 percent interest, instead of borrowing the same amount
for the same term at 7 percent, is more than $23,000 over the life
of the loan.
- If a borrower took
advantage of the Cash Assistance second mortgage loan in this example, they would also receive
a $3,000 grant to assist with down payment and closing costs.
Q: I have been
told that I shouldn’t use the First Place program. Why is that?
A:
For most first-time buyers, this
loan product is an excellent choice.
However, mortgage brokers and some
lender are not eligible to offer this program, so they
may try to discourage you from using it. Funds are not always
immediately available
so some sellers or their agents may want you to use another type of loan
so the loan closing can take place more quickly. Finally, some lenders
offer programs that are more profitable to the lenders and often less
beneficial to the consumer, and they may offer these loans more
aggressively.
Q:
What is a first time homebuyer?
A:
First-time homebuyers are defined as those persons who have not
owned a home or had an ownership interest in a primary residence for
the past three years.
Q:
What is a qualified veteran?
A:
A qualified veteran is any veteran who served on active duty and who
applies for financing within 25 years after leaving active service.
Q: What first-time
buyer would not want to use the First Place Program?
A:
The program can
be beneficial to any homebuyer. However, if you know for certain that
you will be in your home for only one or two years, you will want to
consider carefully the type of loan you will use to purchase your first
home. For example, if you have transferred into an area and will be
transferred out after one or two years, you might have to pay a
Recapture Tax upon selling the home, if you use the First Place Program.
Q: My lender
warned me about Recapture Tax, and said that I would have to pay a
penalty when I sold my home. Is this true?
A: Recapture
Tax applies in a limited number of cases when a home financed with these funds is sold.
For Recapture Tax to apply, you must meet all of the following
conditions:
1) Sell the home within nine years;
2) Make a net profit on your home, after adjusting the value of the
home for any improvements or repairs you have made, and after deducting
all costs of sale, including sales commission; and
3) Your household income must have increased at least 5% each year
(on average).
Fear of paying Recapture Tax should not stop you from utilizing the First Place program. If you refinance your home at a
later date to obtain a better interest rate, or to use the equity you
have in your home, Recapture Tax is not triggered.
Q: Can I ever
qualify for the program if I have owned a home before?
A: Yes. If it has
been three years since you owned your home, you are considered a
first-time buyer or if you are a qualified veteran. Also, if you have owned rental property or undeveloped
land, you are still eligible for the program. Also,
MHDC has
committed to constantly fund loans in federally-targeted areas
that include specific census tracts in counties throughout the state.
Homebuyers do not have to be first time buyers if they purchase in
target areas. Consult your lender for specific locations of
target areas. Loans originated in Federally Targeted Census Tracts
will receive the lowest First Place Loan rate that has been offered
in the last 12 months.
Q: I have heard a
lot about predatory lending. Should I be concerned about this when
financing a home using MHDC funds?
A: No. MHDC
regulates and monitors all fees that are charged to the buyer. If a
lender accidentally charges too much or charges a fee that is not
allowed, MHDC will require a refund to the borrower of this amount.
Q: How much will
it cost me to get into a home using First Place funds?
A: This amount
will vary based on the type of loan application, i.e., FHA, VA. Fannie
Mae MyCommunityMortgage®
or USDA-RD. MHDC does not have a minimum down payment or a
minimum loan amount requirement.
Q: What is the
difference between purchasing a house in a rural area or one in an urban
area?
A: There are no differences between the purchase price limits in rural or urban
areas.
Q: What are
federally Targeted Areas?
A: Federally
Targeted Areas are those Census Tracts where 70% of all households earn
less than 80% of the statewide median income. These areas may be found
in both urban and rural communities. MHDC has committed to constantly funding loans in
federally-targeted areas
that include specific census tracts in counties throughout the state.
Homebuyers do not have to be first time buyers if they purchase in
target areas. Consult your lender for specific locations of
target areas. Loans originated in Federally Targeted Census Tracts
will receive the lowest First Place Loan rate that has been offered
in the last 12 months.
Q: Where can I
find out more about the home-buying process?
A:
Homebuyer education is for anyone interested in buying a home.
Since the home purchase process can be costly and complex, educating
yourself about home buying and financing is smart. Becoming an
informed homebuyer and homeowner can save you thousands of dollars.
The Department
of Housing and Urban Development (HUD) has created a Homebuyer Kit on
their website, www.hud.gov. Click on the Homebuyer icon.
Click here for a list of
providers of homebuyer education.
