Purchase With No Money Down Today in California
You do not have to be a first time home buyer to qualify for the zero money down program. First Time Home Buyer Programs can be found in Riverside and San Diego County with Down Payment Assistance. Down Payment Help is available for low to moderate income first time home buyers in the cities of Vista, Oceanside, San Diego, Carlsbad, Chula Vista, San Marcos, and Escondido.
Q: Why didn’t my lender mention this program?
A: The majority of mortgage companies are not approved to offer down payment assistance programs. Many loan officers working for companies that are allowed to participate are not familiar enough with the program to confidently recommend it to you.
What are First Time Home Buyer Programs (FTHB’s) and Down Payment Assistance Programs (DAP).
First Time Home Buyer Programs (FTHB).
Programs designed to help people who are FTHB’s buyer a home. A FTHB is defined by the federal government as anyone who has not owned a home in the last 3 years. In the process of applying for a FTHB program, your lender will require one additional year of taxes (3 years tax returns). The lender verifies you are a FTHB by verifying that you have not claimed the Mortgage Interest Deduction on your taxes for the last 3 years.
Some programs will even allow people who are not classified as First Time Home-Buyers (who have owned a home in the last three years) to use the program if they buy in “Targeted Areas” which further the governments goals of rebuilding those areas.
The FTHB’s are generally broken down into three categories:
CRA (Community Reinvestment Act)
Banks are required to reinvest in the individual needs of the specific communities that they serve. You can imagine that the needs of a community on Alaska would be very different than the needs of a community in Palm Desert. It makes sense then that the needs of a High income community would be different from those of a low income or moderate income community. The banks have a CRA file for each branch which details the programs that they have put into place for that community. Failure to have a positive CRA file can have devastating effects on the bank when they apply to open a new branch or even buy/take over an existing bank. Through the CRA programs banks offer to low and moderate income buyers mortgages with lower interest rates, reduced costs and sometimes lower/no down payment and reduced PMI costs.
Grants and Silent Seconds Grants and silent seconds are used primarily in two ways. It might be good to give a better understanding of what a Silent Second is. Let’s say that you wanted to buy a house but were not only short on cash, you were having a hard time affording the payment. So you turned to the most trusted of all sources, your parents. You asked them to lend you 60,000 dollars so that you had a Down Payment and also so the payment would be low enough that you could afford it. You want to thank them by offering a 3% simple interest on the loan. You agreed that when you moved out, refinanced or sold the house, you would give them back the money with the interest. In return, you did not have to make any payments on the borrowed money until then. In reality, this happens all of the time. But there is one problem with this arrangement. not everyone has parents with 60,000 to lend to their kids. Solution California has silent seconds. You borrow the money, with no expectation by them for you to make any monthly payments. Usually they are at ridiculously low interest rates (about 3% simple interest). Some times they are forgiven if you live in the house for a certain amount of time (approximately 15 Years), other times you must pay them back in all cases when you move, refinance, or sell.
DAP’s (Down Payment Assistance) Down Payment Assistance can be used to cover most of the minimum required down payment for a FHA loan. Some DAP’s are even large enough to cover the cost of a conforming loan (20% of the purchase price). Usually (but not always) the DAP program requires the buyer make a small down payment.
Example: buyer wants to use a FHA loan to buy a 300,000 house. FHA requires that the buyer put 3.5% down ($10,500). The buyer gets a DAP program that allows him up to 20% in Down Payment Assistance ($60,000). Because the $60,000 more than covers the $10,500 that FHA required, the FHA down Payment requirement is met. But if the DAP program then requires that the buyer puts in 1% of his own money, then they buyer would need $3,000 in down payment. There are federal laws that dictate where the buyer may get his down payment from. Often the requirement is use of the buyer’s own money, however sometimes a gift from a family member, non profit, or one of these federal programs is acceptable. The seller can never contribute to the down payment for the buyer
Closing Cost Assistance The buyer is receiving funds to help with funds needed to close the transaction. In this case the program has specified that the funds can only be used to cover closing costs. Closing costs are a separate cost from the down payment. Closing costs are the cost the buyers must pay for certain services that they need to use to buy the house. Some examples of closing costs would be Loan fees, title fees, escrow fees, appraisal fees, etc. they generally add up to 2 to 4% of the purchase price. Unlike the down payment, the seller is permitted to pay closing costs on behalf of the buyer. Most conforming loans allow up to 3% and FHA allows up to 6% of the purchase price.
Down Payment Closing Cost Assistance Sometimes the program will let the buyers decide how to use the funds. They can use them towards the Down Payment and Or the closing costs. Here the buyer must use stategy. If they are getting a small DCCA type program that only allows them 3% in costs, they would need to ask the seller to pay most if not all of their closing costs and use the 3% in program funds to go towards the FHA 3.5% minimum down payment. Now the buyer only has to come up with .5% down payment!
Payment Assistance There are many programs out there that help the buyer to reduce their payments without providing grants or silent seconds. We have already talked about CRA, and there are others to. An example would be MCC (Mortgage Credit Certificate. Generally if a buyer is approved for a MCC they will get a 15% 0r 20% non refundable tax credit at the end of the year. The MCC gives the buyer a certificate that allows the buyer to change their withholding at their job and claim the tax benefit every month through an increase in their bring home pay. The underwriters will usually add this income directly to the amount that the buyer can afford on his PITI (monthly payment). So the buyer got two benefits. (1) He gets a credit to use towards his new monthly mortgage payment. (2) he usually qualifies for a more expensive house.
FTHB’s and DAP’s not only very with complexity, but also on benefit. There is a reason that it has been nearly impossible for you to find out any information on these programs. Like in most things, it all has to do with money. Lenders and Real Estate Agents get paid a percentage of the sale in commission. Here are some things to consider. Is it not unreasonable that most people would spend time and money learning how to be successful at the transactions that bring them the most money? And when you think about it, First Time Home buyers are not where the money is. They are the most complex of any residential transactions. The City has its own programs, the unincorporated areas of the county has its own programs, each Incorporated City has its own programs, the State and Federal government have their own programs and the banks have their own CRA programs. They are the hardest type of transaction to get accepted by the seller and listing agent. The Listing Agent will be very skeptical of the offer, and your Real Estate Agent must be able to put the Listing Agent at ease about your teams chances at successfully completing escrow. It is not unreasonable for the listing agents to be skeptical. After all, their fiduciary responsibility lies with the seller. It will be the buyers agents job to demonstrate that all parties have a firm grasp on the intricacies of the programs that buyer has stated that they are using to buy the home.
It is the buyer who looses when mistakes are made. When a transaction fails they can loose:
1. Appraisal fees
2. Home Inspection fees
3. Earnest Money Deposit
It is the buyer who is ultimately responsible for assembling a team that compliments his goal of success. The first step in the process is to educate yourself one what is out there and if you qualify. Feel free to review all of the information on this website with no obligation. This will help you to understand what is available. Your next step will be to see if you qualify by scheduling a First Time Home Buyer Consultation.
San Diego Down Payment Assistance
The home you purchase must be in an unincorporated area of San Diego County or in the city of Coronado, Del Mar, Imperial Beach, Lemon Grove, Poway or Solana Beach
low-interest deferred payment loans of up to $35,000 or 33% of the purchase price whichever is less for low-income first-time homebuyers
single-family homes, condominiums, townhomes and manufactured homes on a permanent foundation
appraised value of the property may not exceed $451,250
You must contribute a minimum of one percent of the purchase price from your personal funds
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