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Market Watch

Opening the Door to Homeownership

Posted on January 3, 2017 by Carlee Spritzer

The dream of homeownership remains strong. However, the reality of buyers getting their proverbial financial house in order in regards to credit score, paying down revolving debt, and saving enough for a down payment can be daunting. There are many resources in place that can provide educational and financial assistance to help renters make the leap to becoming first-time homeowners. One new organization that offers assistance is HomeNow, which is affiliated with the Montana Community Development Corporation (MCDC). The gift program provides funds in the form of cash for closing to eligible borrowers who meet certain criteria. The first step is to meet with a lender who is able to offer the program. Lenders must be preapproved in order to participate. Currently Mann Mortgage, Yellowstone Bank and Opportunity Bank (coming soon) can work with borrowers to determine eligibility for HomeNow assistance. Potential homebuyers must qualify for and use a 30-year federally backed loan program such as FHA, VA, RD or HUD1-184. Furthermore, they must be at or below the established limit of 115% of the area's median income and possess a credit score of 640 or above. The property must be used as a primary residence in Montana. Once the initial steps have been met, the fun part of house hunting begins. Working with a real estate professional to find available properties that can both meet the conditions of the loan program and stay within the appropriate price range is the process that is often most appealing to homebuyers. After a home is identified and making an offer is anticipated, the juggling of funds can become part of the consideration. The down payment gift program comes in two forms – either 3.5% or 5.0% of the amount of the mortgage loan. It can be put toward the down payment, applicable closing costs, or any expenses related to the mortgage. There is no requirement to repay the money. It is truly a gift. Additionally, though mainly considered a program for first-time homebuyers, it can be used by any borrower for a home purchase (first home or not) and also toward refinancing an existing loan. Homebuyer education courses are not a requirement to receive the gift, but they are always a good idea to help prepare for what is in store. So how does the program remain sustainable? The MCDC offers the loan that has been originated by the lending institution. They set interest rates for the loan dependent on current, local market conditions. U.S. Bank, N.A. then purchases the loan and services it for the borrower. Suffice it to say, the interest rates are higher than with a direct Rural Development loan, for instance. This will lead to a nominally higher monthly mortgage payment. However, it could allow borrowers to use their cash reserves that they were putting aside for a down payment for other purposes, including paying off debt with even higher interest rates.  Once it becomes feasible, the loan could be refinanced to a lower interest rate – and again, with no need to repay the gift. As with all real estate transactions, working closely with a professional team which can include real estate associates, lenders, and accountants can offer a number of financial scenarios that meet an individual buyer's current needs.  Having a trusted network in place to negotiate and understand the intricacies can lead to smooth sailing into a new home.

Agents: Robyn Erlenbush


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