The FHA guidelines on student loans is changing again effective June 30, 2016. I believe this is going to have a big impact on buyer’s purchasing power. If you have student loans and have been pre-approved. I would highly recommend that you re-examine your pre-approval amount with your lender if you plan on purchasing after July 1st. FHA seems to be getting tougher on student loans which could mean that they are seeing higher default rates for buyers that have student loan debt.
Last year before September 2015, your lender could exclude student loan debt if you could show it was in forbearance or deferment for 12 months from the date of your settlement. In September 2015 FHA changed the guideline again.
The new guideline starting this month is lenders must use the GREATER of, 1% of the outstanding balance on the loan or the monthly payment reported on the borrower’s credit report OR the actual documented payment providing the payment will fully amortize the loan over its term.
Here is an example of how this will affect a buyer’s purchasing power. A buyer owes $40,000 in student loan debt. The payment base on 1% of the balance of $40,000 is $400 per month. The lender will have to add $400 to the buyer’s monthly debt when qualifying. This can have a big impact on a buyer’s purchasing power.
Federal Home Loan Bank of Atlanta first-time home buyer grant program is back! All buyers must contribute a minimum of $1,250 into buying their home, and those funds can actually be gifted as well. This grant is forgivable after 5 years. If a buyer sells the property prior to 5 years then the grant is forgiven at 20% per year. FHLB does not cap out the buyer’s debt ratio at 45% like most other grant programs. The buyer does their home buying counseling over the phone for this program. FHLB can also be combined with other first-time home buyer grant programs. All banks or lenders do not participate in this program. You can contact me for a list of mortgage companies or lenders that participate.
Effective September 2, 2015, Maryland is offering four special incentives (hence the name Grand Slam) for borrowers who are purchasing a home in Baltimore City. The Maryland Grand Slam Program in Baltimore City is open for reservations until the allocated funds for the grants are expended. The remaining balance of these funds will be posted daily in a flashing bulletin on Lender Online.
Incentives & Highlights are Listed Below:
First Base: the interest rate is 1/4% below the regular MMP interest rate for a conventional or government loan, whichever is applicable.
Second Base: $5,000 outright grant for down payment and closing costs from the state of Maryland.
Third Base: $2,500 outright grant for down payment and closing costs from Baltimore City.
Home Plate: $450 CDA Mortgage Credit Certificate (MCC) fee waived for an MMC associated with an MMP loan under the Maryland Grand Slam.
*Property must be in Baltimore City*
*Grants under the Maryland Grand Slam cannot be combined with matching funds from CDA Partner Match Programs*
*The entire city of Baltimore is a targeted area and therefore, someone buying a home in Baltimore City does not have to be a First-Time Homebuyer; however, they cannot own real property at the time of closing*
*The income limit for a one or two member household is $108,600 and $126,700 for a three or more member household*
*A CDA-approved lender must originate the loan*
*The maximum loan amount is $417,000*
If you have any questions contact me at 410-977-7176.