2011 homeownership programs

2011 Homeownership

Programs

Ohio Housing Finance Agency

First-Time Homebuyer Program

Who is Eligible?

1. Actual first-time homebuyers

2. Buyers who have not had an ownership interest in a principle residence within the last 3 years

3. Anyone buying in a “Target Area” (this includes previous homeowners )

4. Veterans

Who Invests in OHFA Bonds?

INSURANCE COMPANIES

FINANCIAL INSTITUTIONS

BOND FUNDS

MONEY MARKET FUNDS

TRUST ACCOUNTS

INDIVIDUALS

LOAN PROGRAMS

• Mortgage Revenue Bond (MRB)

• Government Loans (FHA, 203k, VA, USDA-RD)

• Conventional Loans

• Financial Assistance Options• 2.5% Down payment Assistance Grant• Grants for Grads Second Mortgage

LOAN PROGRAMSProgram details:

• 30-year fixed rate loans*• Owner occupied, primary residence• Multifamily dwellings

– 1 to 4 unit• Non-traditional credit permitted • Acreage limits

– 2 acre limit within a municipal corporation– 5 acre limit outside a municipal corporation

(Documented exceptions considered)•

LOAN PROGRAMSProgram details:

Home purchase options: Existing Modular Manufactured Spec homes New Construction

LOAN PROGRAMSProgram details:

Home purchase options:• Manufactured Homes:

– Must be attached to the foundation– No transportation apparatus– Titled as Real Property–(Not through Bureau of Motor Vehicles)

LOAN PROGRAMSProgram details:

Home purchase options:• Spec homes• New Construction

– 90% complete– Certificate of occupancy issued– Owner must occupy within 60 days of closing

LOAN PROGRAMSOhio Heroes program

.25% Rate Reduction on current rate for:

• Active Military• Veterans• Law Enforcement • Public Safety • Teachers• Healthcare

• Full Time employment* • State license or Certification

LOAN PROGRAMS

• 203 K & Streamline loans available

• Housing Choice Vouchers (aka: Sec 8)

Other Government Loans:

LOAN PROGRAMS

OHFA Credit Score Requirements:

600 without OHFA financial assistance

620 with OHFA financial assistance

Credit Scores:

2007 average = 690

2009 average = 650

2010 average = 665

Sources of Household Income

All Income from all adults

(18 years and older) living in the home

Social Security Medicaid

Food StampsUnemployment

VA benefits

Child SupportAlimony

InheritanceInsurance policiesLottery winnings

Wages, Tips &Overtime

Income from Partnerships

Business profits

OHFA Assistance Grant

• Grant equal to 2.5% of purchase price• Interest rate is .5% higher than unassisted

mortgage rate. • Used for down payment or closing costs.• No requirement for repayment.• Homebuyer Education required

Target Area

• A HUD-designated economically distressed area • Most counties have target and non-target areas• Income and purchase price limits are higher in

target areas• Do not have to be a “first-time” homebuyer

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Federal Recapture Tax

• IRS regulation• Recapture Tax not just for real estate• IRS Publication 523, Form 8828• Must meet requirements for recapture tax

to apply

Federal Recapture TaxWhen does recapture apply?

1. The home is sold or otherwise disposed of within the first 9 years of ownership.

AND

2. The home is sold at a profit.

AND

3. The homeowner’s income at the time of sale exceeds the adjusted qualifying income. (adjusted up apx. 5% per year.)

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

%Percentage per

Year

Recapture Tax Chart

1 2 3 4 5 6 7 8 9 Years of Ownership

Federal Recapture Tax

Maximum 6.25% of net profit

Federal Recapture Tax

OHFA Recapture Reimbursement Program

OHFA will reimburse homebuyers for the full amount of recapture tax paid to the IRS on loans closed on or after March 1, 2006.

Federal Recapture Tax

What if. . . Sales price $ 125,000Purchase price - $ 105,000Gross profit = $ 20,0006% Real estate commission - $ 7,500Net profit = $ 12,500

X 6.25%Recapture tax = $ 781.25

Ohio Housing Finance Agency

Mortgage Credit Certificate (MCC) Program

Current Guidelines

• $2000 Maximum mortgage interest credit per year

• Borrower must owe taxes to the IRS at

the end of each year after credits and deductions.

Current Guidelines

Annual tax credit rates:– (20%) Credit for non-target areas– (25%) Credit for target areas– (30%) Real estate owned (REO)

• Credit is valid for each year of homeownership

Current Guidelines

Applicants Must:

• Use an OHFA participating lender

• Qualify under the current First-Time Homebuyer Program guidelines

Current Guidelines

MCC Program Exceptions Ownership status of borrower*• If the applicant has owned a mobile home in the past

regardless of how it was titled, (BMV or as real property) the applicant is considered to be a homeowner and is not eligible for the MCC program unless purchasing in a Target area.

• One-unit single family home purchases

Current Guidelines

Two options for credit:

• End of the year tax credit

• Adjusting W-4 withholding

Buyers are strongly encouraged to consult a tax professional for advice on claiming the credit.

Current Guidelines

Lenders:• Must be able to originate, underwrite, close & fund

loans• Will combine with their own loan product• Must use a “fixed rate” loan product• May permit borrower to buy-down the interest rate

Current Guidelines

Rate cannot be 100 basis points or more above the current Freddie Mac Primary Mortgage Market Survey (PMMS)

Federal Recapture Tax

OHFA will reimburse homebuyers

for the full amount of recapture tax

paid to the IRS on loans closed on or

after March 1, 2006.

Reservation & CommitmentTimeline

Type: Reservation Commitment

Existing 60 days 30 days

New 90 days 60 days

REO 120 days 90 days

Issuance

Lender Receives:– MCC certification

letter – lender duties– Copy of Certificate

Borrower Receives– Congratulatory letter– How to claim credit– OHFA and IRS websites– Original MCC document

Reissuance

If Borrower Refinances:• One year to request new certificate• Must be reissued to original holder(s)

– MCC credit non-transferable• Original Certificate becomes void• MCC credit percentage will not change• Review IRS Publication 530

MCC Exercise

If the first year of interest on a $100,000 loan is $6,467.09, how much credit would the borrower be able to claim the first year?

MCC Example

$6467.09 $1293.42

Annual Interest x % = yearly credit

20%

25%

30%

$1616.77

$1940.13

Ohio Housing Finance Agency

Grants for Grads

Second Mortgage

Program

Grants for Grads Second Mortgage

• Purpose of Program:– Offer financial incentive to recent college

graduates toward the purchase of a home in Ohio.

– Encourage Ohio residents to return to or stay in Ohio.

Grants for Grads Second Mortgage

The Grants For Grads Program provides down

payment assistance equal to 2.5% of the home

purchase price in the form of a forgivable second

mortgage.

CURRENT MORTGAGE RATE:  4.50%

Grants for Grads Second Mortgage

Homebuyer Qualifications: • Follow First Time Homebuyer Guidelines• Single family home purchases only• Primary residence of borrower• Borrower must occupy home within 60 days of

closing

Homebuyer Qualifications

• Ohio Resident at time of High School Graduation,

Graduate from an Ohio High School or

Proof of parent’s residency at time of high school graduation

• GED not eligible at this time• Graduate from any accredited college or

university

Homebuyer Qualifications

• College Graduation:• Receive one of the following degrees within the 18

months from a college or university:

- associate

- bachelors

- masters

- doctoral• Proof of graduation

- Diploma from high school and college/university

Grants for Grads Second Mortgage

What about a degree from a “Technical College”?

The Ohio Board of Regents has determined that a degree from an approved Technical College is equal to an associates degree.

Grants for Grads Second Mortgage

Program details:

• Interest rate is same as OHFA unassisted Rate (currently 4.50%)

• Homebuyer Education required• Income limit is 140% of area median income• Program cannot be combined with other OHFA

down payment programs or Ohio Heroes.

Grants for Grads Second Mortgage Repayment

• Repayment of second mortgage required if:

-borrower moves out of Ohio within first five years.

• Repayment of second mortgage is not required if:

-borrower sells the house but stays in Ohio.

Ohio Housing Finance Agency

Homebuyer Education Program

OHFA Homebuyer Education

Purpose:

• Educate borrowers about the home buying process

• Provide additional educational resources to improve chances of success as a homeowner.

OHFA Homebuyer Education

Who is required to use Homebuyer education?

OHFA borrowers requesting additional financial assistance from OHFA.

OHFA Homebuyer Education

Process:

• Borrower should have a loan reserved with OHFA

• Access the OHFA website and review and complete the required documents

– Homebuyer Guide

– 25 question test

– Budget worksheet

OHFA Homebuyer Education

Two options:

• Courses offered through HUD-approved housing counseling agencies

-OR-

• OHFA Streamlined education program

OHFA Homebuyer Education

33 HUD approved Counseling Agencies:• Available for all 88 counties• Counselor will complete counseling and send

certificate to OHFA • OHFA will upload the certificate and notify lender

OHFA Homebuyer Education

OHFA Streamline Education:• Borrower sends test and budget to OHFA• OHFA one-hour telephone counseling session

with buyer• OHFA will upload the certificate and notify lender• $75 fee to borrower

Ohio Housing Finance Agency

New Home Sweet Home Program

Ohio Housing Finance Agency

Purpose:

To provide qualified homebuyers the same opportunity to secure a low-interest OHFA loan for a “new-construction” home to be built.

Ohio Housing Finance Agency

• Program follows First Time Homebuyer Program guidelines• Qualified borrowers are eligible for 2.5% Assistance Grant• Lender reserves loan with OHFA and performs underwriting• Interest rate is “locked” at time of reservation • Interest rate is .25% higher than unassisted rate (currently

4.50%)• Interest rate is locked throughout the building process

Details:

Ohio Housing Finance Agency

Additional requirements:• Single family property construction only• Builder has 180 days total: 150 days to complete

construction; 30 days to close• Homebuyer education required• Additional information on OHFA website:

www.ohiohome.org

OHFA Conference

Ohio Housing Conference November 29- December 1, 2011

Columbus Convention Center

Sponsored by:The Ohio Housing Finance Agency (OHFA)

& The Ohio Capital Corporation for Housing (OCCH)

Ohio Housing Finance Agency

Questions?