Down Payment Advantage FAQ’s
Q Why do your guidelines say to use the lower of HomeNow or FirstHome limits if HomeNow seems to always be the lower of the two?
A It’s true that in the majority of cases, HomeNow income limits will be lower than those for FirstHome. However, because HomeNow limits are based on the exact number of persons in the household, there could be instances -for very large households, for example - where the HomeNow limit would be higher than that for FirstHome. Best practice is to always check both and use whichever one is lower.
Q I understand that the borrower’s first loan will always be the FirstHome program, but when incorporating the grant into the transaction, am I still free to use any of the same underlying loan types as usual – (i.e., FHA, VA, USDA, HFA Preferred conventional)?
A Using the grant program will not affect your ability to choose whichever one of these first mortgage loan types works best for your borrower.
Q If my HFA Preferred borrower ends up with a very substantial down payment because of using the grant, will they still need to purchase mortgage insurance?
A Of course, you must always follow Fannie Mae’s guidelines with respect to how much mortgage insurance is required; however, there will likely be many borrowers with LTV ratios low enough that MI will not be required.
Q What happens if I learn just before closing that I’m a couple of hundred dollars off in my calculations? I know the borrower cannot get any grant funds back at closing, so can I use it to make a principal reduction?
A Yes, MFA would allow those excess grant funds to be used as a principal reduction.
Q Does the borrower sign a note and mortgage for this grant?
A No. Because this is an actual grant program, no repayment will ever be required. Therefore, a promissory note and mortgage aren’t required.
Q What if a borrower wants to sell their home within a few months of closing? Do they have to pay the grant back under those circumstances?
A No. A borrower is free to sell or refinance their home whenever they like. In no case will MFA ever seek to recoup the grant funds. If the borrower has also received a HomeNow forgivable second mortgage, then that loan would become due and payable at the time of sale or refinance. For more information about HomeNow, click here: https://housingnm.org/uploads/documents/HomeNow_Program_Policy_October_17_2022_REVISED_-_FINAL.pdf
Q Why is Fannie Mae’s 80 percent AMI figure usually quite a bit higher than MFA’s 80 percent AMI limits for HomeNow and Down Payment Advantage?
A Very simply, Fannie Mae is allowed to make certain adjustments and allowances in their calculations under their “Duty To Serve” mandates, which results in their higher limits. In contrast, MFA is required to precisely follow AMI calculation methodologies prescribed by the IRS for bond loans. Lenders must always follow the HomeNow income and purchase price limits posted on MFA’s website, when qualifying borrowers for HomeNow and/or Down Payment Advantage.
Q Your program announcement states that a borrower may use the grant and also get either a FirstDown or HomeNow second. If the borrower qualifies for the grant, then they also qualify for HomeNow, so why would they want to get a FirstDown, which requires monthly repayment?
A MFA’s program policy was written as broadly as possible to allow for the use of either down payment assistance loan to be used in conjunction with the grant. Although there are currently plenty of HomeNow funds available, that may not always be the case. If the time comes when HomeNow is no longer available, borrowers will still have the option of using FirstDown if they so desire.
Another possible scenario wherein a borrower might choose FirstDown instead of HomeNow, is when FirstDown can provide a higher level of funding.
MFA allows borrowers to get a maximum of $35,000 in combined assistance. Given that the grant will always provide $25,000, a borrower could potentially – depending on the purchase price - also get a FirstDown loan for $10,000. Whereas in contrast, HomeNow provides a fixed amount of $7,000.
Although the FirstDown maximum loan amount is up to 4 percent of the sales price, lenders may need to use less when combining it with the Down Payment Advantage grant, in order to stay at or below $35,000 in combined assistance. In any case, FirstDown funds may only be used to cover the minimum down payment required, plus closing costs. For more information on the maximum allowable FirstDown loan amount, please view the program policy:
Q If my borrower is purchasing a home in a targeted area and using Down Payment Advantage, can I follow the higher income and purchase price limits normally allowed in targeted areas?
A No. The borrower would still need to meet the lower income and purchase price limits applicable to HomeNow and Down Payment Advantage. However, the borrower will still be given the lowest interest offered by MFA in the preceding 12 months.
Q Is the grant program only available in targeted areas?
A No. The grant is available to be used statewide by any qualified borrower on any acceptable single-family property allowed by MFA’s guidelines.
Q If I have reserved a FirstHome along with a grant and need to extend my lock, how much is charged to extend the grant?
A If you request an extension on the FirstHome lock, the grant (and any second mortgage loan) will be extended automatically with no additional fee. Please see the FirstHome Compliance Manual for more information about extensions: https://housingnm.org/uploads/documents/Compliance_Manual_First_Home_First_Down_Final_12-2016a.pdf