New THDA Stimulus Second Mortgage Program
Earlier this year, Congress passed the American Recovery and Reinvestment Tax Act of 2009 ("2009 Tax Act"). In division B, Title I, Section 1006, there is a provision for a First Time Homebuyer Tax Credit (Form 5405) up to $8,000 or 10% of the purchase price. This act provides for an exception for principal residences purchased between January 1, 2009, and November 30, 2009, which enables a first time homebuyer to receive the tax credit with no repayment required if the homebuyer occupies the property for 3 years. The 2009 Tax Act also provides for use of this credit with loans purchased with proceeds of tax-exempt mortgage revenue bonds. Therefore, this credit can now be used with THDA's mortgage programs.
THDA has implemented a new second mortgage program, THDA Stimulus Loan Program, for downpayment and closing cost assistance. This program complements THDA’s existing Homeownership Choices incorporating the tax credit. In order to be eligible for the second mortgage program, THDA MUST be providing funding for the first mortgage through the Great Rate or Great Advantage programs for the borrower(s) to purchase the home. Both the first and second mortgage must close on or before November 30, 2009. The November 30, 2009, date also applies to new construction. The new home must be complete and the loan closed on or before November 30, 2009.
PROGRAM TERMS
- Eligible Borrower: Homebuyer obtaining THDA first mortgage Great Rate or Great Advantage loans and who is otherwise eligible for the First Time Homebuyer Credit.
- Maximum Household Income: THDA Homeownership Choices limits apply.
- Maximum Loan Amount: 3.5% of Purchase Price
- Interest Rate: 0% deferred until June 1, 2010, 1% above corresponding first mortgage rate if amortized.
- Loan Term: After initial deferral period, the loan will fully amortize over 10 years, beginning July 1, 2010.
- The Stimulus Loan Program is only available on FHA loans.
- Underwriting Criteria: Borrowers must have 620 minimum credit score. Must include amortizing second mortgage payment in total housing expense ratio and back end ratio cannot exceed 45%. Manual underwriting is not permitted.
- Pre-Payment: The second mortgage loan is due in full upon first mortgage payoff, assumption, or refinance. No pre-payment penalty.
- Allowable Fees: Normal and customary second mortgage fees.
- Closing Documents: Second Mortgage Note and Deed of Trust must close in the name of THDA. Title Policy must insure first and second mortgage.
- Homebuyer Education: Required prior to closing on first mortgage loan.
- Servicing: Servicer will service combined payments. Under this program, both the first and second mortgage must be serviced by U.S. Bank.
If you have any questions or need additional information from THDA, please contact Ed Lozier by email or at 615-815-2082.