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© Freddie Mac 2015

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It’s Still a Great Time to Buy

Sources You Can Tap to Fill Your Down Payment Gap

Down Payment and Closing Cost Resources in [Add Location Name Here]

Mortgage Options We Offer

Information Resources

Today’s Presentation

© Freddie Mac 2015


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It’s Still a Great Time to Buy

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© Freddie Mac 2015

Low Interest Rates + Low Home Prices = Affordability

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U.S. Home Prices Are at 2005 Levels

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© Freddie Mac 2015


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Many potential homebuyers today are anxious about buying a home, and those concerns are legitimate.

Challenges

Lack of down payment Anxiety over housing prices Inability to find financing Lack of information Challenges of selling current

home

Lack of down payment Anxiety over housing prices Inability to find financing Lack of information Challenges of selling current

home

Fear of making wrong choices

Not the right time to buy

Down payment struggles

Fear of making wrong choices

Not the right time to buy

Down payment struggles

Universal

Source: Freddie Mac

But today is a great time to buy, if you do your homework and understand your options….

© Freddie Mac 2015


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You’ve Decided to Go Ahead and Buy

You’ve found your first home.

Your loan officer tells you you’re approved for a mortgage.

The numbers have been crunched -- and you find you’re just short of the cash you need to close.

So what do you do?

Drain your 401(k)? Not ideal.

Bank of Mom? No.

Any other options? Yes.

- There are homebuying assistance resources out there – ranging from a few thousand dollars to larger amounts – waiting for well-qualified, mortgage-ready borrowers like you.

© Freddie Mac 2015


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Overcoming Your Challenges and Fears: the Benefits of Pursuing Homeownership:

Owning a home still has its advantages, both personally and financially:

– housing costs are more stable if you obtain a fixed-rate mortgage (still available at low rates);

– tax incentives such as the mortgage interest deduction not offered to renters; and

– you obtain a sustainable mortgage at an affordable rate using available down payment and closing cost assistance.

© Freddie Mac 2015


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Sources You Can Tapto Fill Your Down Payment Gap

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Where Can I Find Down Payment and Closing Cost Assistance?

States;

Cities;

Counties; and

Other local government resources.

The U.S. Department of Housing and Urban Development provides grant assistance through either the HOME Investment Partnerships Program or the Community Development Block Grant Program that are used to administer programs on the state and/or local level. An example of a program is the Neighborhood Stabilization Program.

© Freddie Mac 2015


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What Are the Qualifications and Requirements? And If I Do Qualify, How Much Can I Get?

Assistance may be limited to first-time homebuyers and/or low- and moderate-income homebuyers, depending on the assistance program.

Homebuyer education counseling is often required, but not always.

Assistance can range from a few thousand dollars to larger amounts, depending on your needs, your qualifications, and where you choose to purchase your home.

There are many programs out there, with different requirements.

Finding the right program to meet your circumstances takes some research, but the solutions are out there.

© Freddie Mac 2015


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What Kinds of Assistance Are There?

There are three main types of down payment help:

Grants;

Low-rate or deferred payment second mortgage loans; and

Tax credits.

© Freddie Mac 2015


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Grants

Grants are funds that you do not have to pay back as long as you own and occupy your home for a certain period of time.

Depending on the source, income limits may apply. For example, if you apply for a grant your state or local government offers, you may be eligible only if you earn no more than 80 percent of the income for your area.

To apply for a grant offered by a state or local government agency (or designate*), you must contact the agency or designate directly. Our loan officers and real estate professionals in your area are also familiar with state and local sources and can help.

“Designate” is an organization (typically, a nonprofit organization) that a state or local government agency has assigned to administer the program.

© Freddie Mac 2015


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Example of a Grant Program

A state-chartered housing finance agency offers a $2,500 down payment and closing cost assistance grant to eligible buyers, including first-time homebuyers, current and past members of the military, and borrowers purchasing a home in one of 16 communities affected by a recent Naval Air Base closure. In addition to the $2,500 grant, new homebuyers will also receive a coupon for up to $500 to pay for an “energy audit” that helps identify cost-effective home energy improvements.

The grant does not have to be paid back, and will not be added to your loan amount.

To qualify for the grant, you must apply for a below-market-rate first mortgage offered by one of the agency’s participating lenders. In addition, you must pay a certain portion of closing costs from your own funds, and attend a homebuyer education class.

© Freddie Mac 2015


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[Add a Specific Grant Program Example in Your Area Here:]

XX City, XX State – [Add Name of Program Here]

Describe program here

Source – Add Here

[USE THIS SLIDE TO PROVIDE A SPECIFIC EXAMPLE OF A GRANT PROGRAM IN YOUR LOCAL AREA OR LENDING FOOTPRINT.]

© Freddie Mac 2015


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Low-rate or Deferred Payment Second Mortgage Loans

The most common type of down payment source, many second mortgage loans offered by state and local governments have low or no interest rates, and the payments are deferred over a certain timeframe.

Income and prior homeownership limits may apply.

Like grants, you must also apply for second mortgage loans through the state or local agency offering the program. Ask your loan officer or real estate professional for more details.

© Freddie Mac 2015


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Example of a Low-rate or Deferred Payment Second Mortgage Loan Program

Through a city home purchase assistance program, low- and moderate-income, first-time homebuyers can receive up to $40,000 in financial assistance to purchase single-family homes, condos, or co-ops in the city, with closing cost assistance provided separately up to $4,000. The assistance is in the form of a low-interest, deferred loan for the first five years. Certain eligibility requirements apply.

Interested residents can apply through one of six participating city-based nonprofit organizations.

© Freddie Mac 2015


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[Add a Specific Second Mortgage Loan Program Example in Your Area Here:]



Source – Add Here

[USE THIS SLIDE TO PROVIDE A SPECIFIC EXAMPLE OF A SECOND LOAN MORTGAGE PROGRAM IN YOUR LOCAL AREA OR

LENDING FOOTPRINT.]

© Freddie Mac 2015


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Tax Credits

Certain states and local governments, including housing finance agencies, issue mortgage credit certificates (MCCs), which reduce the amount of federal income tax you pay, thus giving you more available income up-front to make your down payment or pay closing costs.

MCCs generally allow you to claim around 20 percent of the annual interest on your mortgage as a federal tax credit every year for the life of the original first mortgage (details vary by state).*

The amount of the credit is capped by the Internal Revenue Service at $2,000 per year.

Although MCCs are not a down payment assistance source, mortgage lenders often use the estimated amount of the credit on a monthly basis as additional income to help you qualify for the loan.

*Borrowers should always check with their tax advisor to determine any potential tax benefits

© Freddie Mac 2015


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Mortgage Credit Certificates (cont’d)

To obtain an MCC, you must meet certain minimum prior homeownership guidelines (restrictions may be waived by issuing entity in certain circumstances):

-- Must not have owned a home in the previous three years;

– Must meet income and purchase price restrictions; and

– Must use the new home as a primary residence.

Source – NCSHA and Wikipedia®

To apply for a Mortgage Credit Certificate, you must apply through a housing finance agency, or state or local government, administering the program.

© Freddie Mac 2015


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How Mortgage Credit Certificates Work

Borrower receives an MCC for:

30% credit on a

$200,000 mortgage at

30-year, fixed-rate, and a

6% interest rate

Borrower receives an MCC for:

30% credit on a

$200,000 mortgage at

30-year, fixed-rate, and a

6% interest rate

Allowable Tax Credit:

Mortgage Interest Paid (First Year): $11,933

X

0.30 (30% MCC Credit)

=

Total Credit: $3,579

Allowable Tax Credit:

Mortgage Interest Paid (First Year): $11,933

X

0.30 (30% MCC Credit)

=

Total Credit: $3,579

Results: Total tax credit in this example exceeds

IRS limit of $2,000

Homebuyer reports a $2,000 credit on

tax return

Homebuyer may continue to receive a

tax credit for as long as they remain in home and

retain mortgage

Results: Total tax credit in this example exceeds

IRS limit of $2,000

Homebuyer reports a $2,000 credit on

tax return

Homebuyer may continue to receive a

tax credit for as long as they remain in home and

retain mortgage

For illustrative purposes only. Borrowers should always check with their tax advisor to determine any potential tax benefits.

Source – Wikipedia®

© Freddie Mac 2015


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[Add a Specific Mortgage Credit Certificate Program Example in Your Area Here:]



Source – Add Here

[USE THIS SLIDE TO PROVIDE SPECIFIC INFORMATION ABOUT MORTGAGE CREDIT CERTIFICATE-ISSUING ENTITIES IN

YOUR LOCAL AREA OR LENDING FOOTPRINT.]

© Freddie Mac 2015


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First MortgageBorrower obtains a 30-year conventional

fixed-rate loan

+

Mortgage Credit Certificate (MCC),

when available

Money Out of PocketBorrower’s personal contribution towards

the purchase can be as low as 3% of the

purchase price

“Gap” LoanSilent second loan from a local government agency

requires no monthly payment and, therefore, is not

counted as a borrower’s debt during underwriting

Other Assistance ProgramsRemaining down payment or closing

cost assistance needed to close the loan

(can include seller concessions)

YOUR BORROWER’S NEW HOME

FIRST MORTGAGEObtain a 30-year fixed-rate conventional mortgage and

combine it with a Mortgage Credit Certificate to lower the borrower’s

monthly payment and maximize his or her purchasing power.

MONEY OUT OF POCKETBorrower’s personal contribution.

“GAP” LOANThese loans fill the gap between what you can qualify for on your own and the actual price of the

home. These loans don’t require any monthly payments.

Home Purchase Price+Closing Costs__________________________TOTAL REQUIRED TO CLOSE

OTHER ASSISTANCE PROGRAMSIf the “gap” loan isn’t sufficient to close the loan, these programs give extra help with the borrower’s down payment and closing costs. Seller concessions can be applied here.

How Government Grants and Loans Can HelpBorrowers Buy Their First Home

© Freddie Mac 2015


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Down Payment and Closing Cost Resources in

[Insert Location Here]

© Freddie Mac 2015


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Summary: Down Payment and Closing Cost Assistance Programs in [Insert Location Here]

Statewide and Regional Programs: [Add here]

City/County Programs: [Add here]

Municipal Programs: [Add here]

[CUSTOMIZE THIS PAGE TO SUMMARIZE DOWN PAYMENT ASSISTANCE PROGRAMS OFFERED IN THE STATE, REGION, CITY,

COUNTY, AND MUNICIPALITY.]

© Freddie Mac 2015


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Housing Counseling Agencies

Homebuyer education counseling is often required to be eligible for down payment and closing assistance.

Counseling Agencies Providing HUD-approved Homebuyer Education:- [Add here]- [Add here]- [Add here]

[CUSTOMIZE THIS PAGE TO LIST COUNSELING AGENCIES PROVIDING HUD-APPROVED HOMEBUYER EDUCATION IN

YOUR AREA.]

© Freddie Mac 2015


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Mortgage Options We Offer

© Freddie Mac 2015


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[List Your Mortgage Product Offerings Here]

[Name of lender] offers the following mortgages that, when combined with down payment or closing cost assistance sources, can help you buy your first home:

[Name of product] – Description…

[Name of product] -- Description…

Source – Add Here

[CUSTOMIZE THIS PAGE TO SHOW MORTGAGE PRODUCT OFFERINGS, REQUIREMENTS, AND SPECIAL PROGRAMS YOU OFFER.]

© Freddie Mac 2015


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Information Resources

© Freddie Mac 2015


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Information Resources -- HUD andNCSHA Websites

HUD provides information on local homebuying programs in all 50 states, Puerto Rico, and the U.S. Virgin Islands.

Directory of housing counselors also available on this site (homebuyer education required for some assistance).

In addition to the HUD site, the National Council of State Housing Agencies (NCSHA) website has links to all state housing finance agencies and the Mortgage Credit Certificate and other programs they offer.

Source -- HUD www.ncsha.org/housing-help

http://portal.hud.gov/hudportal/HUD?src=/states

www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm

© Freddie Mac 2015


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Contact Information

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