Neighborhood Stabilization Program Overview

Some of you may have recently heard about the Neighborhood Stabilization Program. Here is a simple overview to help explain how it works. This program only applies to properties that have been foreclosed on and are owned by the lien holder. It will not work for properties in short sale or bought at auction and being resold/flipped. I am a Realtor, not a lender, so if you are interested in the program, I will be happy to forward you to a lender who has experience with the program.

Features

The NSP is a community loan designed to assist buyers in financing a REO home in eligible areas that have been hard hit by foreclosures.

The program allows for up to a maximum of $50k or, 20% of the purchase price plus allowable closing costs, whichever is the lower. So on a $150k purchase with closing costs of $5k, the amount being lent would be $35k. The loan is 0% and no payments are required until the home is refinanced or sold.

This program isn’t just for 1st time buyers but all can qualify Buyers can qualify so long as they do not make over 120% of the HUD median income. Buyer is required to put out at least ½ of the required down payment. So, if the FHA loan requires 3.5% down, the buyer will have to come to closing with a minimum of 1.75% in down payment. Buyer may not have more than $15k in liquid funds after closing (retirement funds do not count)

This program is not for flippers, if the buyer were to sell in the 1st five years after purchase, they would be subject to paying the NSP some of the net equity remaining after sale as follows:

With in the 1st year 50% equity to lender

After 1st year but before the 2nd year 40%

On or after the 2nd Year anniversary 30%

On or after the 3rd year anniversary 20%

On or after the 4th year anniversary 10%

On or after the 5th year anniversary 0% Value to the client

Basically the buyer gets a free 20% down payment and they don’t have to jack up the sale to cover closing costs. This will greatly reduce their payments or allow for a buyer to qualify for a lot more home than they typically would.

In one situation, the buyer was already planning to put 5% down to buy a $150k home, if they used the NSP program, they would actually have saved about $346 per month because they would not be required to have MI as well as having a much lower principle and interest payment.

So another situation you would likely see, is a buyer who only qualified to buy up to $150k but nothing works in that price range. With the NSP, they could buy up to $180k and essentially have the same payment because the NSP would lender her the 20% of that price, $36k and any closing costs not paid by the seller.

This is a great tool if used by the right buyers. Contact me today about more information. kaydeeh@johnlscott.com or (541) 285-0040.