George Souto

Last week I posted a blog updating some of the changes to Connecticut Housing Finance Authority (CHFA) since my previous post. This post covered most of the requirements for CHFA Loans as well as additional programs that they have. The danger of writing a post like this is that it covers so much, that it is very easy to miss some very important points that most do not know, or have a misconception about. The reason why I included so much in that blog is because I wanted a blog that a Borrower could go to, and read all about CHFA in one place without having to search around and jump from one screen to another.

The purpose of this blog and possibly others to follow, is to just pull out one of the features of CHFA that is commonly misunderstood, or not know, which could have easily been overlooked when reading the more inclusive blog.

One of the major misunderstandings about CHFA is that it is JUST for First Time Homebuyers. A First Time Homebuyer is defined as someone who has not owned a property in the last three years. While CHFA’s major purpose and focus is to provide mortgage loans for First Time Homebuyers, there is a situation in which it can also apply to non first time buyers.

CHFA has designated 5 towns (Bridgeport, Hartford, New Haven, New London, and Waterbury) as Targeted Areas, and portions of 13 other towns (Ansonia, Danbury, Enfield, Groton, Meriden, Middletown, New Britain, Norwalk, Norwich, Rocky Hill, Stamford, Torrington, Windham) as Targeted Areas. If a Buyer purchases a property within any of these areas, and meets CHFA’s Income and Sales Limits, they can apply for a CHFA Mortgage even if they are not a First Time Homebuyer. However, it DOES have to be the only property that they presently own, they cannot own a property that they plan on keeping, and then purchase another property with a CHFA Loan. Also since CHFA further reduces their already below market interest rate by .25% for properties within the Target Area, they qualify for the reduced rate as well.

This is not commonly known by many Loan Officers in Connecticut, and as a result many non first time buyers who have qualified for CHFA Mortgages in the past, have not taken advantage this. Hopefully those who are reading this blog will not make that same mistake.

I plan on following this blog with another one to clarify anther misstated perception about CHFA Loans, so keep an eye out for it.

***************************************************************************************************

Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com

The new Tax Credit has created a great new opportunity for all First Time Home Buyers, but it has created an even bigger opportunity for who are able to qualify for a CHFA Loan. The previous Tax Credit was not available for mortgage loans that were funded/backed by Tax Exempt Bonds. But the new Tax Credit in is now available for these loans as well as continuing to be available to all the other mortgages like FHA, VA, and Conventional loans.

This is HUGE for CHFA Borrowers because now they may have the ability to not only apply for a mortgage that has below market rate interest, but they may also be able to borrow the Downpayment & Closing Costs at the same rate, as well as not getting this tax credit to do improvements to the property. For more information on the Tax Credit please read my blog "Washington Update ........ New Tax Credit".

Because of this great new opportunity for CHFA Borrowers, I thought that it would be good to include here a post that I did a while back on CHFA.

*************************************************************************************************

The Connecticut Housing Finance Authority The (CHFA) is Connecticut’s Premier Mortgage Loan Program for “First Time Homebuyers”. There have been a few Posts written here on ActiveRain, that have provided some information about different components of the CHFA Loan Program. So I thought it might be beneficial for “First Time Homebuyers” if a Post was written covering all of the features that make up the CHFA Loan Program. Even though CHFA is a Loan Program specific to Connecticut, it is important for “First Time Homebuyers” who maybe planning to relocate to Connecticut to also have information about it. Therefore this Post will be posted in the “Mortgage, First Time Home Buyer, New England, Connecticut, and Realtor Groups”.

CHFA is a Quasi Government Agency that provides a 30-year, fixed rate Loan Program, with an interest rate that is below comparable market rates. For example this week the CHFA rate is 5.0 % with up to One Point (1% Origination Fee) payable to Lender. The Conventional Mortgage rates this week have been fluctuating between 5.5% and 5.75%, so as you can see the CHFA rate is far below the Conventional Rate. CHFA rates are posted every Thursday, and are fixed until the following Thursday. These Mortgages are originated and serviced by over 80 participating lenders (banks and mortgage companies) statewide in Connecticut.

Eligible Borrowers - CHFA Mortgages are available to homebuyers who have not had an ownership interest in a home for the previous 3 years. Prior homeowners may qualify for a CHFA mortgage if the home they purchase is within an area that is designated as a “Targeted Area”, recieve an additional .25% off the rate. These homebuyers must also be below "Income Limits" that are established by “Household Size” and these “Income Limits” vary by town. There are also “Sales Price Limits", which also vary by town.

Eligible Properties - CHFA Mortgage may be used to purchase an existing one- to four-family home, mobile homes, a newly constructed single family home, or a newly constructed two-family home in a targeted area. They can also be used to purchase condominiums that are on the CHFA eligible condominium list. All properties must be owner occupied, and CHFA loans are not available for investment properties.

Downpayment and Closing Costs Assistance (DAP) – CHFA requires a 3.5% downpayment on their loans. If a qualified borrower does not have enough funds for the downpayment and or closing costs, CHFA will let them borrow it on a second loan know as a “DAP Loan” at the same interest rate as the first loan. CHFA allows a borrower applying for a DAP Loan to keep up to $5,000 of their own money before CHFA requires them to use their funds to satisfy the 3.5% downpayment and or closing cost. The minimum DAP Loan amount is $3,000. Qualifying Homebuyers who apply for a “DAP Loan” need to attend an approved CHFA “Homebuyer Counseling Class”. These classes are free, and upon completion of the class a “Course Completion Certificate” which needs to be submitted with a DAP Loan, will be given to the homebuyer by the class Counselor. If a homebuyer already has a sales contract on a house, then they only need to attend a 3 hour class, but if they do not have a sales contract on a house and want to get the classes out of the way, they need to do 8 hours of class time.

PMI/MI - CHFA Mortgages are usually FHA insured, so the Mortgage Insurance Rate (MI) is much less than the Private Mortgage Insurance Rate (PMI) for a loan with the same downpayment. Because CHFA Mortgages are FHA insured they also are subject to the FHA Up Front Mortgage Insurance Premium (UFMIP) of 1.75%.

Veterans Mortgage Assistance Program (CHFA/VA) - CHFA Mortgages are available to Veterans and can be insured by the VA. This means that besides qualifying for the below market CHFA rate, the CHFA/VA Mortgage does not require any downpayment, and since it is VA insured, there isn’t any PMI. However, the VA “Up Front Mortgage Premium” can be up to 2.5%. If a Veteran who is on Active Duty applies for a CHFA/VA Mortgage, they are entitled to an additional .125% reduction in the already below market rate.

Teachers Mortgage Assistance Program - Connecticut certified full-time or part-time public school teacher or vocational-technical teacher employed by and teaching in a “Priority or Transitional School District”, or who are certified to teach and are teaching in a “State-identified Subject Matter Shortage Area”, may qualify for the Teachers Mortgage Assistance Program. Teachers who qualify for this program are also entitled to an additional .125% reduction in the already below market rate.

Police Homeownership Program - This CHFA Loan Program is available to local or state police officers who purchase homes in eligible municipalities. Eligible municipalities must agree to participate in this program, then designate areas of the municipality where an increased police presence would be desirable. State or local police officers who purchase homes in those designated areas are eligible to apply for the CHFA low interest rate, and are entitled to an additional .125% reduction in the already below market rate.

Processing Time - Generally, the process time for CHFA Mortgages, from loan application to loan closing can be as much as six weeks. However, at McCue Mortgage we are experiencing only two to three weeks to commitment, and an additional one to two weeks to Close. This is because we know what documentation are needed, and we collect everything at the time of the application. So by the time our underwriters process the loan application, and send it to CHFA for their Loan Review, we receive it back within 24 to 48 hours approved. The loan packet is then sent to the Closing Attorney for them to complete the Loan Documents, Title Search and schedule the Closing.

Federal Recapture Tax - Under certain circumstances, CHFA mortgage loans may be subject to Federal Recapture Tax. The payment of federal recapture tax occurs at the time the property is sold, only if:

1. The house is sold or disposed of within nine (9) years of being purchased, for reasons other than death.
   
2. There is a capital gain on the sale of the home.
   
3. The household income exceeds Federal Recapture Tax limits at the time of the sale.

We have been doing CHFA Loans for over 30 years and have seen this Recapture Tax kick in less than a handful of times. If a homeowner’s income has reached the point that it exceeds the Federal Recapture Tax Limits, they will probably be happy to pay the tax in exchange for that income. And even then the other two conditions must also apply in order for this tax to be paid.

As you can see this is an excellent Loan Program for anyone who can qualify for it, and it is the first loan program that I look to when I am talking to a “First Time Home Buyer”.

************************************************************************************************

Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com

Ever since the passage of the New Stimulus Package, we have been anxiously awaiting FHA to formally announce their new higher Loan Limits. This finally happened yesterday when FHA published Mortgagee letter 2009-07 which included the 2009 TEMPORARY FHA loan limits which will be the same as the 2008 TEMPORARY LIMITS. I say TEMPORARY because they will only be in effect until December 31, 2009, unless FHA extends them. Below are the new FHA TEMPORARY Loan Limits for Connecticut.

However, these new TEMPORARY LIMITS will not go into effect until investors start accepting them, which should happen over the next couple of weeks. For Example when FHA came out with these same limit in the beginning of 2008, investors did not fully adopt them, investors increased them, but not to the full FHA Limits. This could very well be the case once again, but at least it will give hope to some who can not qualify for a Conventional Mortgage.

Fannie Mae and Freddie Mac have not yet announced their loan limits, but it is expected that they will very soon. I will post Fannie Mae and Freddie Mac once they formally announce them.

********************************************************************************************

Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com

Earlier today I received an update from the President of McCue Mortgage, Bill McCue, on the Stimulus package that the House and Senate have come to agreement on, and expected to be signed by President Oboma some time today. This update was mainly on the Tax Credit which has been in place for almost a year and has now been altered by new legislation.

The legislation that was finally agreed upon has be significantly altered from what I posted ten days ago. As in my previous blog I am going to just concentrate on the Tax Credit portion of the legislation at this time, and will give further updates on other parts of it at a later date.

1. The tax credit is only for first time buyers just as defined in the past.
   
2. The credit is increased from $7,500 to $8,000.
   
3. The credit is no longer an interest free loan. No repayment is required now.
   
4. The credit is now available to Connecticut Housing Finance Authority (CHFA) borrowers.
   
5. The new credit will be effective as of 01/01/09
   
6. The new credit will end on 12/01/09
   
7. The $15,000 Tax Credit that was part of the senate version of the bill is now gone.
   

The previous Tax Credit will continue to apply to all First Time Homebuyer that purchase between April 8, 2008 and December 31, 2008. First Time Homebuyers who closed on their home beginning January 1, 2009 will be eligible for the new Tax Credit until December 31, 2009. For example, a CHFA loan that closed on 12/31/08 gets no tax credit but one that closed the next day gets the new credit. A market rate borrower who closed on 12/31/08 gets a $7,500 interest free loan while one that closed the next day gets an $8,000 tax credit with no repayment required. I’m sure this will make some people unhappy. Remember nobody has to take the tax credit.

I hope to post another update when we have a better understanding of what the new FHA loan limits will be, the maximums have gone up a little, but not to the limits that had been hoped for. The new limits are not an across the board increase, they are county by county, and not all counties will see a change.

*****************************************************************************************

Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com

Last week at McCue Mortgage we held our 2nd Annual Mini Golf Fundraiser. Now this is not played on your ordinary mini golf course, it is held right in our office. Each hole is designed by each department, and is located in between their cubicles. They are very creative in creating their mini golf hole, and they are as tough if not tougher then the holes that you would have at a regular mini golf course.

The participants are Realtors, Attorneys, Appraisers, and other Vender's that do business with McCue Mortgage, and are invited by our Loan Officers. I invited two Realtors who's office is located near McCue Mortgage Valerie Osterhoudt and Silvia Garafalo. When I invited Valerie and Silvia I did not realize that I was inviting two ringers, they are more then just pretty good.

Everyone had a good time and we raise $3,200 for the Connecticut Humane Society. Many of the departments are already planning their holes for next year, and I am hoping to have Valerie and Silvia back, as well as a few more Realtors that I do business with.

********************************************************************************************

Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com