Texans now have $600 million in new help from the state to buy their first home.This month, the Texas Department of Housing and Community Affairs began releasing the largest amount ever offered by the state to fund a new mortgage program for first-time home buyers.The program offers several ways to help people finance a purchase, including the option of a second mortgage for up to 5 percent of the house's cost, interest-free, for a down payment or closing costs.In addition, the loan program can be linked with a federal tax credit of up to $2,000 a year for the mortgage interest paid, as long as the house is your primary residence."The program has several attractive features," said Craig Vecchiola, manager of the retail division for Colonial National Mortgage of Fort Worth. "We will definitely be marketing this for sure."Many first-time home buyers do not have enough saved for a down payment, said Judith O. Smith, a mortgage broker with Cendera Funding in Fort Worth, which, like Colonial, is an approved lender in the state program."A lot of our buyers have reasonable credit scores, but they don't have a lot of ready cash," she said. "When you combine this program with the fact that sellers can contribute up to 6 percent of the sales price for closing, some borrowers can get into a house for nothing."Federal Housing Administration loans -- often used by first-time home buyers -- require just a 31/2 percent down payment, not the 20 percent required for most conventional loans.Besides the closing assistance and tax break, the buyer qualifications are generous for the state mortgage program, called the Taxable Mortgage Program or TMP 79. (The name is expected to change in a week to something more consumer-friendly.)A first-time home buyer is defined as anyone who has not owned a home in the past three years, said Gordon Anderson, spokesman for the Texas Department of Housing and Community Affairs. It doesn't have to be the first house you've ever bought.The qualifying income levels for TMP 79 are higher than most county and city housing assistance programs. For a one- or two-person household, the qualifying income is up to 100 percent of the area median income.For larger households, it's up to 115 percent of the area median income. In most other home assistance programs, it's 80 percent or less."This is probably the only program that allows for more moderate incomes as opposed to just low incomes," Anderson said.Buyers in the Fort Worth-Arlington area can earn up to $69,200 for a one- or two-person household to qualify for the state program. A family of three or more can earn up to $79,580.Qualifying income levels are even higher for houses bought in areas determined by the state to be in economic distress. Locally, those neighborhoods are mostly north and southeast of downtown Fort Worth.In those targeted areas, buyers can make as much as $84,120 for a family of one or two or $98,140 for a larger family and still qualify.Income caps are waived for qualifying veterans, Anderson said."The program gives people of low to moderate income access to a mortgage that they might not otherwise have," he said. "So often the down payment is that insurmountable obstacle in buying a house. Most buyers can make their monthly mortgage payment."The state's home buyer assistance program has been revamped from its previous bond-supported program to one funded by selling the loans as bundled mortgage-backed securities, Anderson said."The new program is far more flexible in terms of interest rates," he said. "It can react to that day's market conditions instead of having to set one interest rate over the whole term of the program as before."The flexibility will mean more competitive interest rates over the span of the program, which is estimated to last about five years and cover some 5,000 home purchases, Anderson said."The interest rate we could achieve through the old program was higher than a conventional loan," he said. "We could not compete."Home buyers are required to take a no-cost buyer education class with one of the program's approved counselors, which are listed at www.myfirsttexashome.com, along with approved lenders."The education class helps them understand what obligations are involved in homeownership and have a better sense for whether they are adequately prepared to take on a house," Anderson said.The new mortgage program is first-come, first-served.Teresa McUsic's column appears Saturdays.TMcUsic@SavvyConsumer.net
City of Fort Worth Homebuyer Assistance Program (HAP). Qualifying buyers can receive a subsidy of up to $14,999 for homes in Fort Worth. The buyer can use the full subsidy for mortgage assistance or use $3,000 of this amount for closing costs and a down payment. Combined family income must not exceed 80 percent of the Fort Worth-area median income. 817-392-7540 or FortWorthTexas.gov.
City of Arlington Homebuyers Assistance Program. This program will pay up to $7,500 for down payment assistance (up to $10,000 for targeted areas). Home buyers' income must not exceed 80 percent of the area median income ($55,350 for a family of four, for example). The program administrator is the Tarrant County Housing Partnership at 817-924-5091 or www.tchp.net.
Tarrant County Community Development First-Time Homebuyer Program. This program pays up to $7,500 for down payment and closing costs for home buyers in the county, outside of Fort Worth, Arlington and Grand Prairie. Buyers' income must not exceed 80 percent of the area median income. The program administrator is the Tarrant County Housing Partnership at 817-924-5091 or www.tchp.net.
Texas Taxable Mortgage Program
On a 30-year mortgage, the current annual percentage rate is 3.687 percent.
Second interest-free mortgages are available for up to 5 percent of the cost of a house to cover a down payment and closing costs.
It's available to buyers who have not owned a home in the past three years. The qualifying income is 100 percent of the median area income. It's higher for targeted areas.
Home buyer counseling is required.
Call 800-792-1119 or visit www.myfirsttexashome.com.
Source: Texas Department of Housing and Community Affairs