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Today’s Presentation
 It’s Still a Great Time to Buy
 Today’s First-time Homebuyers
 Bridging the Gap: Down Payment and Closing Cost Resources
 Down Payment and Closing Cost Resources in Your Area
 Putting These Programs into Action for Your Business and Your Clients
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It’s Still a Great Time to Buy
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Low Interest Rates + Low Home Prices = Affordability
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Refinances Are Still High, New Purchases Increasing
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Today’s First-time Homebuyers
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First-time Homebuyers Today
2014 Homebuyer Profile
First-time Homebuyer – Demographic Characteristics
 FTHB share is lower by five percent -- from 38 percent in
2013 to 33 percent in 2014
 Married couples represent 54 percent of FTHBs
 Single female buyers represent 18 percent of FTHBs
 Single male buyers represent 11 percent of FTHBs
FIRST-TIME HOMEBUYER DEMOGRAPHICS
Repeat
Buyer
52%
First-time
Homebuyer
33%
First-time
Homebuyer
Other 2%
Repeat Buyer
Unmarried
Couple 15%
Married couple
Single Male
Buyer 11%
Single Female
Buyer
18%
Source -- National Association of REALTORS Profile of Home Buyers and Sellers 2014
© Freddie Mac 2015
Single Female Buyer
Married Couple
54%
Single Male Buyer
Unmarried Couple
Other
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Age of First-time Homebuyers
Homebuyer Age
 First-time homebuyers are younger
than repeat buyers.
Age of First-time Homebuyers
Age
2012
2013
2014
18-24
9%
8%
9%
 The largest demographic, 25-34 years
old, continues at 56 percent.
25-34
54%
59%
56%
35-44
19%
19%
19%
 Median age of first-time homebuyers
is 31 years old.
45-54
10%
8%
8%
55-64
5%
5%
6%
65-74
2%
1%
1%
75+
0%
<%
<1%
Source -- NATIONAL ASSOCIATION of REALTORS Profile of Home Buyers and Sellers 2014
© Freddie Mac 2015
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Projected Population Increase – 2010-2050
Population Growth 2010–2050
White
2010
2020
2030
2040
2050
246,630
266,275
286,109
305,247
324,800
(7.97%)
(7.45%)
(6.69%)
(6.41%)
Black
2010
2020
2030
2040
2050
Percentage
Change
55%
50%
45%
39,909
44,389
48,728
52,868
56,944
(11.23%)
(9.77%)
(8.50%)
(7.71%)
14,415
18,756
23,586
28,836
34,399
(30.11%)
(25.8%)
(22.26%)
(19.29%)
40%
35%
2010
2020
2030
2040
2050
30%
Asian
22.70%
25.94%
33.46%
19.29%
22.26%
25.8%
7.71%
8.50%
9.77%
5%
11.23%
(33.46%)
(29.48%)
(25.94%)
(22.70%)
6.69%
10%
6.41%
49,726
66,365
85,931
108,223
132,792
15%
7.45%
2010
2020
2030
2040
2050
30.11%
Hispanic
20%
29.48%
25%
7.97%
2010
2020
2030
2040
2050
0%
White
Black
Asian
Hispanic
Source -- U.S. Census Data 2008 and 2009
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What Does This All Mean for You and Your Clients?
 Low interest rates + low home prices = affordability.
 2015-16: less refinances, more purchases.
 There are opportunities out there to sell more homes to first-time homebuyers and
grow your business.
 Many well-qualified first-time homebuyers need your assistance to overcome fears.
 Many first-time homebuyers will need to seek ways to bridge small gaps in
down payment and closing costs.
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You Are the Critical Link
 You are the critical link to helping well-qualified homebuyers achieve their
homeownership objectives.
 Help first-time homebuyers understand home financing in new market.
 Guide eligible first-time homebuyers in choosing homes that they can afford
and keep.
 Result: First-time homebuyer dream realized – and more sales closed for you.
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Bridging the Gap:
Down Payment, and Closing Cost
Assistance Resources
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Sources of Funds
 Assistance from a variety of sources is available for mortgage-ready, well-qualified
first-time homebuyers who need a little bit more to bridge the gap:
– Mortgage Credit Certificates; and
– Down payment and closing cost assistance (grants and deferred seconds)
offered through either HUD’s HOME Investment Partnerships Program or the
Community Development Block Grant Program that are used to administer
programs on the state or local level. An example of a program is the
Neighborhood Stabilization Program.
 Assistance may be limited to first-time homebuyers and/or low- and moderateincome homebuyers, depending on the assistance program.
 Homebuyer education counseling is often required, but not always.
Source – HUD and NCSHA
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Sources of Funds
Mortgage Credit Certificates (MCCs)
 Issued by certain state or local governments (including state housing finance
agencies), MCCs generally allow homeowners to claim around 20 percent of
the annual interest on their mortgage as a federal tax credit every year for
the life of the original first mortgage (details vary by state).
 Amount of credit per mortgage loan capped by Internal Revenue Service @
$2,000 per year.
 NOTE: 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 the potential borrower qualify for the loan.
Source – NCSHA and Wikipedia®
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Mortgage Credit Certificates (cont’d)
 Homebuyers who wish to obtain an MCC must meet certain minimum 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®
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How Mortgage Credit Certificates Work
Borrower receives an MCC for:
30% credit
$200,000 mortgage
30-year, fixed-rate
Results:
6% interest rate
 Total tax credit in this example exceeds
IRS limit of $2,000
 Homebuyer reports a $2,000 credit on
tax return
Allowable Tax Credit:
Mortgage Interest Paid (First Year): $11,933
 Homebuyer may continue to receive a
tax credit for as long as they remain in home
and retain mortgage
X
0.30 (30% MCC Credit)
=
Total Credit: $3,579
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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Sources of Funds
Down payment and closing cost assistance
 Most assistance is provided to the mortgage-ready borrower through grants and
deferred seconds funded by states and local governments through:
– the HOME Investment Partnerships Program; and
– the Community Development Block Grant (CDBG) Program (which includes
the Neighborhood Stabilization Program).
Source -- HUD
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Sources of Funds
Grants
 Grants are funds that do not have to be paid back, but often have to be
paid back if the borrower sells his or home within a certain period of time.
Deferred Seconds
 Many down payment assistance programs come in the form of a second
mortgage that has a low interest rate and/or deferred payments.
Source -- HUD
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HOME Investment Partnerships Program
 Administered by HUD, HOME is the largest federal block grant to state and
local governments (including housing finance agencies), and is designed
exclusively to create affordable housing for low-income households (those
earning 80 percent or less of the area median income).
 HOME provides annual formula grants to states and localities that
communities use – often in partnership with local nonprofit groups – to fund a
wide range of activities that build, buy, and/or rehabilitate housing for
homeownership or rental, or provide direct rental assistance to low-income
individuals and families.
 Provides participating jurisdictions with a line of credit to draw upon, as
needed, to use for grants, direct loans, loan guarantees or other forms of
credit enhancement, or rental assistance or security deposits.
Source – HUD and Wikipedia®
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HOME Investment Partnerships Program (cont’d)
 States are automatically eligible for HOME funds and receive either their
formula allocation or $3 million, whichever is greater. Local jurisdictions
eligible for at least $500,000 under the formula can receive an allocation.
Communities that do not qualify for an individual allocation under the formula
can join with one or more neighboring locality so that members’ combined
allocation would meet the threshold for direct funding.
 Eligible jurisdictions receiving funds must provide 25 cents of their own funds
for every HOME dollar received.
 State and local government HOME grantees (or designees) administer these
programs and accept applications from eligible mortgage-ready borrowers
seeking funding.
Source – HUD and Wikipedia®
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Down Payment and Closing Cost Assistance Example –
[Add Type of Assistance Here]
XX City, XX State – [Add Name of Program Here]
 Describe program here
[USE THIS SLIDE TO PROVIDE A SPECIFIC EXAMPLE OF A DOWN PAYMENT AND CLOSING COST ASSISTANCE PROGRAM
IN YOUR LOCAL AREA OR LENDING FOOTPRINT.]
Source – [Add Here]
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Community Development Block Grant (CDBG) Program
 One of HUD’s longest-running programs (since 1974), the CDBG provides
communities with resources to address a wide range of unique community
development needs including affordable housing, anti-poverty programs, and
infrastructure development.
 CDBG funds are allocated to more than 1,100 local and state governments
called “entitlement” and “non-entitlement” communities.
 Entitlement communities – Annual grants to larger cities and urban counties to
develop viable communities by providing decent housing, a suitable living
environment, and opportunities to expand economic opportunities, principally for
low- and moderate-income persons.
Source – HUD and Wikipedia®
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Community Development Block Grant Program (cont’d)
 With Non-entitlement Communities or State Administered CDBG (also known
as the Small Cities CDBG Program), states award grants to smaller units of
general local government for community development activities. Annually, each
state develops funding priorities and criteria for selecting projects.
 HUD determines the amount of each CDBG entitlement grant by a statutory dual
formula which uses the needs of the community, extent of poverty, population,
housing overcrowding, age of housing, and population growth lag in relation to
other metropolitan areas.
 CDBGs differ from categorical grants; they are made for specific purposes in that
they are subject to less federal oversight and are largely used at the discretion of
the state and local governments and their subgrantees.
 CDBG grantees, or nonprofit designees, administer these programs and accept
applications from eligible mortgage-ready borrowers seeking funding.
Source – HUD and Wikipedia®
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Neighborhood Stabilization Program (NSP)
 A component of CDBG, HUD provides Neighborhood Stabilization Program grants
to communities hardest hit by foreclosures and delinquencies to purchase,
rehabilitate, or redevelop homes and stabilize neighborhoods.
 Grantees (government agency or nonprofit administering the program) develop
their own programs and funding priorities, but must use at least 25 percent of the
funds appropriated for the purchase and redevelopment of abandoned or
foreclosed homes or residential properties that will be used to house individuals or
families whose incomes do not exceed 50 percent of the area median income.
 All activities funded by NSP must benefit low- and moderate-income persons
whose income does not exceed 120 percent of the area median.
Source -- HUD
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Neighborhood Stabilization Program (cont’d)
 Eligible NSP activities can include (but are not limited to):
– Direct purchase and rehabilitation of abandoned and foreclosed homes for
sale, rent, or redevelopment;
– Establishment of financing mechanisms for purchase and redevelopment
of foreclosed homes and residential properties; and
– Demolition of blighted structures.
 NSP funds can be used to help homebuyers purchase homes and the
borrower must apply through the NSP grantee.
Source -- HUD
© Freddie Mac 2015
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Down Payment and Closing Cost Assistance Example –
[Add Type of Assistance Here]
XX City, XX State – [Add Name of Program Here]
 Describe program here
[USE THIS SLIDE TO PROVIDE A SPECIFIC EXAMPLE OF A DOWN PAYMENT AND CLOSING COST ASSISTANCE PROGRAM IN
YOUR LOCAL AREA OR LENDING FOOTPRINT.]
Source – [Add Here]
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How Government Grants and Loans Can Help
Borrowers Buy Their First Home
YOUR BORROWER’S
NEW HOME
FIRST MORTGAGE
Obtain 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.
Home Purchase Price
+
Closing Costs
__________________________
TOTAL REQUIRED TO CLOSE
First Mortgage
Borrower obtains a 30-year conventional
fixed-rate loan
+
Mortgage Credit Certificate (MCC),
when available
Money Out of Pocket
Borrower’s personal contribution towards
the purchase can be as low as 3% of the
MONEY OUT OF POCKET
Borrower’s personal contribution.
purchase price
“GAP” LOAN
These 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.
“Gap” Loan
Silent 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 Programs
Remaining down payment or closing
cost assistance needed to close the loan
(can include seller concessions)
© Freddie Mac 2015
OTHER ASSISTANCE PROGRAMS
If 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.
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Down Payment and Closing Cost
Resources in
[Insert Location Here]
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© Freddie Mac 2015
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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]
Counseling Agencies Providing HUD-approved Homebuyer Education:
 [Add here]
[CUSTOMIZE THIS PAGE USING INFORMATION FROM HUD’S WEBSITE @ http://portal.hud.gov/hudportal/HUD?src=/states TO
LIST DOWN PAYMENT AND CLOSING COST ASSISTANCE PROGRAMS OFFERED IN THE STATE, REGION, CITY, COUNTY, AND
MUNICIPALITY -- ALONG WITH THE LIST OF COUNSELING AGENCIES OFFERING HOMEBUYER EDUCATION.]
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[Lender: List Your Product Offerings Here]
 [Name of product] – Description…
 [Name of product] -- Description…
[CUSTOMIZE THIS PAGE TO SHOW YOUR MORTGAGE PRODUCT OFFERINGS, REQUIREMENTS, AND SPECIAL PROGRAMS.]
Source – [Add Here]
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Why Is Homeownership for Mortgage-Ready, First-time
Homebuyers Still Important?
 Owning a home still has its advantages, both personally and financially:
– housing costs are more stable if the first-time homebuyer obtains
a fixed-rate mortgage (still available at historically low rates);
– tax incentives such as the mortgage interest deduction not offered to
renters; and
– mortgage-ready borrower obtains a sustainable mortgage at an affordable
rate using available down payment and closing cost assistance.
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Contact Information
[CUSTOMIZE THIS PAGE TO INCLUDE YOUR CONTACT INFORMATION, “800” NUMBER, NAME OF A SPECIFIC LOAN OFFICER, ETC.]
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