No Down Payment and A Check Back At Closing

Debi and David bought a home last month.  It was a perfect home for them - two bedrooms, two bathrooms, brick exterior, recently remodeled, the works.  Their Realtor was sharp too and managed to negotiate a $72,500 price for them even though things were selling for $75,000+ in the area.

Debi and David were thrilled.  How could they not be?  They got a home of their own, their mortgage payment was significantly less than their rent had been, and they got a check back at closing.

Wait a minute.....did I say that they got a check back at closing?

Yep, I did.  Debi and David used IHCDAs Next Home Down Payment Assistance program to cover their down payment and their sharp Realtor negotiated for the seller to pay the closing costs and prepaid items.  Between these two, all the costs were covered so Debi and David got their full earnest money check back when they closed on the purchase.

Does that sound like an attractive scenario for you or someone you know?  Then let me tell you more!  IHCDA's Next Home Down Payment Assistance is a great program and it's easy for buyers and Realtors to participate in.  Here are the plusses of it:

• No Down Payment - IHCDA gives 3.5% of the price to the buyer.  This is a FHA loan with only 3.5% needed for the down payment so the whole thing is covered.  
• Lower Credit Scores Allowed - buyers with credit scores as low as 660 are considered for approval.
• Fast and Simple - the home buying process doesn't take any longer than normal and the home does not need to meet any higher standard.  The buyer does take an online homebuyer education class but that's about it.  Otherwise, it functions much like a regular FHA purchase.

Of course, there are always a few negatives:

• Higher Interest Rate - the Next Home interest rate is typically a little higher than the regular FHA interest rate.
• Higher Closing Costs - the closing costs are also higher so we normally have to ask for more in seller concessions to cover that.
• Two Year Occupancy - the buyer does have to stay in the home for two years.  If they don't they have to pay some of the money back.  If they do, though, the money is theirs. 

Are those drawbacks something that a buyer should consider?   Certainly, but for most buyers who are having a hard time saving up a down payment, they are well worth it.  To learn more about how Next Home might work for you or for someone you know, give me a call or pop me an email (574-234-5201 or lori.hiscock@ruoff.com). 

Lori Hiscock is a Sr. Loan Officer at Ruoff Home Mortgage‘s South Bend office.  One of Michiana’s top mortgage loan officers, Lori started her lending career in 1995 after obtaining her bachelor’s degree in Finance from Western Michigan University.  You can connect with Lori Hiscock or apply online here.