“A Lot of Moving Parts”
DPAs are very tedious; rules change on a dime, and the State of Calif. and local cities (or counties) routinely run out of money, “ala 2023,” when Dream for All” funding ran out in 11 days.
Please contact Christy Coffee at (949) 887 0338 or CCoffey@pct.com for vetted referrals to MLOs currently originating DPAs as a buisness model.
FYI! Just because a lender is listed on CalHFA’s website doesn’t mean the process will go smoothly. Too many MLOs try to originate every loan application that comes their way, regardless of their expertise.
In a slow lending market, with staff cuts and MLOs changing jobs, all can further exacerbate this issue, which can kill what is already an
intricate deal.
Agents need to exercise and have maximum input throughout the process when working with the MLO, as the deal can easily languish otherwise.
It’s common for MLOs to prioritize the easiest loans to fund and those with the biggest comm checks FIRST, and then work on the harder and smaller loans” as time permits (i.e., after golf lessons).” Just saying!
Without an agent riding herd, even when the deal funds, the buyers get put through hell, and the agent loses future biz!
Note: I’ll be composing and posting an article titled loosely “All the Back Stories about Lending You Wished You Knew” or something similar.
Of course, after I “rat out” the shoddy lending practices, I’ll have to hire someone to start my car every morning. Enjoy the post!
Freddie Mac Adds Calif. DPAs to Its Website
On Jan. 1, Freddie Mac expanded its down payment assistance website and search engine DPA One.
DPA One has 80 down payment assistance (DPA) programs on its site and offers a free consumer tool to find local down payment programs.
The platform aggregates the programs with a standardized tool so buyers and lenders can access and compare programs.
Freddie Mac says, “The single largest hurdle for first-time buyers is a down payment on a home.”
Umm …” Not precisely accurate”.
Here are the other challenges for all DPAs that don’t “show up in the box scores,” aka “the fine print.”
1. Persuading a seller to accept a “minimal down offer” that will take 45+ days to fund.
2) Appraisal Reviews: With all DPAs, there’s a first TD (FHA) and a second and sometimes a third mortgage, so plan on a 45-60+-day COE.
It’s also common to have an “appraisal review” by one of the junior mortgage holders, which can slow the process down a couple of days.
3) DPAs routinely have a interest higher rates (.25-5%) than a standard FHA loan. so do the seconds and thirds.
4) Minimum FICO scores are typically 660 -680 vs. 620 for standard FHA loans.
5) DPAs have income limits. Depending on the program and the home’s location, typically based on which county or economic zones, zip codes, or even census tracts. and vary by family according to family size.
Even when a buyer(s) “maxes out” at the income limits, often (because of the lack of affordable housing in SoCal), they often can’t afford where they “prefer” to live.
6) Lower “debt to income” ratios = “less purchasing power.”
Because the buyer is putting low (or nothing down), lenders have lower debt-to-income ratios for qualifying.
Typically, a buyer’s maximum “front-end debt ratio” (housing payment divided by gross monthly income) for an FHA loan is 43%.
For a DPA loan, it’s a 33% (20% or so) reduction in purchasing power!
Typically, a DPA’s maximum back-end debt ratio is 41% versus 49% for the typical FHA loan.
This will be problematic for buyers with virtually any significant credit card debt or car payment (or even student loans), and they may need to pay off “most” of that debt before applying.
Typically a DPA’s maximum back-end debt ratio is 41% versus 49% for the typical FHA loan.
Visit the below site to determine the loan limits in your area!
The Calif. Dept. of Housing and Community Development (HCD) publishes annual tables of official federal and State income limits to determine these maximums for various programs, including most on the website.
6) Down payment programs have become even more convoluted, luring some buyers to abandon a valid loan offering only to chase “free money” advertised by another lender.
Note: I’ll compose and post an article titled loosely “All the Back Stories about Lending You Wished You Knew” or something similar within ten days.
Of course, after I “rat out” shoddy lending practices, I’ll have to hire someone to start my car every morning.
“DPA One” has only one noted limitation.
The search tool allows “anyone” to search and compare assistance programs loaded onto its site side-by-side.
Buyers don’t need a MLO to assist. However, few buyers will understand the nuances of the site’s questions.
Whether it’s income averaging, income limits, credit scoring, or a horde of other questions, buyers can choose an MLO to begin their journey with..
For example:
1. What is the difference between annual household income and annual qualifying income?
2. Applicants need to learn that household income can include overtime pay and annual bonuses. Income qualifying for underwriting purposes may not allow this because there isn’t a long enough history.
3) What if someone went from a salaried job to a commission job? The income will only be counted if there is a two-year commission history or the company guarantees the commission.
There are many essential other income calculation details that consumers may erroneously think they qualify for when they do not. That’s a heartbreaker for agents and a time waster/commission killer for agents.
Another Resource
As of March 1, this platform the company had 252 agencies in California offering 370 homebuyer assistance programs. Some are duplicitous with DPA One, but it can’t hurt to check it out!
