Home Advantage is a program that is offered through the Washington State Housing Finance Commission. Home Advantage is typically combined with a Home Advantage second mortgage that can finance closing cost and the down payment. Unlike the House Key program (state bond), this program has unlimited funds available for qualified Washington home buyers.
The first mortgage can be FHA, VA, USDA or a conventional mortgage. With a 680 or higher credit score, the conventional mortgage offers reduced mortgage insurance premiums which makes this a very attractive option for home buyers shy on down payment who have been considering FHA.
The second mortgage, if using a Home Advantage DPA, has a maximum loan amount of 4% of the first mortgage loan amount and the payment is deferred for 30 years (or until the property is no longer owner occupied) at zero percent interest. Should the home owner convert the property to an investment/rental or sell the home, the second mortgage may be called due.
Here are some of the program guidelines:
- property must be owner occupied/primary residence
- only for homes in Washington state
- you do not need to be a first time home buyer
- maximum debt to income ratio is 45% (exceptions up to 50% with specific compensating factors)
- income limit of $97,000 (co-borrowers income may be removed if not needed for qualifying)
- 620 is the minimum credit score
- home buyers must attend a Home Buyer Education class that has been registered with WSHFC
As a WSHFC trained mortgage originator, I’m pleased to be able to offer their programs.
Scenarios quoted below are based on rates as of 9:00 am on April 11, 2013 and are subject to change at any time. For your personal rate quote for this or any program on homes located in Washington, click here.
The following quote is based on a credit score of 660 with a sales price of $400,000 using the Home Advantage mortgage using the second mortgage for down payment assistance for a purchase of a home in Seattle closing May 31, 2013. Taxes are estimated based on 1.25% of the sales price and I’m using $60 per month for home owners insurance.
Home Advantage – Conventional Mortgage with Private Mortgage Insurance. The pmi for this scenario is “split premium” financed – very similar to FHA except the premiums are much less.
$384,800 base loan amount plus financed pmi of $2886 = total loan amount of $387,686.
4.500% for a 30 year fixed (apr 4.817). NOTE: WSFHC sets the mortgage rate.
Principal and interest = $1964.35
Monthly mortgage insurance = $38.77
Property taxes and insurance = $463.83
TOTAL estimated monthly first mortgage payment = $2463.95
TOTAL monthly mortgage payment for second mortgage = $0.
Remember, the second mortgage is at 0% interest and is deferred for 30 years. When you sell, refi or if your home becomes a rental (you no longer occupy the home), it will be called due.
Sales price of $400,000 less base loan amount of $384,800 leaves a down payment of $15,200.
Closing cost are estimated at $8347.08 and prepaids/reserve at $2090.29 for a total of $10,437.37.
Down payment of $15,200 plus closing cost of $10,437.37 = $25,637.37 for funds due (before factoring the second mortgage).
Second mortgage at 4% of the loan amount of $384,800 = $15,392 towards down payment.
After applying the second mortgage towards the down payment, the remaining funds due for the home buyer is $10,245.37.
The seller is allowed to contribute up to 3% of the sales price towards closing cost and prepaids if negotiated in the purchase and sales agreement. Should the seller agree to contribute towards closing cost or prepaids, the $10,245.37 would be reduced by that amount.
Comparing this program to a standard non-Home Advantage FHA loan, the borrower would need to have 3.5% of their own funds (or a gift from family) = $14,000 with FHA vs. $10,245 or less with seller contribution with Home Advantage conventional.
FHA mortgages also have upfront mortgage insurance of 1.75% with monthly mortgage insurance at a rate of 1.35% with FHA (much higher than conventional).
EDITORS NOTE: 3/28/2015: FHA mortgage insurance has been reduced since the publishing of this post. Please click here if I can provide you with a current rate quote.
FHA 30 year fixed (not a Home Advantage or House Key FHA loan): 3.250% (apr 4.195). Even though the rate is low, the total mortgage payment (using the same taxes and insurance as the quote above) is estimated at $2,600.41. Funds due at closing after rebate pricing is estimated at $15,454.08. Borrower would required to meet minimum down payment of 3.5% = $14,000.
Based on this scenario, the FHA mortgage is $136.46 more each month and, assuming the seller does not pay any closing cost for either scenario, the FHA loan will require about $5000 more at closing from the home buyer (this is using current rebate pricing so this amount could vary).
Rates quoted in this post are from April 11, 2013 and have expired. For a current mortgage rates quote on a home located anywhere in Washington state, click here.