August Real Estate Roundup: Income Limit Updates, First-Time Homebuyer Programs

As we continue to watch the markets, remember there are always industry updates and innovations happening that can help your buyers. Last month, we talked about what’s happening with discount points and closing costs. Now let’s look at the latest news around income limits and first-time homebuyer programs. 

New Income Limits    

The Federal Housing Finance Agency has released its new Area Median Income (AMI) limits for 2023-24, and we’re seeing an increase in most parts of the country. This is great news for your buyers because: 

• It allows Atlantic Bay to accommodate a wider range of income levels. 

• Buyers who might not have qualified in the past could be eligible now. 

• It’s the first time that AMI will impact loan-level price adjustments (LLPAs), meaning more borrowers could be eligible for waivers and therefore more favorable loan terms.  

• Stimulating more affordable financing encourages new home construction and boosts the overall real estate sector.  

Area median income — just like it sounds — is the midpoint of a specific geographic area’s income ranges and is calculated on an annual basis. To qualify for Fannie Mae’s HomeReady program, for example, borrower(s) can’t make more than 80% of the AMI. So if your area’s AMI is $100,000 your borrowers’ combined income must be $80,000 or less to qualify.

Ask me for help determining your borrowers’ new income limits for Fannie/Freddie Conventional programs, and USDA. PS, there are no income limits for FHA – your buyer must qualify with a debt-to-income ratio (DTI) of around 43%. 

First-Time Homebuyer Programs     

First-time homebuyer (FTHB) programs are wonderful tools for getting clients into a home – and they clients don’t actually have to be first-time owners! Typically, “first-time” means that they haven’t owned a home within three years. Other requirements may include (but not always):  

• Credit score minimum 

• Location of home 

• How long buyer will own home 

• Household income maximum 

• Online homeownership education  

• Minimum down payment 

Let’s start with the federal/agency programs. You know of course that FHA, USDA, and VA loans, in addition to low or no down payment, offer great flexibility for first-time buyers. For conforming (conventional), the two big programs you may know about are Fannie Mae (HomeReady) and Freddie Mac (Home Possible). These options require only 3% down, and rental income is eligible.

Additionally, Atlantic Bay offers two great programs for FHA clients: Buyer Boost and Chenoa Fund. Both programs combine an FHA-insured 30-year first mortgage with a 10-year repayable second lien to help cover the required FHA 3.5% down payment for 100% financing! Buyer Boost and Chenoa both offer 5% DPA options as well. 

All of the agency programs can also be combined with state (bond) programs – and this is where things get really helpful! These options include forgivable funds and specialized loan programs that offer down payment and/or closing cost assistance through grants, zero-interest loans, and deferred payment loans. (You’ll sometimes hear these called “second mortgages,” “community seconds,” or “second liens.”)

Depending on your state, there may be specialized programs for first responders, educators, and medical professionals. Finally, some states offer Mortgage Credit Certificates (MCC) that let borrowers claim a percentage of their mortgage interest as a tax credit. This can be included upfront as income, helping more buyers qualify.

Buyers apply for these programs through Atlantic Bay, which is “delegated” to represent the state agencies in the loan process. In other words, I can help your buyers find the right programs in their state, and they will work with me from start to finish, just as with any other loan program.

If you have buyers who still may struggle to meet qualifications for FTHB programs, I’d love to have them sign up for SmartPath, which is a complimentary step-by-step series of emails and conversations with me on building credit, saving for a down payment, and achieving that dream home.

As always, I’m here to help! Call me with any questions.