After several years of a protracted lawsuit brought about by the U.S. Justice Dept., the final ruling states that rebates are allowed for home purchases in Austin, TX.
So, what does this really have to do with a no down payment mortgage to buy a home? Think in terms of Nehemiah; et al, and how the seller would increase the purchase price to give a portion of the sales price for down payment or other costs. The basis for the current legal format is that the amount agreed upon (up to the maximum amount of 6% of the sales price) and written into the sales contract is actually paid to a third party real estate firm who will rebate the amount to the buyer.
The rebate payment is available in two methods of dispersement:
1) As a cash rebate given to the buyer at closing…even in Texas.
2) As a down payment paid to the seller. With this option, there will be a soft second lien which stipulates that there will be equity sharing equal to the percentage arranged with the purchase. Did I mention that this is for mortgage amount up to conforming limits of $417,000? So, if you use the maximum of 6%, you would agree to a 6% share when you sell within the first 5 years, 3% until 10 years, and no equity sharing after 10 years.
There are no first time home buyer or income restrictions with this program. This is for owner occupied single family homes. You still can use the normal amounts of contribution currently acceptable to Fannie Mae and Freddie Mac. Of course, the appraisal has to support the sales price in order for this to work. Otherwise, the amount of financial assistance would be modified accordingly.
I know that FHA hasn’t been mentioned until now. At this time, only the direct rebate to the buyer is available. The actual down payment isn’t allowed. So, with FHA, there would still be a down payment which can come from a family member. The buyer can, if so inclined, reimburse the family member after receiving the rebate check at closing…even in Texas. In a less direct route, it would still be no down payment.
With this being a brief overview of the recently instituted program, stay tuned for updates.
Tom Frey
TX – Austin
Custom Mtg Group
512-821-1185
