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CHFA Mortgages………..Great For First Time Homebuyers!!!

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Mortgage and Lending with George Souto NMLS #65149 FHA, CHFA, VA Mortgages NMLS #65149

The Connecticut Housing Finance Authority The (CHFA) is Connecticut’s Premier Mortgage Loan Program for “First Time Homebuyers”.  There have been a few Posts written here on ActiveRain, that have provided some information about different components of the CHFA Loan Program. So I thought it might be beneficial for “First Time Homebuyers” if a Post was written covering all of the features that make up the CHFA Loan Program.  Even though CHFA is a Loan Program specific to Connecticut, it is important for “First Time Homebuyers” who maybe planning to relocate to Connecticut to also have information about it.  Therefore this Post will be posted in the “Mortgage, First Time Home Buyer, New England, Connecticut, and Realtor Groups”.

CHFA is a Quasi Government Agency that provides a 30-year, fixed rate Loan Program, with an interest rate that is below comparable market rates.  For example this week the CHFA rate is 5.250 % (APR range 5.350 - 5.750 %) with up to One Point (1% Origination Fee) payable to Lender.  The Conventional Mortgage rates this week have been fluctuating between 6.125% and 6.375%, so as you can see the CHFA rate is far below the Conventional Rate.  CHFA rates are posted every Thursday, and are fixed until the following Thursday.  These Mortgages are originated and serviced by over 80 participating lenders (banks and mortgage companies) statewide in Connecticut.

Eligible Borrowers -  CHFA Mortgages are available to homebuyers who have not had an ownership interest in a home for the previous 3 years.  Prior homeowners may qualify for a CHFA mortgage if the home they purchase is within an area that is designated as a “Targeted Area”.  These homebuyers must also be below "Income Limits" that are established by “Household Size” and these “Income Limits” vary by town.  There are also Sales Price Limits", which also vary by town.

Eligible Properties -  CHFA Mortgage may be used to purchase an existing one- to four-family home, mobile homes, a newly constructed single family home, or a newly constructed two-family home in a targeted area.  They can also be used to purchase condominiums that are on the CHFA eligible condominium list.  All properties must be owner occupied, and CHFA loans are not available for investment properties.

Downpayment and Closing Costs Assistance (DAP) – CHFA requires a 3% downpayment on their loans.  If a qualified borrower does not have enough funds for the downpayment and or closing costs, CHFA will let them borrow it on a second loan know as a “DAP Loan” at the same interest rate as the first loan.  CHFA allows a borrower applying for a DAP Loan to keep up to $5,000 of their own money before CHFA requires them to use their funds to satisfy the 3% downpayment and or closing cost.  The minimum DAP Loan amount is $3,000.  Qualifying Homebuyers who apply for a “DAP Loan” need to attend an approved CHFA “Homebuyer Counseling Class”.  These classes are free, and upon completion of the class a “Course Completion Certificate” which needs to be submitted with a DAP Loan, will be given to the homebuyer by the class Counselor.  If a homebuyer already has a sales contract on a house, then they only need to attend a 3 hour class, but if they do not have a sales contract on a house and want to get the classes out of the way, they need to do 8 hours of class time.

PMI/MI - CHFA Mortgages are usually FHA insured, so the Mortgage Insurance Rate (MI) is much less than the Private Mortgage Insurance Rate (PMI) for a loan with the same downpayment.  Because CHFA Mortgages are FHA insured they also are subject to the FHA Up Front Mortgage Insurance Premium (UFMIP) of 1.5%.

Veterans Mortgage Assistance Program (CHFA/VA) -  CHFA Mortgages are available to Veterans and can be insured by the VA.  This means that besides qualifying for the below market CHFA rate, the CHFA/VA Mortgage does not require any downpayment, and since it is VA insured, there isn’t any PMI.  However, the VA “Up Front Mortgage Premium” is 2.5%.  If a Veteran who is on Active Duty applies for a CHFA/VA Mortgage, they are entitled to an additional .125% reduction in the already below market rate.

Teachers Mortgage Assistance Program -   Connecticut certified full-time or part-time public school teacher or vocational-technical teacher employed by and teaching in a “Priority or Transitional School District”, or who are certified to teach and are teaching in a “State-identified Subject Matter Shortage Area”, may qualify for the Teachers Mortgage Assistance Program.  Teachers who qualify for this program are also entitled to an additional .125% reduction in the already below market rate.

Police Homeownership Program -  This CHFA Loan Program is available to local or state police officers who purchase homes in eligible municipalities.  Eligible municipalities must agree to participate in this program, then designate areas of the municipality where an increased police presence would be desirable. State or local police officers who purchase homes in those designated areas are eligible to apply for the CHFA low interest rate, and are entitled to an additional .125% reduction in the already below market rate.

Processing Time -  Generally, the process time for CHFA Mortgages, from loan application to loan closing can be as much as six weeks.  However, at McCue Mortgage we are experiencing only two to three weeks to commitment, and an additional one to two weeks to Close.  This is because we know what documentation are needed, and we collect everything at the time of the application.  So by the time our underwriters process the loan application, and send it to CHFA for their Loan Review, we receive it back within 24 to 48 hours approved.  The loan packet is then sent to the Closing Attorney for them to complete the Loan Documents, Title Search and schedule the Closing.

Federal Recapture Tax -  Under certain circumstances, CHFA mortgage loans may be subject to Federal Recapture Tax. The payment of federal recapture tax occurs at the time the property is sold, only if ALL three of the following conditions apply:

  1. The house is sold or disposed of within nine (9) years of being purchased, for reasons other than death.
  2. There is a capital gain on the sale of the home.
  3. The household income exceeds Federal Recapture Tax limits at the time of the sale.

We have been doing CHFA Loans for over 30 years and have seen this Recapture Tax kick in less than a handful of times.  If a homeowner’s income has reached the point that it exceeds the Federal Recapture Tax Limits, they will probably be happy to pay the tax in exchange for that income.  And even then the other two conditions must also apply in order for this tax to be paid.

As you can see this is an excellent Loan Program for anyone who can qualify for it, and it is the first loan program that I look to when I am talking to a “First Time Home Buyer”.  With “30 Year Fixed Rates” that are below the rate of “Adjustable Rate Mortgages”, these loans make home ownership much easier to achieve. 

For more indebt information on CHFA Mortgage Loan Programs is available at www.chfa.org  or contact a participating Lender like McCue Mortgage (860) 573-1308  

 

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Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com

Posted by

George Souto
NMLS# 65149

C (860) 573-1308
CALL 7 Days/Wk
Fax (860) 760-6891

Email Me
About Me
My Blog

I am a Mortgage Loan Officer who can assist you with all your mortgage & refinancing needs in
CT, and RI

I can assist you with your Conventional,
FHA, CHFA, VA, USDA, & 203K loan programs.

I reside in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Haddam. E. Haddam, Higganum, Chester, Essex, Deep River.

 

Comments (31)

George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert
Pat, that is pretty unlucky to not do many of these and have 2 clients get hit with the recapture.  What you described would be one of the few ways that it could happen.  Have someone who makes good money and just qualify for CHFA, then get married to someone who also has good income and now they are over the limits if they sell. If you have any questions about CHFA that you can not find on their site, just ask and I will be happy to give you the answer if I know it.
Mar 28, 2007 02:42 PM
Anonymous
Louis Delegan
What is the average closing cost for someone who has a CHFA loan?  I am dealing with another bank and i think i am gettign ripped off!  How could closing costs go up to $8,000? Please help explain this to me before i yell at my lender
Jun 27, 2007 05:18 AM
#13
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Louis, I need to have some information before I can answer this.

- What is the loan amount? 

- What town is the house in?

- When is it suppose to close?

- What are the taxes?

These are just a few questions to start with, but it would be best to talk on the phone, because I am sure that answers to these questions might lead to more questions.  The best number to reach me at is my Cell Phone (860) 573-1308

Jun 27, 2007 05:46 AM
Anonymous
Julia Salnikova

Good Morning,

I bought a condo in June 2003 using an FHA loan that has recapture tax restrictions. Subsequently I got married and now both of us together make more money then the allowed limits. The loan is in my name and my husband is not written in. Does that matter? Can I avoid paying recapture tax and count only  my income since I am the only owner? Please advise. Thanks!

Nov 11, 2007 03:54 AM
#15
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert
Julia, what town do you live in, how much is your household income now, and how many people live in the house now?
Nov 11, 2007 04:11 AM
Anonymous
Julia Salnikova
I live in Suffield. We have two people in the house. Me and my husband, but the loan is just in my name. Thanks for reponding so quickly.
Nov 11, 2007 04:51 AM
#17
Anonymous
Julia Salnikova

Both of our incomes is about 108,000 for 2007.

Nov 11, 2007 05:04 AM
#18
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert
Julia, then you are over the income limits for Suffield, but you do not have to pay the recapture tax unless you are planning on selling the Condo and make a capital gain on the sale of the property.  However, it is up to you to report this information to CHFA, they do not check your household income or whether you made a capital gain on the property when you pay off the loan.  
Nov 11, 2007 05:14 AM
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert
Julia, check with your accountant, but I do not think that you make a capital gain if you reinvest the profit on the Condo into the purchase of another property.  It there is no capitol gain, then the recapture rule does not go into effect.
Nov 11, 2007 05:16 AM
Anonymous
Julia Salnikova
Thank you George. I will check with the accountant, we indeed plan to purchase another home with the proceeds. Thanks again.
Nov 11, 2007 05:28 AM
#21
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert
Julia, I would appreciate the opportunity to assist you and your husband on a loan for the purchase of your new home, my cell phone number is (860) 573-1308.
Nov 11, 2007 05:36 AM
Joan Whitebook
BHG The Masiello Group - Nashua, NH
Consumer Focused Real Estate Services
These types of loans are wonderful for many people.  We have a similar program in New Hampshire with the New Hampshire Housing Finance Authority.  I try to let clients know about these options.  The NHHFA does a lot of seminar throughout the state and I try to participate.
Nov 11, 2007 02:14 PM
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert
Joan, here in Connecticut this is the best 30 year fixed loan program for those that can qualify for it.
Nov 11, 2007 03:31 PM
Anonymous
john

is there anyway to avoid the recapture tax by having a married couple file separate tax returns? 

Dec 05, 2007 07:59 AM
#25
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

John, CHFA goes by household income, and not whether you file jointly or not.  But in order for the recapture tax to kick in three things have to happen:

You have to sell the house or Condo within the first 9 years.

You have to make a capitol gain (you did not purchase another house with your profit)

The household has to be over the CHFA recapture tax income limit which goes up every year (check their website to see what it is for your household.

So all three of these things have to happen in order for their to be a recapture tax.  You can call me on my cell phone to talk about  this further (860) 573-1308.

Dec 05, 2007 09:11 AM
Anonymous
john

George,

Let's assume I am subject to the tax (I'm over the income limits, sold the house in the 5th year, and I made a profit). 

 The way I read it is that it is a federal tax, determined by the adjusted gross income on your federal return.  Let's say the household limit for CHFA purposes is 100,000.  If my married federal adjusted gross income is 110,000, I am subject to the tax.  If I file separately, say my adjusted gross income is 55,000 - does that exempt me from the tax? 

 Also, if my gain on the house is not taxable because of the $250,000/$500,000 exclusion, am I subject to the tax.

Thanks for your help.

Dec 06, 2007 02:13 AM
#27
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert
John it is better if I discuss this with you on the phone in stead of here in the blog, because there are a lot of variables to your questions, and my answers are probably going to lead to more questions.  I can be reached at the Cell Phone number that I gave you before up to 10 PM, so call me on it and I will attempt to answer all this for you as well as the additional questions that I am sure you will have.
Dec 06, 2007 04:56 AM
Anonymous
Julia
I am told that even if you purcahse another house with the profit, you are still subject to the recapture tax. The tax exclusion rule does not apply here, you still have to pay.
Dec 17, 2007 07:23 AM
#29
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Julia, the capital gains is just one of the three things that needs to happen in order for you to pay the Recapture Tax.  You also need to sell the house withing the first 9 years and be over the Income Limits for the year of the loan you are in.  And as far as the Capitol Gains I do not think that the information that you received is correct.  You should talk with your accountant and have him/her contact CHFA about that.

Also Julia depending on some things you might have other options, but those are things that I would need to probably talk to you on the phone on.

Dec 17, 2007 08:18 AM
Anonymous
Anonymous
How much money is the capital gain?
Feb 28, 2008 02:45 PM
#31