New Tax Credit .................... Connecticut Housing Finace Authority (CHFA)

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

The new Tax Credit has created a great new opportunity for all First Time Home Buyers, but it has created an even bigger opportunity for who are able to qualify for a CHFA Loan.  The previous Tax Credit was not available for mortgage loans that were funded/backed by Tax Exempt Bonds.  But the new Tax Credit in is now available for these loans as well as continuing to be available to all the other mortgages like FHA, VA, and Conventional loans.

This is HUGE for CHFA Borrowers because now they may have the ability to not only apply for a mortgage that has below market rate interest, but they may also be able to borrow the Downpayment & Closing Costs at the same rate, as well as not getting this tax credit to do improvements to the property. For more information on the Tax Credit please read my blog "Washington Update ........ New Tax Credit".

Because of this great new opportunity for CHFA Borrowers, I thought that it would be good to include here a post that I did a while back on CHFA.

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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 5.0 %  with up to One Point (1% Origination Fee) payable to Lender. The Conventional Mortgage rates this week have been fluctuating between 5.5% and 5.75%, 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”, recieve an additional .25% off the rate. 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 3.5% 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 3.5% 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 1.75%.

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” can be up to 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:

  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”.

 

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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

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Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

George.  You are absolutely right.  This is BIG.

Feb 27, 2009 05:17 AM #1
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Celeste "SALLY" Cheeseman
Century 21 Liberty Homes - Mililani, HI
(RA) AHWD CRS ePRO OAHU HAWAII REAL ESTATE

WONDERFUL information George! We can always add to the information with updates and make it twice as informative....

Now...if I ever move to CT you can bet you're the go to guy...you know your stuff!

Feb 27, 2009 05:19 AM #2
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George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Lenn we are the larges CHFA Lender in Connecticut, so this is particularly big for us.

Feb 27, 2009 05:20 AM #3
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George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Sally it would be my pleasure to some day have the opportunity to work with you :)

Feb 27, 2009 05:22 AM #4
Rainmaker
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Sandra Cummings
William Raveis Real Estate - Guilford, CT
Real Estate Agent, Guilford Connecticut

I have been waiting for you to post something like this, if it is alright with you I'm planning on re-blogging it.

Feb 27, 2009 07:38 AM #5
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George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Sandra yes, please feel free to re-blog any of my blogs.

Feb 27, 2009 11:52 AM #6
Rainer
232,370
Diane Rice
Diane Rice, Rice Prprty Mgmnt & Rlty, LLC, South Holland, IL - South Holland, IL
SFR, SRES, CNC

Now, George, you have written this in terms that ANY buyer-to-be can understand, and make plans to take advantage of the credit.  I hope they will come to you in droves... so much that you will not have the time to write or answer blogs for a while!!! (smile) 

Feb 27, 2009 12:33 PM #7
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George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
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Diane ............ LOL

Thank you but I don't think I can ever get to busy to comment on my friends blogs :) :)

Feb 27, 2009 01:03 PM #8
Rainmaker
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Neal Bloom
Premier Associates Realty LLC - Weston, FL
Realtor CRS-Weston FL Real Estate

George,

Why do you always have to be perfectly correct? Because you know your stuff...that's why.

Feb 27, 2009 01:27 PM #9
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George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
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Neal my friend thank you for the compliment I appreciate, but unfortunately there are many that feel differently ......... LOL

Feb 27, 2009 01:44 PM #10
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Jennifer Fivelsdal
JFIVE Home Realty LLC | 845-758-6842|162 Deer Run Rd Red Hook NY 12571 - Rhinebeck, NY
Mid Hudson Valley real estate connection

George - You certainly outlined many mortgage program of which a First time buyers could avail themselves.  I am confident many will make use of this opportunity.

Feb 27, 2009 03:28 PM #11
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George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Jennifer CHFA is an excellent program and right now they also have the lowest rates around here.

Feb 27, 2009 03:50 PM #12
Rainmaker
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Esko Kiuru
Bethesda, MD

George,

This whole CHFA is obviously huge with a capital H for first-time buyers over there in Connecticut. Anyone even near qualifying should give it a shot.

Feb 28, 2009 07:29 AM #13
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George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Esko, the CHFA Program is really the only true First Time Homebuyer Program left here in Connecticut, and now that it is also eligible for the $8,000 Tax Credit it is even more of an advantage for First Time Homebuyers.

Feb 28, 2009 10:46 AM #14
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George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Eloise, the new tax credit is a huge thing for this Loan Program, because it was not eligible for the credit under the $7,500.  But if I had the choice of $8,000 credit that was in the Stimulus Package or $15,000 tax credit that was originally proposed I would have chosen the $15,000 because it applied to all home buyers and not just First Time Homebuyers.  That credit would of had a much bigger impact on the economy in my opinion.

Mar 01, 2009 07:56 AM #16
Rainer
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Paul Begemann
Attorney Paul H. Begemann - Hamden, CT

Thanks for the heads-up, that is good to know and an important aspect of the new program - lets hope it helps the market a little at least!  Unfortunately it seems we take one step forward like with the stumulus program or the homebuyer credit, but then the latest from the economy as a whole and  the news from it knocks everyobdy right back!

Mar 01, 2009 03:10 PM #17
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George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Paul, this program (CHFA) has been around since the 70's and has helped many first time homebuyers, unfortunately some of the recent programs have had a lot of sizzle but very little meat to them.

Mar 13, 2009 02:41 PM #18
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