The Chenoa Fund, offered by CBC Mortgage agency--a federally-chartered housing finance agency, helps borrowers all across the country with our suite of mortgage products. These products assist homebuyers with their down payment in the form of a 2nd mortgage on both FHA and Conventional products.
One product in particular, the DPA Edge Forgivable, puts the borrower in a better position financially because of its aggressive loan forgiveness feature. The DPA Edge Forgivable or Soft Second is a fully-disclosed, fully-recorded 2nd mortgage that lives on title, but requires no payment. The DPA Edge Forgivable has no interest rate, and it is forgiven after 36 consecutive on-time payments to the 1st mortgage associated with it. Many HFA's offer a 2nd mortgage forgiveness option, but with longer terms for forgiveness. When compared with our other products, that require a 2nd mortgage payment, even with a lower 1st mortgage interest rate, the DPA Edge Forgivable comes out on top.
Rate Advantage $200,000 Home
$193,000 1st Mortgage @4.75% 30 years = Payment of $1007 month (P&I)
$7,000 2nd Mortgage @8% 10 years = Payment of $85 month (P&I)
Total Monthly Principal & Interest Payment = $1092 month
DPA Edge Forgivable $200,000 Home
$193,000 1st Mortgage @5.50% 30 years = Payment of $1096 month (P&I)
$7,000 2nd Mortgage @0% 30 years = Payment of $0 Month (P&I)
Total Monthly Principal & Interest Payment = $1096 month
Difference in payment: $1096 - $1092 = $4 month x 36 months = $144.
Don't let the slightly higher payment on the DPA Edge Forgivable fool you; the difference is how mortgage interest is front-loaded, which means you pay more interest upfront over the life of the mortgage and very little principal. During the 1st three years, with DPA Edge Forgivable, you will only pay an extra $144 dollars in payment, but if all the payments are on time, you will gain $7000 of home equity by that principal amount being forgiven. On the Rate Advantage, you will pay less in payment, but still have a remaining 2nd mortgage principal balance of $5400. So, if you could spend $144 dollars over the next 3 years to gain $5400--would you do it? After three years, the 1st mortgage could be refinanced to a lower rate if one is available, and you have quickly extinguished $7000 in loan principal by paying your payments on time.
The DPA Edge Forgivable has the following requirements:
<115% of Area Median Income
DTI as per AUS findings
SFR or 2 Unit Property
FHA Qualified Borrower
Call your Corporate Account Director, Shawn King, at 208-991-8239 or email me at firstname.lastname@example.org if you have any questions.