First Time Home Buyer Assistance Program

[Tyler Rowland]

Today, I wanted to highlight some of the features for the First-Time Homebuyer Assistance Program in Utah. There has been a lot of Buzz about this program and what it does for first time homebuyers and when it is appropriate to use.

Starting from the top…

1.  You can use up to $20,000 that can be used for a down payment, closing costs, and/or permanent Interest Rate buydown.  Assistance Program loan is a 0% interest, No-Monthly payment loan secured by a recorded deed of Trust and evidenced by a Subordinate Note.
   1. The $20,000 will need to be paid back if the recipient completes a future sale or Refinance.  Which is the lesser of the amount of assistance the recipient received or 50% of the home equity amount.
2. Valid on New Construction homes priced $450,000 or below.
3. For First time home buyers (no home ownership for the last 3 years) and a resident of Utah. (Resident of Utah for at least 12 months prior to closing).

Whether legislation is good or not is not something I want to get into.  But the goal was to incite more affordable housing. 

Who is this loan going to be for?

This is not an investment loan in any way, and primary residence status is expected for the life of the loan.  But it could be your ticket into owning your first home.  Especially if down payment funds are not plentiful.  Just know that if you ever want to rent it out, you will need to refinance into a different loan that does allow rentals, just remember that the amount of assistance you used for the acquisition will become due and need to be paid back to the state.  The lesser of the assistance received or 50% equity amount. 

As an example. If you used $20,000 in assistance and purchased the home for $450,000. If the appraised value comes in at $480,000, then 50% of your home equity is $15,000, then that is the amount that would be Due to the state. Since the assistance it was part of the acquisition, it can still considered a rate and term refinance. (this is a very rough example of how it works in principle, I know the LTV's and loan types probably wouldn't work with this specific example.)

All in all, this could be a loan to get your foot in the door, which is a step up from renting.  But there are other loan programs that would make more sense to pursue first if you can qualify for them.