Chapter 33 — Key Takeaways

The core claims

1. "First-time homebuyer" means no ownership interest in a principal residence in the past three years. Not "never owned." A borrower who sold five years ago usually qualifies again, and the borrower will not know that. Programs vary and several categories of prior owner are commonly included by exception — teach the three-year test and verify per program.

2. FHA is not a first-time buyer program. It never has been. It is popular with first-time buyers because of its low minimum investment and credit flexibility, which is a different claim.

3. The product with the smallest down payment is not automatically the right product. The conventional 97% loan asks \$1,075.00 less than FHA on a \$215,000 purchase — and at a 641 score it is the wrong loan anyway, because mortgage insurance at 97/641 is expensive, sometimes unavailable, and severely price-adjusted. The binding constraint is rarely the one on the brochure.

4. Three DPA structures, and the structure decides what the borrower owes. - Forgivable — no payment, forgiven on a schedule, recapture on early sale or refinance. - Deferred — no payment, no forgiveness, full balance due on sale, refinance, or payoff. - Repayable — an amortizing payment that counts in the ratios, front-end and back-end.

5. Forgivable and deferred are identical at application and completely different at exit. Both add zero to the ratios and the same lien to the CLTV. One disappears on a schedule; the other never does.

6. Layering is where files break — and they break on sequence, not on underwriting. Every layer has its own income definition, first-time test, recapture, and effect on CLTV, and no layer can override the first mortgage's rules about permitted secondary financing.

7. The education certificate must usually predate the reservation, and there is no cure. It is the first task you assign on any assistance file. Before the appraisal. Before the reservation.

8. A mortgage credit certificate is a tax credit, not assistance and not a loan — and where it is permitted in qualifying, whether it is treated as a payment reduction or as added income changes the back-end ratio by about two points on an identical file.

9. A gift of equity is a credit at value, not a discount off the price. Because LTV uses the lesser of price or value, selling cheap produces a 100% loan and selling at value with a documented gift produces a 90% loan — same house, same family, same \$0 out of pocket.

10. Anxiety is a reasonable response to a thirty-year obligation, not an obstacle to manage. A borrower calling twice a week is measuring the gap between your update cadence and their anxiety cadence. The fix is a scheduled weekly update, the next three things named with dates, warnings issued before the events, and a specific task in their hands.

The key numbers — the Harlow Street file

The rules of thumb

The ratio effect of a repayable second = its monthly payment ÷ gross monthly income, added to both ratios (a subordinate lien payment on the subject property is housing expense).

On Harlow Street: \$106.07 ÷ \$4,150.00 = 2.56 points → 41.48/51.00 becomes 44.04/53.56. At a five-year term instead of ten: \$188.71 ÷ \$4,150.00 = 4.55 points → 46.03/55.55.

CLTV on an FHA file = (base loan + all subordinate liens) ÷ lesser of price or value. The base loan, not the total loan — the financed premium is excluded.

(\$207,475.00 + \$10,000.00) ÷ \$215,000 = 101.15%. Using the total loan gives 102.84% and is the wrong number to quote against a program cap.

The cost of leaving early = unforgiven DPA balance + (payoff − net sale proceeds). Compute it at application, not at sale.

Harlow Street at month 30, flat market, 7% selling costs: net \$199,950 against a payoff of about \$204,600 is \$4,650 short, plus \$6,000 of recapture = **about \$10,650 to sell**.

Assistance priced into a rate has a break-even = assistance received ÷ monthly rate premium.

\$8,000 ÷ \$73.11 = about 109 months. Before that the borrower is ahead; after it they are behind.

The key terms

first-time homebuyer · down payment assistance (DPA) · forgivable second · deferred second · repayable second · homebuyer education · mortgage credit certificate (MCC) · housing finance agency (HFA) · affordable lending product · area median income (AMI) · layered assistance · gift of equity · recapture

What you should be able to do Monday morning

Find out today whether your employer is an approved participating lender with your state housing finance agency — and if not, who in your market is. Then build the six-source list from §33.3 for your county: state HFA, county and city housing departments, HUD-approved counseling agencies, your Federal Home Loan Bank district, employer and nonprofit programs, and the agents and closing attorneys who work the affordable price point. Write down what you find, with the date you verified it, and put a quarterly reminder on your calendar to re-verify.

Then add a seven-line eligibility check to your intake process — income limit, price limit, first-time test, property eligibility, education requirement, lender participation, funding remaining — and run it on every first-time buyer file regardless of how the income looks. It takes twenty minutes after the first time. The one file in ten where you are wrong about the limit is worth \$10,000 to somebody.

And on the first assistance file you take: produce the sale-at-month-thirty table at application and hand it to the borrower. Say the number out loud. That is the difference between "forgivable" and "free," and the borrower is entitled to hear it from you while it is still free to hear.