By Kendal Groner
One of the primary roles of the Tennessee Housing Development Agency (THDA) is supporting financing opportunities for first time homebuyers of a low to moderate income status.
The THDA wants to remind interested homebuyers of an ongoing Hardest Hit Fund Down Payment Assistance Program that provides eligible borrowers purchasing homes within specific zip codes a $15,000 forgivable loan to put towards down payments and closing costs.
“This is the time people think about buying homes, and we thought this was a good time to remind people that this is still available,” said Ralph Perry, executive director of the THDA. “It should be available for much of this year, certainly during the homebuying season.”
Tennessee’s share of the Hardest Hit Fund was $80 million, and targets areas that are recovering more slowly from the last economic downturn.
Originally, when the Down payment Assistance Program began last year, 55 zip codes in Tennessee were approved for the program, but last October the THDA was permitted to include seven more.
“We are the only state that they let us target at the zip code level,” Perry said. “Last fall we got permission to add most of Unicoi County, the zip code that covers Erwin in particular.”
The local zip codes eligible for the program are 37660 in Sullivan County, and 37650 in Unicoi County. Forgiveness for the $15,000 loan begins in the sixth year of home ownership.
“If you stay in that home and with that mortgage for 10 years, you’ll never have to pay back a penny of that $15,000,” explained Perry. “Starting in the sixth year, we basically forgive 20 percent of it a year. This is not an incentive for someone to come in and buy a house, flip it and sell it next year.”
Perry mentioned the benefits of encouraging more homebuyers and stakeholders such as more civic engagement and money fueled back into the local economy.
Thus far, the THDA has been very pleased with how the program has been received, and Perry stated that the program has resulted in an enormous increase in mortgage production for the agency.
He said for 2017, mortgage production was 44 percent better than the previous year, and much of that improvement was attributed to their ability to offer the downpayment assistance.
“For example in Sullivan County, we did four times the amount of business in 2017,” Perry said.
In order to qualify for the Down Payment Assistance Program, a pre-purchase and post-purchase homebuyer education course must be completed.
“We have found that people really appreciate the financial information,” Perry said. “It really helps prepare them for what they are going to go through in buying a home.”
Citing an academic study, Perry said homebuyers who participate in a homebuyer education program are 40 percent less likely to encounter financial difficulty such as delinquency or default.
“This is stuff most of us don’t learn in school,” he said. “It’s helpful information that really prepares you. We have it set up to where you can actually take most of it online and at your own pace. We have excellent counseling agents in the area, and once you go through the counseling it’s good for one year.”
Perry said he encourages any new homebuyer to participate in a homebuyers education program to help avoid any potential hiccups throughout the purchasing process.
Even if someone doesn’t qualify for the Down Payment Assistance Program, THDA still offers a Great Choice Home Loan with a competitive rate on a 30-year, fixed rate mortgage in addition to assisting with downpayment and closing costs. Those who qualify for a Great Choice Home Loan, can also apply for a Great Choice Plus second loan that provides up to five percent of the purchasing price.
“Even if you’re not in one of those zip codes, we can still help you with an amount equal to five percent of the purchasing price,” Perry informed. “So if someone is buying a $150,000 home, that’s $7,500 we can help you with on down payment and closing costs.”
For most families, Perry says it’s the closing costs and down payment that present the biggest financial obstacles. He said oftentimes homebuyers have good credit and they are bringing in enough income to cover their mortgage, but they underestimate the closing costs.
“They’re surprised to learn that there could be $3,000 to $5,000 in closing costs,” he said.
For Unicoi County, a family of two making up to $68,760, or a family of three or more making up to $80,220 qualify for the Great Choice Price Second Loan worth up to five percent of their purchase price.
“We run so many programs that help lower income folks that a lot of times that surprises a lot of people,” said Perry. “That can reach a lot of families. … It makes it that much easier for them to buy a home.”
For more information on the Down Payment Assistance Program, or any other programs provided by the THDA, please visit their website at www.thda.org.