- Soft second mortgages have favorable payment terms, such as forgiven over time, no monthly payments for a period of time or due only on sale.
- With a mortgage credit certificate (MCC) program, the offering agency gives the borrower a certificate that indicates the amount of the tax credit.
- Some employers offer homebuying assistance to recruit and retain employees.
The most successful real estate agents and loan officers are able to effectively navigate all interest rate and property appreciation markets. They do it by having more tools and resources to support their clientele.
One often underused resource is the huge number of homebuyer assistance programs that are funded by government agencies, nonprofits and employers. According to Rob Chrane, president of Down Payment Resource, there are over 2,300 programs across the country that offer assistance to homebuyers.
Let’s talk about a few options you can inform your clients about to help them become homeowners.
Second mortgages
Some of the programs offer soft second mortgages. The second mortgages have favorable payment terms, such as forgiven over time, no monthly payments for a period of time or due only on sale.
The second mortgage can help reduce the amount of cash needed to close and reduce the monthly payment, thereby requiring less income.
Especially in high-cost areas, some state and local building regulations require builders to offer homes at a price below appraised market value to eligible buyers.
Known as inclusionary zoning, having strong knowledge about the programs can provide you with a referral pipeline and the opportunity to build a relationship with a builder who wants partners that can quickly sell their inventory.
Mortgage credit certificate programs
With a mortgage credit certificate (MCC) program, the offering agency gives the borrower a certificate that indicates the amount of the tax credit.
The borrower can reduce his or her federal tax paycheck deduction by the amount of the tax credit, generally 15 percent to 30 percent of the mortgage interest. MCCs do not take the place of a first mortgage; they simply work off the interest paid.
For a borrower whose monthly mortgage interest payment is $800, a 20 percent MCC program would offer an annual credit of $1,920 a year and the borrower could reduce the amount of monthly federal tax liability by $160.
Borrowers should work with their tax adviser to understand the program benefits and potential recapture. For more information, click here.
Employer benefits
Some employers offer homebuying assistance to recruit and retain employees. The eligibility requirements are determined by the employer and may be targeted to entry level employees or higher income professionals.
Many hospitals and universities will offer significant assistance to doctors and professors. There are also programs for teachers, fire, police and many others.
Always at least ask if the homebuyers have checked with their employers.
An advantage for agents
The programs are not going to be the panacea to success, but knowing about them will give you a leg up over your peers.
I recall one real estate agent saying to me that all buyers were interested in hearing more about the programs; however, not many actually needed one to qualify for the loan.
In the end, the agent made a long line of referrals because no one else was offering that type of information.
Another agent shared that not many buyers used the programs, but they started a lot of conversations that produced solid leads.
Find the programs in your area and become the known expert. Many of the programs can be layered to provide homeownership opportunities to even more homebuyers.
Check out first-time homebuyer or down payment assistance programs on the internet, and you will see state and local programs.
You might also check out Down Payment Resource. The site is easy to use and will provide a list of programs and the name of the agency offering the program.
Call the agency yourself, let them know you are interested in serving buyers and sellers in the neighborhood, and be sure to take advantage of training or program brochures that are available.
You can also use program information as a listing tool. Add program availability to your yard signs, your property flyers and multiple listing service information.
Congratulations — you now know more than most others in your area and are on your way to creating a market change resistant stream of referrals!
Dottie Sheppick is a founding partner of Specialty Mortgage Product Solutions, LLC. You can find out more about her on LinkedIn.
