February 17, 2023 | by Katie Claflin
Categories: First Time Buyer, Homeownership, Lending
TSAHC released a new 4% down payment assistance (DPA) option on February 1st. The DPA was funded with mortgage revenue bonds and was able to offer a mortgage interest rate of 5.75% which is lower than we are currently offering with our non-bond assistance options.
The bond DPA was limited to $60 million in loan reservations. TSAHC reached the reservation limit on February 14th and is no longer accepting new reservations. However, we encourage loan officers to check back daily as we may resume accepting reservations in Targeted Areas.
An Alternative to TSAHC's Bond DPA
While we were only able to offer the bond DPA for a limited time, we want to encourage anyone interested in our programs to consider combining our non-bond DPA with a Mortgage Credit Certificate (MCC). An MCC provides home buyers with a 20% tax credit on what they pay in mortgage interest every year.
In other words, when a home buyer combines our non-bond assistance with an MCC, they are getting an effective interest rate that is 20% lower than they would get without an MCC.
To calculate the new effective interest rate, simply multiply the actual interest rate by 80%. Here's an example using one of TSAHC's non-bond assistance options:
7.125% (4% deferred forgivable interest rate)
5.70% (effective interest rate with an MCC)
Please note that the MCC does not lower the home buyer's actual interest rate. In this scenario, the home buyer must still qualify for the full 7.125% interest rate. They simply receive 20% of that interest back at tax time, which gives them the effective lower interest rate and a great savings.
A lender can also use the 20% credit amount as additional income when qualifying the home buyer for the mortgage. This can help some qualify for the mortgage in some cases. Furthermore, the funding source for TSAHC's non-bond DPA is unlimited, so home buyers can combine it with an MCC at any time.
How to Qualify for TSAHC's Non-Bond DPA and MCC Together
To combine both assistance types, you must meet the following criteria:
- Have a 620 credit score
- Earn up to 115% of the Area Median Family Income (based on county of purchase)
- Meet home sales price requirements (also based on county of purchase)
- Be a first-time home buyer (not required if using TSAHC's non-bond DPA without an MCC)
Take the eligibility quiz to see if you meet the requirements and connect with a TSAHC-approved lender.
On the House blog posts are meant to provide general information on various housing-related issues, research and programs. We are not liable for any errors or inaccuracies in the information provided by blog sources. Furthermore, this blog is not legal advice and should not be used as a substitute for legal advice from a licensed professional attorney.