HUGE Discounts and Lower Rates

If you are a first time home buyer I’m going to educate you about the new program that everyone is drying to get.  It's a welcome entry to the lending world finally allowing the homebuyer to reap the benefits of their 'first time' status.  I'll show you how to search for whether or not you qualify for the massive first time homebuyer discounts and show how to run your own numbers in excel under the newly expanded AMI program.

What is this program?

Before getting too far along, let’s discuss what the AMI program is and why it’s so good.

AMI stands for Area Median Income. The design of the new program is to help more first time homebuyers qualify and be encouraged to buy a home by offering lower rates and overall better terms than a typical 30 Year Fixed Mortgage. Here are the main things it does.

1. First off, it immediately discounts the cost of the rate. The typical reduction to your interest rate is about .3% in rate. That’s a pretty significant amount. If you amortized the .3% over 30 years for a 300k loan amount, it is $72.62 less per month.

2. It caps secondary marketing adjustments resulting in significantly better pricing.  What the AMI program does is cap the secondary market LLPA.  LLPA stands for loan level pricing adjustments and it’s what the secondary markets ‘add-on’ to adjust for risk. The LLPA will adjust the points and even the rate of your loan to come up with a final price.  You may have heard it said, ‘well your LTV or loan to value is 97%, or your home is a condo, or your credit score is below 720, so there is an extra cost’.  These 'costs' are the LLPAs being applied... the most common LLPA being the credit score LLPA and the Loan To Value (LTV) of the loan.  Well all of that gets capped under the new program.  No matter what your LLPAs are, the adjustments are albeit eliminated with this program.  This is HUGE and is in addition to the already better starting rates of the program.

So how do you qualify for this program?

Here is the Criteria.

• AT least ONE of the borrowers must be a first time homebuyer. The definition is having not owned a home in the last 3 years.

• Your income must not exceed either 100% or 120% of the AMI. Here is the lookup tool: https://ami-lookup-tool.fanniemae.com/amilookuptool/ – notice:

  • You don’t need to use all your income to see if you qualify for this program.

    • Before anyone gets discouraged that you think you make too much money to qualify, REPEAT;  You don’t need to use all your income to see if you qualify for this program. In other words, if you qualify for the loan just with your salary, you can ignore any ‘other income’ such as bonus, commissions, alimony, etc. so you meet the AMI requirements.

    • SIDE NOTE: Most loan officers don’t know that you can exclude income to meet the AMI limits. Don’t just take NO for an answer.

  • You can use up to 120% of AMI! If you are in a designated high cost area: https://singlefamily.fanniemae.com/originating-underwriting/loan-limits then you can earn up to 120% of AMI. Otherwise your income cannot exceed 100% of AMI.

Let’s see this in action.

Let’s look up a property: Pick anything on Zillow and grab the address.

1. Look up the property on the AMI lookup tool.

2. Check to see if you are in a High Cost Area. (The lookup tool will typically show you if you are in a 'high cost area' and do the 120% calculation for you.

   

3. Write down the maximum income based on AMI limits.

4. Calculate your total Income and subtract any ‘other income’ to get you below the AMI limit.

5. Enter your total monthly debts and check to see if your debt to income ratios are in an acceptable range.

The Excel Worksheet

Below is an actual example with real loan pricing.  You can see my pricing live on www.rate.com/rickelmendorf but NOTE that the pricing for THIS program is MUCH BETTER than what you will see online anywhere.  You will need a specific quote.  

Just email rick@loanwithrick.com if you would like to get the spreadsheet and work up your own scenario.  

Any questions, just email me at rick@loanwithrick.com or call/text me at 571-249-5363.