Housing-News-Report-August-2017

HOUSINGNEWS REPORT

LEAD ARTICLE

U.S. UNDER AGE 35 HOMEOWNERSHIP RATE

Traditional Financing Options for Shared Equity Purchases

45.0 43.0 41.0 39.0 37.0 35.0 33.0 31.0 29.0 27.0 25.0

VA Financing: Mortgages backed by the U.S. Department of Veterans Affairs (VA) are available to individuals with qualifying federal service, generally in the military. The VA mortgage program can be used as a “joint loan” to finance shared-equity purchases, however there are complexities. The “VA home loan benefit is personal to the Veteran,” according to a senior official at the Loan Guaranty Program at the Department of Veterans Affairs who researched the subject at the request of the Housing News Report. This means the “VA is only permitted to guaranty – or back – that portion of the loan which represents the Veteran’s interest in the property. In a home loan purchase involving a Veteran with home loan eligibility and a non- Veteran (other than a spouse), the guaranty would only extend to half of the purchase price.” Portfolio Loans: “Portfolio loans” are mortgages not sold into the secondary market to such buyers as Fannie Mae and Freddie Mac. Instead, the lender holds the mortgage for its lifetime. Because the mortgage is essentially a private deal between a lender and a borrower the mortgage terms can differ from typical loans. For instance, there might be a higher loan-to-value ratio or maybe less down. For details speak with individual lenders and mortgage brokers.

SOURCE: U.S. CENSUS

shareholder returns),” said Bailey. “This is a very important part to our business, as we want to help low-to- moderate-income families (and other underserved communities) transition into homeownership to both realize the dream of homeownership and help build wealth.” Bailey said that “shared equity helps ease some of the most significant barriers to homeownership bringing a new capital source to the table to overcome down payment requirements and deleveraging the home purchase. Instead of borrowing $380,000, for example, to buy a $400,000 home (assuming a 5 percent down payment), shared equity can provide an additional $60,000 toward the down payment — reducing the debt burden to $320,000. This improves home affordability by lowering the ongoing monthly payment

through a lower principle balance and avoidance of costly PMI fees.”

Bailey noted that his company’s shared equity program helps improve the credit profile of a borrower. He provided the example of a mortgage with a 95 percent loan-to-value (LTV) and a 43 percent debt-to-income (DTI) ratio and 33 percent payment-to-income (PTI) ratio that with the help of an equity sharing agreement could look more like an 80 percent LTV with a 38 percent DTI and 28 percent PTI. “So, with shared equity you’ll have a better credit profile with the mortgage loan, allowing those who previously might not have satisfied tight credit standards to now qualify,” Bailey said.

Under the OWN program Bailey said the home buyer “is listed as owner on title.

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JULY 2017 | ATTOM DATA SOLUTIONS

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