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Today, there is more need for families to refinance their mortgages for financial reasons, and it is harder for younger buyers to secure enough cash for the down-payment of their first home than a couple decades ago. There are some federal programs that can assist first-time buyers such as The American Dream Act, Home Owners Emergency Loan Program, FREE HUD (department of Housing and Urban Development) Counseling and websites like FindHelp.org.
Many states have also implemented their own programs to help people buy affordable homes in their communities, and refinance to lower interest rates, which also strengthens their economies and improves the quality of life. In the third quarter of 2012, the percentage of Americans that did not own their own home decreased 7% nationwide from just a month ago, and 16% from one year ago. These sizable decreases are attributed mostly to five states: California, Georgia, Texas, Arizona and Michigan.
Texas has put into place its own set of unique mortgage and mortgage refinancing laws, that most of their major lenders embrace. Their guidelines are:
- For refinancing, they will only consider loans with at least 20% equity in their home.
- Interest rates are determined by the current market demand the federal mandates, but they do look at individual records of borrowing.
- Closing costs can not be more than 3% of the principal.
- All lenders must give the borrower 12 days to consider, think and accept the loan with no penalties if they cancel within that time frame.
- All homes must be in the state of Texas only.
- Loan debt must not exceed 80% of the home’s current value.
- No homeowner may have more than one home equity loan. Cash out is fine, but if the equity is used for another loan it must be a different type such as home-improvement.
- Homeowners must wait at least one year to refinance again.
- False statements on any home loan application is punishable by a fine with a maximum of $10,000 and/or 2 to 99 years in prison.
- Lenders in Texas may not change the terms of low rate government loans or those backed by non-profit organizations for a period of 7 years, unless it is to lower the rate. Fines are strictly imposed upon violations.
- Texas home equity and mortgage loans are secured by the principal residence and the borrower is not personally liable for repayment. Banks who do not comply with this rule may forfeit principal and interest claims.
- Borrowers in Texas for a line of credit against value of their homes can only borrow a maximum of 50%.
The Texas state constitution is constantly updating and reviewing programs for home mortgages and in 1997 limited the amount of equity one can borrow, and in 2003 allowed reverse mortgages in their state.
Good Neighbor Next Door
One of Texas’ best programs to improve the quality of life for all its citizens is the “Good Neighbor Next Door” program. This program is for full-time employees in the fields of education, law enforcement, fire fighting, and emergency medical treatments to purchase and live in certain communities. In a qualified community of homes, this program allows participants to purchase at a 50% discount of an “as is” appraised home. FHA (Federal Housing Authority) approved loans are offered with only a $100.00 down payment, and all closing and improvement costs, repair expenses and costs for new appliances can be rolled into the loan.
The buyers must be buying a “first home” and all live in their homes a minimum of 3 years to complete the rules of the grant before allowed to sell. These people must be employed by any federal, state, county, or municipal government, an Indian tribal government, or in the public or private school sector.
Further rules indicated the location of their purchased home must be within a reasonable commute distance from work, unless a federal employee, which is not restricted. Teachers must be employed by a state accredited school or private school that teaches pre-K through 12th grade serving the area where the home is located. Fire fighters, policemen and EMTs must also be serving their neighborhood.
When a property goes on the market in a qualified neighborhood, it will be selected by lottery 8 days later. People have 7 days to enter the lottery and closed at midnight of the 7th day. A primary winner and 2 backups are selected. In case the primary winner does not qualify or withdraws, a backup winner may not be notified for up to 3 months after a particular drawing.
Texas First Time Home buyer Program
This program allows discounts on sales of certain properties and offers financial grants and loans at 30-year fixed low interest rates. The grants are available for 50% of the mortgage amount, to be used as down payments and closing costs. These loans need to be paid back.
A variation of this program is extended to qualified teachers and professional educators, librarians, counselors and nurses in the form of a grant that does not have to be paid back. They must meet the purchase price income requirement and work in Texas.
Texas also supports these programs:
- Texas foreclosure prevention task force.
? Designed to reduce foreclosures, raise awareness, offer free assistance and counseling. Offers foreclosure solutions and intervention programs. There are “Neighbor Works” centers and HUD counselors in Texas.
- Mortgage Credit Certificate Program.
? Offered by the Texas Affordable Housing Corporation (TSAHC). This program allows for a $2,000 a year tax credit that reduces tax liability and increases disposable income for purchasing a home.
- MyCommPlus loans.
? This program is backed by FannieMae for teachers who have at least a 3% cash down payment and minimum credit bureau rating of 680.
- American Dream Down Payment Act.
? Offers assistance to low and moderate income families and all teachers, fire fighters, policemen and city sanitation and maintenance workers. The grants are for down payments only, and applications and free consults are available over the internet.
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