DPA Edge: Soft Second Product

 

Chenoa Fund is an affordable housing program administered by CBC Mortgage Agency (CBCMA), a federally chartered government entity. CBCMA specializes in providing down payment assistance (DPA) for borrowers receiving a FHA-insured first mortgage.

 

CBCMA has a mission to increase affordable and sustainable homeownership specifically for creditworthy, low- to moderate-income individuals. CBCMA partners with reputable mortgage lenders on a correspondent basis to provide down payment funds for qualified homebuyers in the form of second mortgages. All assistance is provided in compliance with FHA guidelines.

 

How do you qualify for the Chenoa Fund DPA Edge: Soft Second product?

In order to qualify for the Chenoa Fund DPA Edge: Soft Second product, you must meet program criteria, including the following:

  • Minimum credit score of 620
  • Debt-to-income ratio based on FICO score:
    • 620–639: 45% or less
    • 640–659: 50% or less
    • 660+: Per AUS findings
  • Qualifying income is equal to or less than 115% of the area median income (AMI) for the county in which the you will live (note: If you make more than 115% median income, ask about the Chenoa Fund DPA Edge: Repayable Second program.)

 

With this program, you receive a 30-year term, 0% rate, no payment second mortgage. A lien is placed on the property for the amount of the assistance.

The loan is forgiven if you meet the forgiveness conditions, which are determined by the down payment amount—3.5% or 5%.

  • 3.5%: Forgiven after 36 consecutive, on-time payments are made on the FHA first mortgage.
  • 5%: Forgiven after the initial 120 consecutive, on-time payments are made on the FHA first mortgage.

 

What is the second lien on the property?

The lien is for the down payment assistance, which is referred to as the second mortgage. This second mortgage has a 30-year term at a 0% interest rate. You, as the borrower, will not be required to make any payments on the second. The second can be 100% forgiven after you meet the forgiveness terms:

  • 3.5%: Forgiven after 36 consecutive, on-time payments are made on the FHA first mortgage.
  • 5%: Forgiven after the initial 120 consecutive, on-time payments are made on the FHA first mortgage.

 

What is meant by “your loan is forgiven”?

For example, let’s assume you receive $10,000 for down payment assistance under the Chenoa Fund DPA Edge Soft Second product. After you meet the forgiveness terms, you may provide evidence of your on-time payments to CBCMA in the form of a payment history. Once confirmed by CBCMA, the $10,000 loan is forgiven entirely—you’ll never have to pay it back.

For 3.5% assistance, the loan is forgivable after you make 36 consecutive, on-time payments on the FHA first mortgage. If you ever have a payment that’s 30 days late (or more), the forgiveness period resets.

For 5% assistance, the loan is forgivable after you make the initial 120 consecutive, on-time payments on the FHA first mortgage. If you ever have a payment that’s 60 days late (or more), the forgivable status of the loan is terminated. (In that instance, the loan will still have a 0% interest rate and require no monthly payments. The loan will be due at the end of the 30-year term, upon transfer of ownership, or upon refinance.)

 

What happens if the borrower refinances the first mortgage before the forgiveness terms are met?

Let’s continue the example outlined above. If you received $10,000 for a down payment and then refinance the first mortgage before meeting the forgiveness terms, you would be required to pay the $10,000 back in full.

 

Why was the Chenoa Fund DPA Edge: Soft Second product created?

While many people do manage to purchase a home by saving for a down payment over a period of years, increasing home prices and stagnant or low wages can make this quite difficult. By helping responsible homebuyers overcome the challenge of the down payment, CBCMA is helping to create healthy communities and improve the balance between homeownership and other types of housing. This way, new homeowners can start building equity for their future now, rather than potentially waiting for years to save a down payment while home prices become even more unaffordable.

 

CBCMA does not originate mortgage loans. This is not an offer to lend money nor a solicitation of a mortgage application by CBCMA.

 

 

Chenoa Fund is an affordable housing program administered by CBC Mortgage Agency (CBCMA), a federally chartered government entity. CBCMA specializes in providing down payment assistance (DPA) for borrowers receiving a FHA insured first mortgage.

 

CBCMA has a mission to increase affordable and sustainable homeownership, specifically for creditworthy, low- and moderate-income individuals. CBCMA partners with reputable mortgage lenders on a correspondent basis to provide down payment funds for qualified home buyers in the form of second mortgages. All assistance is provided in compliance with FHA guidelines.

 

How do you qualify for the Chenoa Fund DPA Edge: Soft Second product?

In order to qualify for this particular Chenoa Fund DPA Edge: Soft Second product, you must meet program criteria, including the following:

With this program, you receive a 30-year term, 0% rate, no payment second mortgage. A lien is placed on the property for the amount of the assistance—3.5% or 5%. The loan may be forgiven if you meet the right conditions, which are determined by the down payment assistance amount:

In the instance that forgiveness on a loan is terminated, the loan will not need to be repaid until ownership of the home is transferred, the home is refinanced, or the 30-year term reaches its conclusion.

 

What is the second lien on the property?

The lien is for the down payment assistance, which is referred to as the second mortgage. This is a 30-year term at a zero percent interest rate.  You, as the borrower, will not be required to make any payments on the second. The second can be 100% forgiven after you meet the forgiveness terms.

 

 

What is meant by the loan is forgiven?

For our first example, let’s assume you received 3.5% down payment assistance. That makes the loan forgivable after 36 consecutive, on-time payments. If you receive $10,000 as down payment assistance, you may apply to have the loan “forgiven” after you make 36 consecutive, on-time payments to the FHA 1st mortgage. To do so, you will provide evidence of these payments in the form of a payment history to CBCMA. Once confirmed by CBCMA, the $10,000 loan is forgiven—the loan goes away and you’ll never have to pay it back. (If you are 30 days or greater late in making a payment, the 36-day consecutive, on-time payment period will start over.)

Note: If for some reason you are unable to make 36 consecutive on-time payments at any time during the term of the second mortgage (360 months/30 years), then you would be required to repay the entire amount of the down payment funds lent to you at the end of the 30-year period.

 

For our second example, let’s assume you received 5% down payment assistance. That makes the loan forgivable after the initial 120 consecutive, on-time payments. If you receive $10,000 as down payment assistance, you may apply to have the loan “forgiven” after you make 120 consecutive, on-time payments to the FHA 1st mortgage. To do so, you will provide evidence of these payments in the form of a payment history to CBCMA. Once confirmed by CBCMA, the $10,000 loan is forgiven—the loan goes away and you’ll never have to pay it back. (If you are 60 days or greater late in making a payment, the forgivable status of the loan is terminated.)

Note: In the instance that forgiveness on a loan is terminated, the loan will not need to be repaid until ownership of the home is transferred, the home is refinanced, or the 30-year term reaches its conclusion. The loan will continue to have 0% interest and require no monthly payment.

 

What happens if the borrower refinances the first mortgage before the forgiveness conditions are met?

Let’s continue with either example outlined above. If you received $10,000 for the down payment and refinance the first mortgage before meeting the forgiveness conditions, you would be required to pay the $10,000 back in full with no interest.

 

Why was the Chenoa Fund DPA Edge: Soft Second product created?

While many people do manage to purchase a home by saving for a down payment over a period of years, increasing home prices and stagnant or low wages can make this quite difficult. By helping responsible home buyers to overcome the challenge of the minimum investment required for a mortgage, CBCMA is helping to create healthy communities by improving the balance between home ownership and other types of housing. This way, new homeowners can start now building equity for their future, rather than potentially waiting for years to save a down payment while home prices become even more unaffordable.

 

CBCMA Does Not Originate Mortgage Loans. This is not an offer to lend money nor a solicitation of a mortgage application by CBCMA.

Requesting Information

If you would like more information about this program, please contact our program development team.

Phone: 866-563-3507

Email: info@chenoafund.org

CBCMA Does Not Originate Mortgage Loans. This is not an offer to lend money nor a solicitation of a mortgage application by CBCMA.

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