Variety of homeownership programs available

In what’s being called a game-changer in increasing homeownership rates in Las Vegas, Bank of America has included Southern Nevada in a new loan program to provide free down payment assistance to homebuyers.

The program that commits $5 billion nationwide in select markets is expected to increase homeownership rates for low-income and moderate income buyers, and boost the rates of minorities for owning homes.

It’s among the new programs, including one unveiled by the Nevada Housing Division, to help more people attain homeownership.

Under the Bank of America program, borrowers can get grants of up to 3 percent of the purchase price of a home, which is up to $10,000 toward their down payment.

Bank of America also has a program called America’s Home Grant in which the bank will offer a lender credit of up to $7,500 that can be used toward nonrecurring closing costs, like title insurance and recording fees, or to permanently buy down a borrower’s interest rate.

“It’s a game-changer for the market,” said Mosi Gatling, president of the Las Vegas chapter of the National Association of Real Estate Brokers, said of the down payment program. The group hosted an event July 11 at Canyon Gate Country Club where the down payment program was outlined to Realtors.

Gatling said existing down payment assistance programs offered in the community require borrowers to get an above-market interest rate.

“That averages about 2 percent above what rates are right now because they’re so low,” Gatling said. “Bank of America is changing the game because they’re bringing down payment assistance to the city without increasing the rates. They’re getting the current low interest rates to the consumer and still getting that down payment assistance to get into a home.”

Currently, Gatling said with the Nevada Housing Division Home Is Possible program, someone with a 3 percent down and 680 credit score and 4 percent down payment assistance, the interest rate falls between 6 percent and 6.25 percent.

Based on a $250,000 loan, Gatling said the savings for the homeowner would be about $190 per month with the lower interest rate. If it’s a $300,000 home purchase, even with 5 percent down, the difference because of the higher interest rate is $280 per month.

Erik McKenzie, vice president and area lending manager for Bank of America in Las Vegas, said “significantly more” people will now qualify to purchase a home who couldn’t do so before.

“What is being offered right now can allow a significant part of the population to qualify for a loan where previously they could not,” McKenzie said. “The vast majority of people that earn between $30,000 and $60,000 a year — all of that money is going to day-to-day expenses. They don’t have the ability to save towards a home.”

The down payment program isn’t offered in every market in the nation. For example, in Nevada, only Clark County residents are eligible, McKenzie said.

“It’s certain markets across the nation where we want to make sure low-to-moderate income needs are being served by the community,” McKenzie said. “Some communities are already doing that, and we’re focusing on areas that didn’t have these types of options before. This is being rolled out to select larger markets and Reno doesn’t meet the size right now. Hopefully, it will be extended to Reno in the future.”

The down payment program started in mid-June in Las Vegas, while the America’s Home Grant started more than a year ago in select markets, McKenzie said.

“In Reno, (the grant program for closing costs) just started three to four months ago. When it started it in Las Vegas last year it was $2,500, and now we’re up to $7,500 (since the end of last year),” McKenzie said.

McKenzie said since the down payment program just started, Bank of America doesn’t have any numbers regarding participation. They are forwarding applications, and the funding takes about a month, he said.

“That’s why we do events like this in trying to meet with the nonprofits,” McKenzie said. It’s about getting the word out. If a lot more people knew about it, more could take advantage of it. Bank of America isn’t advertising this on media. Going to real estate agencies and working with nonprofits to get the word out to industry professionals will allow more people to take advantage of the program.”

Bank of America partners with nonprofits Neighborhood Housing Services of Southern Nevada and Money Management International.

The $5 billion is allocated nationwide, and there’s no limit on what a market can get, McKenzie.

“It’s not like we will use up our funds,” McKenzie said. “The $5 billion is going to last a long time. We’ve had a couple of clients qualify that were never qualified for a home before. Right now, unfortunately, there are a lot of people who don’t know what’s available.”

Buyers aren’t required to have accounts with Bank of America to participate.

McKenzie said Bank of America is doing the program as part of a commitment to helping low-income and moderate-income residents. The Community Reinvestment Act is a federal law to encourage depository institutions to meet the credit needs of communities.

“It’s no additional risk because clients are still having to qualify for the loans like everybody else,” McKenzie said. “It’s loan-to-value credit scores so it’s no additional risk. There’s an additional cost because the bank is paying these up front.”

Those who currently own homes and want to move up to another and first-time homebuyers who currently rent are expected to take part in the program.

There’s no income limit for those who want to buy in low- to moderate-income areas as designated by Freddie Mac. If someone wants to purchase outside of those areas, the grant and down payment is $51,840, McKenzie said.

“You could make $200,000 and still qualify for it in the low- to moderate-income areas,” McKenzie. “If the house in an affluent neighborhood in a middle-upper-income census tract, then the income limit is $51,840. That’s applicant income. You can have two people on the application, and if they made less than $51,840 they could both apply. If you have a husband and wife and one makes $50,000 and the other makes $40,000, you could apply with either one of those but not both.”

The areas where the income requirement does not need to be met includes parts of North Las Vegas and East Las Vegas.

“If you take a map, it’s everything pretty much east of the Interstate 15 down to where the U.S. Highway 95 is,” McKenzie said. “If you take the Spaghetti Bowl and go north, everything east of the 15 and north of the 95 would be a targeted market. There are pockets in the entire valley that qualify though. It’s not like something in Summerlin can’t qualify.”

McKenzie said people can qualify for the down payment assistance and closing costs grant only through the Freddie Mac Home Possible loan. If someone does a Federal Housing Administration loan or conventional loan, the borrower is only eligible to get the grant. They can’t get the down payment assistance, he said.

Nadja Vital, the affordable lending regional manager for Freddie Mac gave a presentation with statistics that showed some 63.6 percent of households in the U.S. are owner-occupied. In Nevada, that total is 54.8 percent, down from 63 percent before the housing collapse more than a decade ago. It’s even lower in Clark County at 47.7 percent, Vital said.

Hispanics have the lowest homeownership rate in Clark County. The average borrower income for Hispanics is $67,000 compared to $92,000 for whites, $84,000 for Asians, and $81,000 for blacks.

There are ongoing and new loan and assistance programs available as part of the Nevada Housing Division.

There’s an ongoing one to recruit and retain public school teachers whose qualified income was below $98,500 a year for a below-market, 30-year, fixed interest rate loan and $7,500 that can be used as a down payment and closing costs. If a teacher stays in their home for five years, they don’t have to repay the $7,500 that is otherwise prorated if they do.

Some 692 teachers have been helped to date, according to Dwight Pace, homebuyer programs supervisor for the Nevada Housing Division.

“When the schools are out recruiting teachers, they use it as a recruiting tool as one of the things the state offers,” Pace said. “It helps bring in teachers from out of state.”

More than 21,000 families statewide have been helped by the state’s Home is Possible program launched in 2014, Pace said. One program for veterans has helped more than 1,300 people in which they can get up to more than 4 percent of the loan amount for a down payment, he added.

For the program for the general public, buyers receive up to 5 percent of the loan amount for down payment and closing costs for homes priced under $484,350 (which is a recent increase) and qualified household income below $98,500. Just like the teacher program, buyers don’t need to be first-time homeowners and no federal or state tax dollars are used to fund it.

The state unveiled a first-time homebuyer program April 1. It’s for people who haven’t owned a home in the last three years. The minimum credit score is 660. Down payment assistance is in the form of a no-interest, no-payment 15-year forgivable note. The full note will be owed if there’s a sale, transfer or refinance.

“It gives the homebuyer a much lower interest rate,” Pace said. “Our normal program to get a FHA loan with 4 percent down payment assistance would be at 5.75 percent. This gives them 4.875 percent. For having that lower interest rate, it allows people to qualify for more home and lowers their monthly payment.”

In Clark County, for households of two or fewer, the income limit is $69,700. For a household of three or more, it’s $80,155. The maximum purchase price is $289,804.

About 300 people have been helped so far, Pace said.

As for the program’s funding, mortgage revenue bonds issued by the Nevada Housing Division are tax-free bonds sold to investors. The division uses the proceeds received from the sale of these bonds to finance affordable mortgages for credit worthy low- and middle-income first-time homebuyers in Nevada, Pace said. The mortgage revenue bonds are secured by the monthly payments by the borrowers whose home mortgages were financed by the sale of the bonds, he said.

Neighborhood Housing Services of Southern Nevada has a program called WISH and sponsored by the Federal Home Loan Bank in San Francisco in which homebuyers bring money into the transaction it will be matched four-to-one for their down payment, closing costs and inspection fees. For example, if someone puts in $3,000, they will get $12,000. There’s no minimum, and $4,000 is the maximum, according to Maureen Saccomani, homeownership director.

There’s a maximum income limit for the homebuyer of 78 percent of the area median income, which for a family of four is $54,366 for Clark County, Saccomani said.