Understand the S.H.I.P. Loan Program for First Time Home Buyers

While the economy has been tough for the housing market, new homeowners may have had the toughest time. In most parts of the country, the housing supply and reduced prices made purchasing a new home now a good idea. Unfortunately, many lenders also started cracking down on their lending practices. They required higher income levels, increased the interest rates, and started asking for larger down payments. People from lower income backgrounds found it increasingly challenge. In Florida, however, a no money downpayment loan for first time home buyers is making things easier.

Background on the Program

This no money downpayment loan for first time home buyers is available through a program known as S.H.I.P which stands for State Housing Initiative Partnership. The program is available in every county in Florida. Each county receives state funds which they, in turn, use to promote home ownership in their area, particularly among those with the lowest income and the greatest need for financial assistance. However, these government assisted home loans are not just given to everyone. Individuals do need to meet specific requirements.

The Down Payment Assistance Program

Buyers must meet certain qualifications if they are going to receive the no money downpayment loan for time time home buyers. Because the program is for low income families, the household income must not equal more than 120% of the AMI (Area Median Income). Because the AMI varies greatly between Florida counties, this is the most effective way of setting income limits for the program. To prevent buyers from moving into counties where they will be eligible, a one year residency requirement in that county is required as well.

Additionally, buyers are asked to secure the mortgage financing and to complete an education seminar provided free through the S.H.I.P program that educates them on the facts about purchasing a home for the first time. Individuals must also contribute either 1% of the total home's sale price of $1,000 to the purchase as a sign of commitment to honor this partnership.

The buyer isn't the only one who must meet specific qualification requirements to receive government assisted home loans. The property must also qualify. Obviously, it must be located in the same county. However, the sale price cannot be higher than $219,000 to qualify. That makes sense because the maximum assistance provided is $35,000. The total amount homeowners will be eligible for depends on their household income. Another requirement is that the combination of the two loans must not be more than 105% of the home's appraised value - this rule is to protect the home buyer from paying too much for a property.

Reasons for Refusal

Following May 2008, a few additional requirements were added to the program to ensure the funds were being used to assist the most eligible individuals. The credit score requirement of 620 was added. However, individuals with lower credit scores can be eligible if they do not have any garnishments, past due revolving accounts, a bankruptcy in the last two years, or past due rent within the last 12 months. Applicants with credit scores below 620 are approved at the discretion of the program, and those are just some of the examples which could disqualify a prospective home buyer.

The Benefits of the Program

The no money downpayment loan for first time home buyers is made to the owners at the time of their closing on the property. While called a loan, it doesn't work as a loan. Instead, they carry a 0% interest rate so the amount needed for the down payment and borrowed will not increase. Additionally, the loan will be completely forgiven if the homeowners are still in it fifteen years later.

Obviously, this has a tremendous positive impact on low-income families who want to purchase their first home but who may find saving up a 10% or down payment to be nearly impossible. After all, a 10% down payment for a $100,000 home would be $10,000 which is a lot of money for anyone to save up.

By forgiving the loan after fifteen years, the program uses these government assisted home loans to encourage people to buy a home, take care of the home, and live in it. After all, purchasing a home is usually a solid investment, even despite the recent slump in the market.

For potential home owners who meet the program's requirements, it can provide a wonderful opportunity they may not have otherwise had.