Chapter 6

COMMMUNITY DEVELOPMENT ADMINISTRATION MORTGAGES (CDA)  

CDA   MORTGAGES (rev. 03/09)

           CDA or the More House 4 Less is a Maryland State government mortgage program geared toward helping the first-time homebuyer to purchase a home.  In this sense, a first-time homebuyer is defined as someone who has not owned a home in three years.

          In the past, there were several different loan programs being offered.  However, CDA is only offering the government mortgages; a 30 year fixed rate mortgage, FHA and VA.  The borrower(s) may receive up to 96.5% financing along with down payment and closing cost assistance. The most recognizable change to CDA financing by realtors and loan officers alike is the funding is no longer at 100%.

          The interest rate is set by the State and changes are made periodically.  They are not set by the fed rate which can change daily.  The rates offered by the CDA program are quite competitive and are posted on the More Homes 4 less website @ morehouse4less.com. or www.mmprogram.org.  Workshops are held throughout the year and are posted for your convenience.  Currently, a 30 year fixed-rate mortgage is at 6.0% with zero points.

          CDA mortgages are available through approved local lenders and are offered by the Maryland Department of Housing and Community Development.  This program offers up to 96.5% financing and has an added feature of down payment assistance toward closing costs.  The purchase price of a home is limited i.e. the limit for a conventional and FHA mortgages through the CDA in Carroll County is $429,620.  There are also income restrictions.  For example:  Carroll county has a limit of $93,840 for a 1 or 2 person household and a limit of $108,698 for a 3 person household.  Interestingly enough, if a borrower is pregnant and can verify her pregnancy with a doctor’s note, the 2 person household will qualify as a 3 person household.  Note:  Maximum purchase price and income limits vary by county/Baltimore City .

          One of the questions often asked by borrowers and realtors is ‘…why would I choose an FHA CDA mortgage over a conventional CDA mortgage?..’   The reason for  a preference is typically due to credit scores as well as availability of mortgage insurance for conventional mortgages.  CDA requires good credit, but is a little more flexible/lenient using the FHA guidelines.  Current acceptable credit scores using conventional financing is 620 and FHA is 580.  CDA still follows HUD  guidelines of a 5% down payment or 3.5% for FHA.  Gift money, seller help, grants and DSELP (Down Payment & Settlement Expense Loan Program-a Maryland State program) funds can be used in the purchase transaction.  Seller help can be as much as 6% of the sale price with a CDA FHA mortgage.  Theoretically speaking, there is no minimum out-of-pocket expense for a CDA mortgage.  Borrowers can purchase a home with ‘zero money’ invested in their new home.  Note:  CDA conventional financing may not be available due to stringent mortgage insurance criteria.

          There are three types of closing cost assistance programs available:  DSELP, a 2% grant program, and a 3% grant program.  DSELP money used toward closing costs/down payment can actually become a no-interest, deferred loan to assist first-time homebuyers!  The DSELP assistance is currently $2,500.  The purchase price, however, is limited to $200,000 or less.  The loan is paid back when the borrower refinances or sells the property.

          The State of Maryland offers a 2 or 3% (of the loan amount) grant program-a closing cost assistance feature.  The 2% grant program offers a higher interest rate of 6.5% and is repayable in full within the first four years when a sale, transfer or refinance occurs from the purchase date; however, it is forgivable after four years of ownership/the purchase date.  The rate of 6.75% applies to the 3% grant program; repayment is the same as the 2% grant.  This has no loan amount restriction (within the CDA limits) and is also forgivable after fifteen years.  Note:  The CDA 2 and 3% grant programs have slightly higher interest rates and these funds are used solely toward closing costs for FHA mortgages.

          Mandatory Homebuyer education is available for all borrowers and is required, but is specific to each county/Baltimore City .  Property home inspections are also required.

          Lastly, there are a few employer sponsored programs such as House Keys 4 Employees and Smart Keys 4 Employees (consult your human resource department with your employer) whereby a participating employer will contribute $5,000 to the employee and CDA will match   the contribution for a total amount up to $10,000.

Example:

CDA Mortgage Story

A State Sponsored Mortgage Program

(Rev. 03/09)

          Susie and Mary Buyers walked into their local mortgage loan officers’ office one day to talk about how they could buy their first home.  They were quite nervous and knew a real estate agent that had referred Susie and Mary to the loan officer for a pre-approval to purchase a $180,000 home.  Susie and Mary were very smart.  They had first called the mortgage loan officer to ask what they needed to bring on that first visit.  Susie and Mary brought the following items:  the last three years federal tax forms (their 1040’s), their W-2’s for the last three year, their most recent paycheck stubs showing 30 days of income, two months of asset information – their checking/savings account, and their home counseling certificate.  In addition, they brought in their landlord’s contact information for the mortgage person to contact. 

          The mortgage loan officer typed up their mortgage application upon their very first visit since Susie and Mary had been so efficient in getting all of these items together.  Gathering all this information ahead of time makes purchasing a new home a much more pleasurable experience; especially, for Susie and Mary Buyers!   The mortgage loan officer also known as the MLO, told Susie and Mary about the details of the CDA Mortgage she had available for them.

        Ø  The CDA mortgage currently had a fixed interest rate of 6.0%,

Ø   It was for a period of 30 years,

Ø   The mortgage loan amount would be 96.5% of the purchase price

Ø   The monthly mortgage payment would include:  principal, interest, real estate taxes, homeowners insurance, and mortgage insurance

              Example:  Principal & Interest                                                $1,059.64

                  Real Estate Taxes                                                       150.00

                  Home Owners Insurance                                              50.00

                  Mortgage Insurance (PMI)                                           79.17

                                                                                                _________

                    Total Monthly  mortgage payment                   $1,338.81

“Do Better Business…. The Carroll Way!”  

The information provided in this manual reflects current mortgage information which may be subject to change 
without  notice/or which may have already been eliminated. Your transaction may involve updates periodically.  
Consult with your mortgage loan officer for updated information.

March 16, 2009