The myriad homebuying options are particularly helpful for
low- and middle-income borrowers.
By JEFF LAZERSON | email@example.com | MortgageGrader.com | April 10, 2023
Article originally posted in Orange County Register on April 06, 2023.
If you’re stuck without a downpayment for a new home, there are at least 300 assistance programs available in California.
In fact, there are at least 311 such programs for California homebuyers among at least 2,300 available nationwide, according to Rob Chrane, founder and CEO of Down Payment Resource.
We’re talking down payment and closing cost programs, along with mortgage tax credits. The myriad homebuying options are particularly helpful for low- and middle-income borrowers.
With a down payment being the biggest barrier to homeownership for most, Chrane back in 2008 went on a journey for solutions, creating a free, searchable online directory at downpaymentresource.com.
Of the 311 programs, there were 233 issuing agencies with 190 (or 61.1%) citing available funds as of Jan. 6, according to DownPayment Resource.
I ran a search on Chrane’s website using this query: A family of four with $150,000 in annual income seeks a $600,000 home in Los Angeles County.
The site returned 17 available programs. One was the CalFHA Dream for All Shared Appreciation Loan offering up to $120,000 or 20% of the purchase price for the down payment.
The Golden State Finance Authority’s OpenDoors Program (temporarily suspended) offered a maximum of $39,900 or 7% of the total loan amount.
CBC Mortgage Chenoa Fund offered up to $30,000 or 5% of the sales price in a repayable FHA down payment assistance program.
Applicants will want to pay careful attention to the terms and whether a downpayment program is forgivable or due a repayment.
I learned about Chrane and his efforts while attending the Mortgage Bankers Technology conference in San Jose. He was honored as a tech all-star at the event.
“In today’s economy, financial institutions are placing a premium on the ability of technology to expand homeownership, fundamentally improve the customer experience and/or reduce costs,” said Rick Hill, MBA’s vice president of Industry Technology.
Here’s a little bit more of what caught my attention at the industry event.
A push for digital ID
Could the mortgage industry help streamline a digital identification system for the U.S.?
The topic of a mobile driver’s license, or mDL, was presented by Mindy Stephens, manager of the American Association of Motor Vehicle Administrators‘ Identity Management division.
The group is part of an ongoing effort to create a nationwide mDL that would digitize a user’s identity into a scannable code, making it updatable in real-time and available to anyone who has the necessary reader device.
“It’s not a picture of the physical driver’s license or ID on the device. There will never be a need to touch or take the device (from you),” said Stephens.
Utah, Colorado, Arizona, Oklahoma, Florida, Delaware, Connecticut, Maryland and Missouri are well on their way to creating an mDL for their residents.
An mDL could speed up the mortgage application process, too, by providing real-time information about a borrower.
Don’t confuse this with never needing a notary again. Unlike 42 states allowing online notaries, California still requires in-person notaries. So, mDL at this early stage is not going to replace the notary process — at least not yet.
In front of many of the 600 conference attendees, Manoj Saxena, chairman of AI Global, former chairman of the Federal Reserve Bank of Dallas and former general manager of IBM Watson, shook me to my core when he presented his thinking about artificial intelligence. Specifically, ChatGPT.
The language tool uses AI to create stories or conversations on a topic.
“Based on all documented information, it is a search engine on steroids,” said Saxena. “If you can type, you can code.”
For example, imagine such AI helping homebuyers find every mortgage they qualify and approve for quickly and at the lowest rate. Or, for a mortgage person like myself to search for every house hunter in the community who wants and qualifies for a mortgage.
The danger is AI’s lack of guardrails. It also has no concept of regulatory compliance. And it can misinterpret data.
The system, Saxena said, is vulnerable to misinterpretation. And, it can spit out erroneous information called model hallucinations, he warned.
Scarier is the potential of nefarious ChatGPT activity.
“How do I break into a house? How do I build a bomb?” Saxena asked.
But don’t worry yet about AI wreaking havoc on your mortgage application. The industry has certain standards for mortgage data.
It’s called MISMO, short for mortgage industry standards and maintenance organization.
“Homeowners may not realize that MISMO standards are used in nearly every residential mortgage originated in the U.S. today,” said David Coleman, MISMO’s president.
Others can’t wait to get mortgage applications exclusively online.
Nima Ghamsari, co-founder and CEO of Blend, a mortgage and banking cloud-based software company, evangelized about online mortgage applications, allowing lenders access to the borrowers’ bank information, for example.
“Forty-five percent of borrowers are online,” he said.
Surgeons like to cut. Internal medicine doctors push pills. Mortgage tech people are always wanting to build a bear and charge accordingly. A completely digital mortgage is not on the horizon. Mortgage shoppers may shop online but ultimately, they want to speak with a mortgage loan originator. They are only human.
Freddie Mac rate news: The 30-year fixed rate averaged 6.28%, 4 basis points lower than last week. The 15-year fixed rate averaged 5.64%, 8 basis points higher than last week.
The Mortgage Bankers Association reported a 4.1% mortgage application decrease from last week.
Bottom line: Assuming a borrower gets the average 30-year fixed rate on a conforming $726,200 loan, last year’s payment was $711 less than this week’s payment of $4,486.
What I see: Locally, well-qualified borrowers can get the following fixed-rate mortgages with one point: A 30-year FHA at 5.25%, a 15-year conventional at 5%, a 30-year conventional at 5.5%, a 15-year conventional high balance at 5.625% ($726,201 to $1,089,300), a 30-year high balance conventional at 6% and a jumbo 30-year fixed at 6.375%.
Note: The 30-year FHA conforming loan is limited to loans of $644,000 in the Inland Empire and $726,200 in LA and Orange counties.
Eye catcher loan program of the week: A 30-year FHA fixed rate at 4.875% with 2 points cost.
Jeff Lazerson is a mortgage broker. He can be reached at 949-334-2424 or firstname.lastname@example.org. His website is www.mortgagegrader.com.
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Jeff Lazerson - Mortgage Columnist since 2011