What is happening today in mortgage lending:
Did you know we have a program called the “Interest Abatement Program”? It can be used on Conv, FHA and VA lending. It does differ a little from each program. The basic idea is the same, the interest portion of the payment is paid by the seller and is placed in a separate non-interest bearing "Replacement Reserve Account" and is used by MLHL to subsidize the monthly payment.
Conventional Guidelines-This product can be used on a construction to perm loan treated as a purchase and must meet the following: The builder (only any other seller not eligible) can contribute up to 6% depending on LTV (that would include money toward closing cost) towards an account that would pay the borrowers interest for 3 to 6 months. This would make it so the borrower would only have a minimal principal payment during this time. The interest or closing cost may not be paid out of premium pricing the prepaids may be paid out of premium pricing. The premium pricing used for prepaids does not count towards the Seller concessions. The seller has to be the builder.
FHA and VA
The interest abatement funds may be paid by the builder and/or seller on behalf of the borrower. The abatement funds may "NOT" be covered by premium pricing or paid by borrower.
· Terms of the Interest Abatement must stipulate in the sales contract or Escrow Instructions or on an addendum to either.
· Interest Abatement Period 3 to 6 months. - no exceptions.
Premium Pricing
Not allowed for interest abatement.
Prepaids and closing costs may be paid out of premium pricing and not counted into the maximum Seller/Interested Party Contributions.
· Seller/Interested Party Contributions
o FHA = Maximum 6% (including abatement)
o VA = Maximum 4% (including abatement
Interest Abatement funds are not refundable and borrowers only interest in the funds is to have them applied as monthly interest due.
Shirley Nault has been a mortgage professional for over 20 years. Visit her other mortgage web sites go to: www.naultfhatips.blogspot.com or www.dutips.blogspot.com
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