Maryland Down Payment Assistance For African Americans And Hispanics | Minority Down Payment Assistance
Everything You Need to Know About Homes by CFE Maryland Down Payment Assistance Program
Buying a home can be an exciting milestone, but it can also feel overwhelming, especially when it comes to securing the necessary down payment. Fortunately, programs like Homes by CFE Maryland down payment assistance can help make homeownership more accessible, particularly for Black, African-American, and Latinx communities. In this post, we'll break down how the Homes by CFE Maryland down payment assistance program works, how to qualify, and what you need to know to decide if it’s right for you.
What Is Homes by CFE?
Homes by CFE is a Maryland down payment assistance program that targets prospective homeowners from Black, African-American, and Latinx communities. It’s designed to make homeownership more attainable by offering a second trust mortgage as down payment assistance. However, this assistance comes with specific terms and conditions that you should understand before applying.
How the Program Works
The Homes by CFE program provides down payment assistance, but it’s not a traditional grant. Instead, it’s a second lien on the property. Here’s what that means:
Second Trust Mortgage: The down payment assistance you receive is treated as a second mortgage (or lien) on the property.
Deferred Payments for 5 Years: For the first 5 years, you won’t need to make payments on the down payment assistance. However, the loan will accrue interest during this time.
Interest Rates: The interest rate on the down payment assistance is calculated by subtracting 2% from the interest rate on your primary mortgage. For example, if your primary mortgage is at 5%, the interest on the second mortgage (down payment assistance) would be 3%.
Balloon Payment After 5 Years: After 5 years, you’ll start making payments on the down payment assistance. Since the program defers payments, you will owe a lump sum, or balloon payment, covering the accumulated interest.
Term of the Loan: The second mortgage is financed over 25 years. However, it must be repaid if you sell, refinance, or pay off your mortgage.
Pros and Cons of the Program
Pros:
No Private Mortgage Insurance (PMI): Since this program is bundled with conventional loans, you won't have to pay PMI, which can significantly lower your monthly mortgage payments compared to an FHA loan.
Quick Access to Funds: Once you’re pre-approved, Homes by CFE can issue the down payment assistance funds within just 3 days, which is much faster than many other down payment assistance programs.
Up to 20% Down Payment: The program offers up to 20% down depending on your conventional loan, helping you avoid large out-of-pocket costs.
Closing Cost Assistance: If your income is at or below 100% of the median family income, you may qualify for an additional $10,000 to cover closing costs, making your offer more attractive to sellers.
Cons:
Balloon Payment Risk: One of the key drawbacks is the balloon payment at the end of the 5-year deferral period. You’ll need to plan for this large sum, which could be a financial strain if you’re not prepared.
Cash Reserves Limitations: The program limits your cash reserves to no more than 6 months after the loan closes. This can restrict your financial flexibility, so make sure you understand these limitations before applying.
The Application Process
Here’s a step-by-step guide on how to apply for the Homes by CFE program:
Get Pre-Approved: First, you’ll need to get pre-approved with a lender of your choice (whether it's a bank or private lender).
Referral to Homes by CFE: Once you’re pre-approved, your lender will submit a referral to Homes by CF to verify your eligibility.
Complete the Application: If you qualify, Homes by CFE will reach out for you to complete a formal application.
Homeownership Orientation: You’ll also need to attend a homeownership orientation to ensure you understand the terms of the program.
Eligibility Requirements
Not everyone will qualify for this program, so it’s important to review the following criteria:
Targeted Communities: Borrowers must identify as African-American, Black, Hispanic, or Latinx.
Location: Eligible locations include the District of Columbia, Prince George’s County, Charles County, Baltimore City, and Baltimore County.
Property Types: Eligible properties are single-family homes, condos, and co-ops. Multifamily properties are not eligible.
Maximum Purchase Price: The home purchase price cannot exceed $650,000.
First-Time Homebuyer Status: To qualify, borrowers must be first-time homebuyers, which means they have not owned a home in the past three years. There are a few exceptions for displaced homemakers and single parents.
Income Limits: The program has income limits, so your household income must fall within the prescribed range for your area. First-time buyers earning at or below 100% of the median family income are eligible for additional assistance, including up to $10,000 for closing costs.
Additional Considerations
Credit History: You must not have any charge-offs or delinquencies on your credit within the past 6 months.
Cash Reserves: After closing, your total cash reserves (including the second mortgage) cannot exceed 6 months of mortgage payments, taxes, and insurance.
Is Homes by CFE Right for You?
As with any down payment assistance program, there are both benefits and drawbacks. While Homes by CFE can provide substantial assistance for first-time homebuyers, the deferred interest and balloon payment after five years could pose a challenge if you're not financially prepared. On the other hand, the quick funding and additional closing cost assistance can make this an attractive option for many buyers.
If you're eligible and comfortable with the terms, it could be a great way to secure a home with less upfront cost. As always, it’s important to speak with a real estate professional or mortgage lender who can help guide you through the process and help you decide if this program fits your financial situation.
Final Thoughts
Homes by CFE Maryland down payment assistance offers a unique opportunity for Black, African-American, and Latinx communities to achieve homeownership with down payment assistance. While the program has some caveats, it can still be a great option depending on your financial situation. If you think this program could work for you, don’t hesitate to reach out to a trusted real estate agent or lender for more information.
Have any questions about Homes by CFE or other down payment assistance programs? Leave a comment below, and let’s chat!
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