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  Homeownership & Home Repair First-time homebuyers and veterans

 

> Frequently Asked Questions

 

 

Q: What is the First Place Loan program? 

A: First Place Loan program is a homebuyer program that provides a pool of money at below-market interest rates that lenders can access to provide loans to first-time homebuyers and qualified veterans in the state of Missouri. One part of the program also provides down-payment and closing cost assistance. These loans are 30-year, fixed-rate, first mortgages. MHDC has constant funding throughout the year.

 

Q: How many types of loans does MHDC offer under the First Place Loan program? 

A: Two types of funds are available, depending on the borrower's needs.


- Cash Assistance Payment provides 4.0 percent of the loan amount to help first-time homebuyers that need assistance with down payment and closing costs. Assistance loans can be used for both existing and new homes.

- Non-Cash Assistance low rate loans are offered at a somewhat lower interest rate, usually .25 percent to .50 percent below cash assistance rate. These loans are best for buyers that have adequate funds to pay their own down payment and closing costs. Low rate funds are available for existing and new homes.

 

Q: Can I apply for an FHA loan and still use First Place funds?

A: Yes. MHDC allows the use of FHA, VA, USDA Rural Development and Fannie Mae Conventional loan programs.

 

Q: What parts of the state are eligible for the program?

A: Home purchases in all parts of the state are eligible for the program. Please review the purchase price and income limits for income and sales price limits on each of the program pages.

 

Q: How do I apply for a First Place Loan?

A: Loan applications are accepted by Certified Lenders. You may also pre-qualify here.

 

Q: Does it matter which lender we use?

A: No, MHDC sets the interest rates for these loans and limits, as well as the amount of closing costs that may be charged by the lender. There should be almost no difference in cost among lenders.

 

Q: Will this program help me if I have poor credit?

A: Applicants for loans under the First Place program must meet the same credit requirements as any other homebuyer. Potential borrowers who have credit issues to address are urged to participate in a financial management program to work their way to an improved credit status. This is not a "credit-repair" program.

 

Q: If the qualifications for this loan are the same as any other loan, what is the advantage of this program?

A: There are two primary advantages to the homebuyer:  
 

- The interest rates offered through the First Place program are usually lower than market rates being offered at the time funds are issued. The interest savings for a buyer borrowing $100,000 for 30 years at 6 percent interest, instead of borrowing the same amount for the same term at 7 percent, is more than $23,000 over the life of the loan.  

 

- The Cash Assistance Loan provides funds to be used to assist with down payment and closing costs.

 

Q: I have been told that I shouldn’t use the First Place program. Why is that? 

A: For most first-time buyers, this loan product is an excellent choice. However, mortgage brokers and some lenders are not eligible to offer this program, so they may try to discourage you from using it. Some lenders offer programs that are more profitable to the lenders and often less beneficial to the consumer, and they may offer these loans more aggressively.

 

Q: What is a first time homebuyer?

A: First-time homebuyers are defined as those persons who have not owned a home or had an ownership interest in a primary residence for the past three years.

Q: What is a qualified veteran?

A:  A qualified veteran is any veteran who served on active duty and who applies for financing within 25 years after leaving active service.

 

Q: What first-time buyer would not want to use the First Place Program?

 

A: The program can be beneficial to any homebuyer. However, if you know for certain that you will be in your home for only one or two years, you will want to consider carefully the type of loan you will use to purchase your first home. For example, if you have transferred into an area and will be transferred out after one or two years, you might have to pay a Recapture Tax upon selling the home, if you use the First Place Program.

 

Q: My lender warned me about Recapture Tax, and said that I would have to pay a penalty when I sold my home. Is this true? 

A: Recapture Tax applies in a limited number of cases when a home financed with these funds is sold. For Recapture Tax to apply, you must meet all of the following conditions:

 

1)    Sell the home within nine years;
 

2)    Make a net profit on your home, after adjusting the value of the home for any improvements or repairs you have made, and after deducting all costs of sale, including sales commission; and

 

3)    Your household income must be over the income limit in the year you sell the home.

Fear of paying Recapture Tax should not stop you from utilizing the First Place program. If you refinance your home at a later date to obtain a better interest rate, or to use the equity you have in your home, Recapture Tax is not triggered.

 

Q: Can I ever qualify for the program if I have owned a home before?

A: Yes. If it has been three years since you owned your home, you are considered a first-time buyer or if you are a qualified veteran. Also, if you have owned rental property or undeveloped land, you are still eligible for the program.  Also, MHDC has committed to constantly fund loans in federally-targeted areas that include specific census tracts in counties throughout the state.  Homebuyers do not have to be first time buyers if they purchase in target areas.  Consult your lender for specific locations of target areas.  Loans originated in Federally Targeted Census Tracts will receive the lowest First Place Loan rate that has been offered in the last 12 months.

 

Q: I have heard a lot about predatory lending. Should I be concerned about this when financing a home using MHDC funds? 

A: No. MHDC regulates and monitors all fees that are charged to the buyer. If a lender accidentally charges too much or charges a fee that is not allowed, MHDC will require a refund to the borrower of this amount.

 

Q: How much will it cost me to get into a home using First Place funds?

 

A: This amount will vary based on the type of loan application, i.e., FHA, VA., Fannie Mae Conventional or USDA-RD. MHDC does not have a minimum down payment or a minimum loan amount requirement.

 

Q: What is the difference between purchasing a house in a rural area or one in an urban area? 

A:  There are no differences between the purchase price limits in rural or urban areas. 

 

Q: What are federally Targeted Areas? 

A: Federally Targeted Areas are those Census Tracts where 70 percent of all households earn less than 80 percent of the statewide median income. These areas may be found in both urban and rural communities. MHDC has committed to constantly funding loans in federally-targeted areas that include specific census tracts in counties throughout the state.  Homebuyers do not have to be first time buyers if they purchase in target areas.  Consult your lender for specific locations of target areas.  Loans originated in Federally Targeted Census Tracts will receive the lowest First Place Loan rate that has been offered in the last 12 months.