Sponsored Partner Content by VHDA

By Mark Foust, Contributing Writer, VHDA

After scrimping and saving for years, a young couple is finally ready to purchase their first home. Like many first-time buyers, they’re far from wealthy but their credit is good and they’ve been pre-qualified for a mortgage. Their excitement is contagious, and their REALTOR® is again reminded of why she chose to make this work her career. Together they look at several properties, and then they find it: the perfect first home. Small, but in a favorable location, with good curb appeal and an attractive floor plan.

There’s just one problem.

When they crunch the numbers, there’s not enough for a down payment, or the monthly payment falls just beyond reach. The couple eventually finds a less expensive house, but it doesn’t quite measure up to the one they really wanted.

Situations such as this were the basis for creation of the VHDA Plus Second Mortgage. It’s a new product designed to make homebuying more affordable for first-time buyers — and help REALTORS® close more of their transactions.

It’s a 30-year fixed-rate loan that covers the entire down payment, when coupled with a VHDA first mortgage. There’s no prepayment penalty, and the second mortgage has the same interest rate as the first mortgage. This is a distinct advantage over other second mortgage products, which often carry interest rates three or more percentage points higher than a first mortgage. Other products may also have shorter terms (15 or 20 years instead of 30), balloon payments, or both.

Borrowers with a credit score of 680 or higher can fold part of their closing costs into a VHDA Plus Second Mortgage, and every borrower receiving this loan qualifies for a VHDA Mortgage Credit Certificate. An MCC allows borrowers to deduct 20 percent of their annual mortgage interest as a dollar-for-dollar credit against their federal income tax liability. The remaining 80 percent can be taken as a traditional tax deduction. Even with the tax law changes taking effect in 2018, first-time buyers with an MCC can still benefit, whether they itemize or take the standard deduction.

The VHDA Plus Second Mortgage must be paired with one of three VHDA first mortgages: an FHA loan or one of two Fannie Mae conventional loans.

The big picture is clear. The VHDA Plus Second Mortgage can make homebuying more affordable for first-time buyers. With less cash needed up front, it frees up money they may need later for furniture, improvements and more. It lets them make more competitive offers, especially when they’re competing against buyers who can make a five percent down payment, and it may enable them to finance their closing costs instead of asking for assistance from the seller. All of which helps first-time buyers land the home they really want — and helps REALTORS® close more deals.

REALTORS® may contact any VHDA-approved lender for information about this or other VHDA products, such as down payment grants and free homebuyer education. VHDA maintains a database of approved lenders at vhda.com/FindALender.