The Finance Authority’s Low Interest First Mortgage Bond Loan and the City of New Orleans Soft Second Mortgage Program may be combined.
Eligible borrower(s) participating in the City of New Orleans Soft Second Program may use this first mortgage bond loan at the 3.25% interest rate, but will not be eligible for additional down payment or closing cost assistance beyond that provided by the City of New Orleans. Minimum required contribution for borrower(s) using the City of New Orleans Soft Second Program will be determined based upon the criteria of that program. Current guidelines state borrower(s) must contribute a minimum of 1% of the sale price or $1,500, whichever is less. These funds cannot be gifted to the borrower.
May I use this mortgage loan program with the City of New Orleans Soft Second Mortgage Program?
Yes, only if you are a first-time homebuyer. When applying for your loan at one of our participating lenders, please inform the mortgage originator that you would like to combine the programs: the Finance Authority’s Low Interest First Mortgage Bond Loan and the City of New Orleans Soft Second Mortgage Program.
DIRECT HOMEBUYER ASSISTANCE PROGRAM
Underwriting Criteria Summary Sheet
Soft Second Mortgage Terms
- 10-year forgivable, 0% interest rate, no payment. Repayment of full amount becomes due if buyer sells/moves before the end of year 5th. After the 5th year of occupancy, 25% of the mortgage is forgiven. 15% per year is forgiven each subsequent year until the grant is fully amortized in year 10.
- No pre-payment penalty, no assumptions.
- The maximum amount of the Soft Second Mortgage cannot exceed 50% of the purchase price of the home.
- Prospective home buyers may purchase homes anywhere in Orleans Parish.
- Households earning up to 80% of Area Median Income (AMI) may access up to $65,000 in Soft Second Mortgage financing no matter where they purchase within Orleans Parish.
- Households above 80% of AMI are provided with incentives for purchasing homes in Placed-Based Strategic Areas. (See www.nola.gov/softseconds for maps of Place Based Strategy Neighborhoods).
Determining the Soft Second Mortgage Loan Amount
- The Lender is required to “max out” affordability on the borrower’s first mortgage before determining the amount needed in a soft second loan.
- The “gross monthly income to house payment ratio” range (Housing Ratio) for a 1st mortgage product must be 30% to 33%.
- 1st mortgages under 30% or those exceeding 33% require rationale/compensating factors provided by the 1st mortgage lender in writing. This calculation is based on the gross monthly income of borrower(s)—NOT Household Income.
- If a homebuyer is given Gift Funds, those funds are limited to 10% of the purchase price.
- The total maximum grant a homebuyer will be eligible to receive as a Soft Second Mortgage will depend upon the homebuyer’s household income, family size and need. See Funding Charts which show funding maximums per household income and family size. www.nola.gov/softseconds
Property Eligibility Requirements
- One-two unit residential properties located in the City of New Orleans.
- Newly constructed homes or renovated homes.
- Homes must be in compliance with the City of New Orleans Housing Code, the International Residential Code and HUD’s Housing Quality Standards.
Homebuyer Eligibility Requirements and Obligations
- Employees of the City of New Orleans are not eligible to participate in this program.
- Road Home Option 2 or Option 3 households are not eligible to participate in this program..
- Option 1 recipients are eligible if they met all the terms of their Road Home Covenant, sold the property and not owned a home in the past 3 years.
- To qualify as a First-time Homebuyer, the prospective buyer must not have held an ownership interest in a residential property within the past 3 years. (Exceptions are made for displaced homemakers.)
- The household income may not exceed 120% of the area median income (AMI). (See income charts.)
- The homebuyer is required to occupy the home as his/her primary residence until the 10-year forgivable period has expired. Buyers who move or sell prior to expiration of the 10-year forgivable period will be obligated to repay all or a prorated portion of the soft second loan.
- All homebuyers will be required to graduate from a 12-hour Homebuyer Education course. A list of organizations that are certified by the Louisiana Homebuyer Training Collaborative, and approved for by the Soft Second Mortgage Program, to deliver the required training and certificate of completion can be found at www.nola.gov/softseconds
- Homebuyers purchasing duplex units will be required to complete Landlord Training Classes from one of the approved trainers mentioned above.
- Homebuyers must contribute a minimum of 1% of the sale price or $1,500 (whichever is less) and must have liquid assets in reserve equal to 2 months of proposed household expenses (see HUD 1003 form) after the payment of closing costs.
- Homebuyers who qualify to receive Purchase Assistance via a Soft Second Mortgage Loan must maintain Homeowner’s Insurance and Flood Insurance for the full-replacement value for the duration of the loan term. The City of New Orleans is to be listed as “Loss Payee” on both policies and evidence of the same will be required prior to closing.
Closing Costs Assistance
- Homebuyers earning up to 80% of AMI may also be eligible to receive up to $10,000 in Closing Cost Assistance.
- Homebuyers earning between 81% and 90% of AMI may also be eligible to receive up to $5,000 in Closing Cost Assistance.
- Homebuyers who are eligible for closing cost assistance and have liquid assets that exceed 12 times their proposed household payment (as noted on the HUD 1003 form) plus 1% of the sale price or $1,500 whichever is less, will be required to contribute excess funds toward closing costs.
First Mortgage Loan and Closing Fees Pricing Standards
- Lenders may charge up to (1) point origination and up to one (1) discount point plus other necessary fees considered reasonable and customary per FHA.
- Interest rate pricing on 1st mortgages loans may not be more that 2% above the current market rate published by Freddie Mac Weekly Mortgage Market Survey (WMMS), for single family fixed rate loan programs, effective for the one week period after publication of the WMMS. The applicable rate may be obtained from www.freddiemac.com
- Prospective buyers may opt to pay “points” to buy down the interest rate.
Closing cost fees may not exceed those as listed in the guidelines provided to approved Closing Agents by the City of New Orleans
ORLEANS PARISH AREA MEDIAN INCOME LIMITS PER FAMILY SIZE
****BUYERS PURCHASING HOMES IN PLACE-BASED STRATEGY NEIGHBORHOODS****
ORLEANS PARISH AREA MEDIAN INCOME LIMITS PER FAMILY SIZE
****BUYERS PURCHASING HOMES OUT OF PLACE-BASED STRATEGY NEIGHBORHOODS****