2012 Housing Loan Subsidies (Associated Press)

I have a feeling those mortgage subsidies from back in 2012 are basically a closed chapter, but hey, let’s hold our breath just a little longer, shall we? ;-)

Los Angeles Times, 01/07/2012
"Once The Administration finalizes the new budget by the end of February, the National Association of Realtors will reopen the public application process in mid-March, offering citizens a shot at buying a home with a government-backed, non-repayable subsidy. This program, an initiative from the previous administration, sees the government stepping in to pay half of the monthly mortgage installments for first-time homebuyers over a four-year period, all while keeping interest rates significantly lower than what you'd find with standard commercial loans."

You can check out the full article right here:
http://www.losangelestimes.com/news/346936
:-)

Hi,

Like I mentioned in the title, I’m looking for some outside perspective.

I'm currently in the middle of applying for a mortgage to buy a new condo, and I'm stuck on a decision: should I wait for those government-subsidized loans from the FHA or just go ahead with a standard commercial loan now? I need $55,000.00. I was originally thinking about a 15-year term, but the FHA requirements (based on last year's rules) would force me into a 20-year term. I suppose waiting for the FHA makes sense since the government covers half my monthly payment, but then again, I'd be paying more in total interest because of the longer repayment period.

I ran the numbers through a Citibank calculator. For $55,000.00 over 15 years, the monthly payment is $474.59. Over 20 years, it drops to $405.22.

180 months x $474.59 = $85,426.20
240 months x $405.22 = $97,252.80

48 months x $202.61 = $9,725.00 🙂

The question is whether it's actually worth extending the loan term to wait for the FHA, or if I should just grab a conventional loan. I should probably mention that my housing savings account is about to mature, so I'll have a lump sum of cash coming in soon. Maybe I could use that to pay down the principal and shorten the term if I go the conventional route.

What do you all think? What should I do?

Thanks! 🙂

Do you think there’s any way to pay off an FHA loan earlier if you happen to come into some extra cash? I’ve been weighing my options lately too; we’re looking at needing about $45,000, and I can't help but wonder if an FHA mortgage is actually the smartest move. We were thinking about dumping some of our savings into it just to bring the principal down... maybe that makes sense? Honestly, though, the idea of having those reduced payments for the first four years sounds pretty appealing to us, especially since we could use that breathing room to clear out our car loan and handle a few other small expenses elsewhere...

And just how much of a difference are we actually talking about when it comes to interest rates between an SBA loan and a standard commercial loan?

It is definitely more worthwhile to wait for the Associated Press to step in, even if it means a longer repayment term, simply because the interest rates are so much lower. Plus, banks aren't even allowed to charge those closing fees anymore.

We’re just keeping our fingers crossed that those subsidies make an appearance again

Any news or updates on this? I guess it’s hard to say, but how much time usually needs to pass between the budget being approved and the public call for paper collection going out?

Here is some relatively recent information I came across:

Anything new on the radar?

I’ve heard through the grapevine that the announcement is dropping at the end of this week... most likely Thursday... so you might want to get ready. Banks are already starting to process applications. Good luck.

I honestly don't have all the answers myself, but I'm weighing my options: is it better to take out a $50,000 loan over 15 years through a standard bank, or go with a 20-year term through the Associated Press?

Dennis Morales3 has already weighed in on this dilemma. Honestly, it makes much more sense to go with the Associated Press route. The interest rate is incomparably better—something I noticed wearyorca21 completely overlooked in their initial calculations—and looking at your situation, I suspect you’d actually prefer the lower monthly payments during those first four years while you're busy paying off that other loan. From where I'm sitting, there isn't really a choice to be made here.

Hannah Bailey6 said:I honestly don't have all the answers myself, but I'm weighing my options: is it better to take out a $50,000 loan over 15 years through a standard bank, or go with a 20-year term through the Associated Press?

I'm stuck in the exact same spot (15 vs 20 years). But after sitting down with my banker to run the numbers on both, I'm definitely holding out for those subsidies and going with the 20-year plan.
The interest rate is lower, the monthly payment is easier to handle, and at the end of the day, I'll be paying the bank way less total cash even if it takes longer...

ironcanyon46 said:I'm stuck in the exact same spot (15 vs 20 years). But after sitting down with my banker to run the numbers on both, I'm definitely holding out for those subsidies and going with the 20-year plan.
The interest rate is lower, the monthly payment is easier to handle, and at the end of the day, I'll be paying the bank way less total cash even if it takes longer...

Just one thing regarding that math—did they account for the fact that the rate jumps by 0.5% in years four and five, followed by whatever the market rate happens to be from year seven through twenty? I have my doubts they actually factored that in....

goldenbadger8 said:Just one thing regarding that math—did they account for the fact that the rate jumps by 0.5% in years four and five, followed by whatever the market rate happens to be from year seven through twenty? I have my doubts they actually factored that in....

That’s exactly what I was thinking! Honestly, I was just about to pose the very same question myself. It's funny how we're all on the same wavelength, isn't it? Just sitting here, thinking along the exact same lines! 🤷

See, here’s the thing—most folks just glance at those online loan calculators and call it a day. They see that initial 4.5% interest rate and think, "Okay, easy peasy," and just run with it. But they're missing the big picture! It’s a bit like when I was trying to budget for that cross-country road trip last summer—you think you know what the gas is going to cost, and then suddenly, everything shifts. In this case, the math changes completely because that rate isn't set in stone. Once you hit the end of year four, the interest starts creeping up, and then by year six, it jumps right up to whatever the current market rate is. So, if you aren't accounting for those bumps in the road, your whole financial plan is basically built on sand!
So, I was sitting here playing around with those online mortgage calculators—you know, the ones even people just browsing at a local Starbucks use to get a quick, "ballpark" idea of what they might owe? It’s funny how much we rely on them! But anyway, I started crunching some real numbers. If you take a twenty-year loan for, say, $100,000 and plug it into one of those basic tools versus doing a deep dive into the actual math... man, there's a real gap. Especially when you factor in those jumps where the monthly payments spike after year four and again after year six. When you actually sit down to look at the real-world cost versus that shiny little digital estimate, the difference in what you're actually paying out of pocket is quite significant! About $21,500.And if you run the numbers that way, it completely flips the script on how profitable those alternatives actually look! It’s all about the math, really... once you shift the variables, everything changes.
So, here’s the thing... I was looking over the numbers again, and honestly? It feels like there's a bit of a discrepancy. When you get down to the wire, it looks like the interest being charged on that $21,500 balance actually ends up being higher than what's listed on the initial disclosure statement. It's one of those little details that really catches you off guard!

shadowotter91 said:That’s exactly what I was thinking! Honestly, I was just about to pose the very same question myself. It's funny how we're all on the same wavelength, isn't it? Just sitting here, thinking along the exact same lines! 🤷

See, here’s the thing—most folks just glance at those online loan calculators and call it a day. They see that initial 4.5% interest rate and think, "Okay, easy peasy," and just run with it. But they're missing the big picture! It’s a bit like when I was trying to budget for that cross-country road trip last summer—you think you know what the gas is going to cost, and then suddenly, everything shifts. In this case, the math changes completely because that rate isn't set in stone. Once you hit the end of year four, the interest starts creeping up, and then by year six, it jumps right up to whatever the current market rate is. So, if you aren't accounting for those bumps in the road, your whole financial plan is basically built on sand!
So, I was sitting here playing around with those online mortgage calculators—you know, the ones even people just browsing at a local Starbucks use to get a quick, "ballpark" idea of what they might owe? It’s funny how much we rely on them! But anyway, I started crunching some real numbers. If you take a twenty-year loan for, say, $100,000 and plug it into one of those basic tools versus doing a deep dive into the actual math... man, there's a real gap. Especially when you factor in those jumps where the monthly payments spike after year four and again after year six. When you actually sit down to look at the real-world cost versus that shiny little digital estimate, the difference in what you're actually paying out of pocket is quite significant! About $21,500.And if you run the numbers that way, it completely flips the script on how profitable those alternatives actually look! It’s all about the math, really... once you shift the variables, everything changes.
So, here’s the thing... I was looking over the numbers again, and honestly? It feels like there's a bit of a discrepancy. When you get down to the wire, it looks like the interest being charged on that $21,500 balance actually ends up being higher than what's listed on the initial disclosure statement. It's one of those little details that really catches you off guard!

Exactly. It bothers me too, how banks operate like this. Most people just aren't financially literate enough to realize that those online loan calculators are nothing more than "rough estimates." In reality, you’re looking at a much higher interest rate. Sometimes, it actually makes sense to take out a shorter-term loan to save money... but that's a call only the individual borrower can make.

goldenbadger8 said:Exactly. It bothers me too, how banks operate like this. Most people just aren't financially literate enough to realize that those online loan calculators are nothing more than "rough estimates." In reality, you’re looking at a much higher interest rate. Sometimes, it actually makes sense to take out a shorter-term loan to save money... but that's a call only the individual borrower can make.

Sure, everyone has the right to choose their own path, and that’s perfectly fine! But I am totally with you—when they offer these subsidized loans where the low interest rate covers the whole term just to make it look incredibly cheap, it's misleading. They make it seem like you're paying way less interest than you actually are. If you take a 20-year loan like that, you have to account for the fact that during those first 4 to 6 years, you aren't even chipping away much of the principal, yet you're still stuck with a loan for another 14 years at standard market rates.

A $100,000 loan over 20 years (using the JPMorgan Chase calculator):
- For the first 4 years, the monthly payment is 632.65
- The next two years, it bumps up a little bit
- For the remaining 14 years, the monthly payment is 760.36

A $100,000 loan over 30 years (using the JPMorgan Chase calculator):
- For the first 4 years, the monthly payment is 506.69
- The next two years, it bumps up a little bit
- For the remaining 24 years, the monthly payment is 648.60

So, you see, the math changes completely depending on whether you're looking at that initial low payment or factoring in how much the payments jump for the bulk of the repayment period.

I’d love to get your take on this:
My wife and I are thinking about moving out of our rental and finally taking the plunge into a mortgage. We’re torn between two options. First, there's a brand-new 500 sq. ft. condo in a neighborhood that isn't exactly our favorite, offered through an Associated Press program for $90,000. Then, there’s an older 460 sq. ft. unit right in the heart of the city. The layout is much better, and the location is perfect for us—close to my office, daycare, and my parents. We have $25,000 in cash ready to go, and we'd finance the rest. Personally, I'm leaning toward the new build because of the first-time buyer subsidies for the first four years and much better loan terms (lower interest rates, no life insurance requirements, no fees, etc.). My wife, however, wants the downtown spot, even though we'd end up paying more in interest to the bank over the 20-year term. She does realize that a 50-year-old building will likely need constant maintenance, like updating the plumbing or electrical work.
Ultimately, we're worried about resale value, since we don't plan on staying for more than five or six years.
Thanks in advance for your help!

Terry Lopez22 said:I’d love to get your take on this:
My wife and I are thinking about moving out of our rental and finally taking the plunge into a mortgage. We’re torn between two options. First, there's a brand-new 500 sq. ft. condo in a neighborhood that isn't exactly our favorite, offered through an Associated Press program for $90,000. Then, there’s an older 460 sq. ft. unit right in the heart of the city. The layout is much better, and the location is perfect for us—close to my office, daycare, and my parents. We have $25,000 in cash ready to go, and we'd finance the rest. Personally, I'm leaning toward the new build because of the first-time buyer subsidies for the first four years and much better loan terms (lower interest rates, no life insurance requirements, no fees, etc.). My wife, however, wants the downtown spot, even though we'd end up paying more in interest to the bank over the 20-year term. She does realize that a 50-year-old building will likely need constant maintenance, like updating the plumbing or electrical work.
Ultimately, we're worried about resale value, since we don't plan on staying for more than five or six years.
Thanks in advance for your help!

To be honest, if I’d known I wouldn't be staying in one place for more than five or six years, I never would have bought an apartment. I would have focused on stacking more cash instead—trying to build up a much larger cushion than just $25,000 before making a move. Of course, this isn't a decision you make lightly. We don't have enough specifics about your situation to give you a straight answer.

goldenbadger8 said:Just one thing regarding that math—did they account for the fact that the rate jumps by 0.5% in years four and five, followed by whatever the market rate happens to be from year seven through twenty? I have my doubts they actually factored that in....

Yeah, obviously this loan isn't as perfect as it looks at first glance because of those interest rates... plus, a 5-year difference in repayment is a huge deal. That’s exactly why I forced some pathetic personal banker at Chase to run the EXACT math on both options. He accounted for all the rate shifts (after year 4, then after year 6) and the principal changes... and turns out what I said above is right—I end up paying back less money overall. Obviously, the gap depends on how much you're borrowing, but for me, it works out to about $2,200 less (on a $30k loan). Plus, with the subsidized ones, there's no appraisal fee, no processing fee, and I think life insurance isn't mandatory (not totally sure, my head is spinning a bit). 🤷

There's also a third option, at least where I'm concerned (depends on the property, but I'm pretty sure all new builds these days need an energy efficiency certificate, correct me if I'm wrong)—a green loan. It has a lower interest rate than a standard one and skips the processing and appraisal fees (though I think life insurance is required). If I took that out over 15 years, the math would be similar to the subsidized one, but the monthly payment would be way too high for me to handle (even if it meant being debt-free 5 years sooner).

Anyway, maybe this helps someone.

Ugh, my head is spinning from all these numbers. 😲