A few weeks ago, the Missouri Housing Development Commission (MHDC) made a fairly large announcement outlining changes that affect their two primary loan programs, the First Place Program and Next Step.
Starting October 1, 2017, the money provided through the program will now be in the form of a forgivable second mortgage. The terms of the second mortgage will be zero interest no payment and it will be a 10-year forgivable loan that will start to diminish after year five and be completely forgiven after year 10. Basically, what this means to potential homeowners who are looking to utilize this program is if they sell or refinance within the first 60 months, 100% of the funds advanced by MHDC would need to be repaid. Starting in month 61 and every month thereafter through month 120, 1/60th of the funds would amortize off and not be subject to repayment.
For example, let’s say you received $5,000 from MHDC to be used for your home purchase. Should you pay off your loan within the first five years (i.e. sell, refinance, etc.), then the entire $5,000 would be subject to repayment. Starting in month 61, $83.33 of the original $5,000 would be forgiven so that by month 120 the entire amount is no longer subject to be paid back.
Prior to this change, the First Place Program was a grant and not a forgivable mortgage. The Next Step product was previously already a forgivable second mortgage, but the terms of recapture started in month one and ended by month 60. Obviously, this change essentially doubles the length of time a potential benefactor of the program has exposure to potentially paying back the funds.
MHDC is a great program for those that struggle to secure funds for either the down payment and/or closing costs. Since 1969, MHDC has helped and continues to assist thousands of Missourians obtain the dream of homeownership. With that being said, if there is one constant within this industry, it’s change. For additional questions about this program, please consult an approved MHDC mortgage originator.