A Boon For First-Time Homebuyers in Connecticut

The Connecticut Housing Finance Authority, more commonly known by its initials CHFA, has been providing low interest financing for first time homebuyers since 1969. Created (in part) by the Connecticut state legislature to help alleviate the shortage of affordable housing for low- and moderate-income families and persons in the state of Connecticut, CHFA has partnered with over 100 participating lenders within the state to provide loans to qualified borrowers.

Though CHFA has many facets, including the financing, maintenance and management of rental housing, support of special needs housing, counseling for prospective and existing homeowners alike, and a wide variety of investment options, the main thrust here is to focus on the program for which the authority is best known among the citizenry of Connecticut, which is the mortgages provided for predominantly first-time home buyers.

The best-known product is the Homebuyer Mortgage Program, which is a 30-year fixed rate loan, with an interest rate that is typically lower than any comparable loan programs. These mortgages are originated statewide by the participating lenders.

Eligible borrowers are first time homebuyers with low or moderate incomes who are buying moderately-priced homes within pre-specified price limits, or persons who have not had an ownership interest in a home for the previous 3 years. If the property being purchased is in a "targeted area" (generally urban locations), a prior homeowner may qualify for a mortgage.

There are also income limitations that apply, depending on location, with one exception: in targeted areas, households which are over the maximum income limit may still apply for CHFA financing despite the stated limits.

Prospective homebuyers may purchase - for owner occupancy - an existing single family home, an existing 2-4 unit dwelling, a newly constructed single family home or a newly-constructed two-family home in a targeted area. Sales price limits are established by county, though there are exceptions for some individual towns within those counties.
Homebuyers are also able to purchase condominiums and qualified mobile homes with CHFA financing.

In addition to the first mortgage financing, eligible buyers who are unable to provide their own down payment and/or closing cost funds may qualify for the Downpayment Assistance Program (DAP). This is a second mortgage loan, to be secured by the home being purchased. The interest rate charged is the same as the regular rate for the Homebuyer program, though if that rate exceeds 6%, the DAP rate would be capped at 6%.

Currently, as of May 6, 2010, the interest rate for a 30-year fixed rate loan is 4.50%. CHFA allows its lender partners to charge 1 point (origination fee) on these loans. As this is being written, local lenders are offering 30-year fixed rate loans (with 1 point) at rates ranging from 4.625% to 5.25% for their best borrowers (credit score of 700 or above).

With most loan products (almost all), credit score requirements have changed drastically, and scores below 700 will generally result in additional costs. At this time, loans originated through CHFA allow borrowers with scores as low as 620 to take advantage of their stellar rates.

The CHFA mortgage is the mortgage of choice for first-time homebuyers. Finding out about how one can qualify is easily done by visiting http://www.chfa.org. There, one can find all of the participating lenders and learn of all the programs offered by CHFA.