For Homebuyers
Frequently Asked
Questions by Homebuyers
The Connecticut Housing Finance Authority (CHFA) has
compiled the following FAQs to provide basic information to
prospective homebuyers interested in learning about CHFA
mortgage programs and the home buying process.
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How do I know that I am ready to buy a home?
If you are thinking about buying a home for the first time
but are not sure you are ready, CHFA encourages you to learn
as much as you can about what is involved in buying and
owning a home before you begin.
CHFA’s website has many
resources to assist you. Use the
homebuyer mortgage
calculator to discover whether you are financially prepared
to buy a home. Contact and meet with a CHFA-approved
Participating Lender to assess whether you pre-qualify for a
mortgage. Read the
First-time Homebuyers Guide to learn
about the process generally followed in finding and
purchasing a home. Review CHFA’s
homebuyer programs to
learn if you meet CHFA mortgage eligibility requirements.
After assessing your financial readiness to embark on
homeownership, you may discover that renting is the better
option for you at this time. This is also an opportunity to
learn the steps you may need to take to prepare yourself for
the responsibility of homeownership in the future.
Does CHFA require
me to attend homebuyer classes before I get a loan?
Yes,
some CHFA mortgage programs require borrowers to attend
either a three-hour or an eight-hour homebuyer course before
they close on their mortgage. (See,
CHFA Homebuyer
Programs.) The eight-hour course, however, is also open to
anyone interested in learning more about homeownership and
includes individual credit repair and debt management
counseling as well. CHFA offers these courses each month at
various locations throughout the state at no cost to
homebuyers. (See,
Homebuyer Education schedule of classes.)
Who is
eligible for a CHFA loan?
Generally, CHFA endeavors to
assist new homebuyers in purchasing their first home.
However, prior homeowners may qualify for a CHFA home loan
if they haven’t had an ownership interest in a home for at
last three years or if they propose to move to a home
located in a
targeted area of the state.
Many CHFA loan
programs limit eligibility by household income and home
sales prices. An eligible borrower’s before-tax household
income can not exceed CHFA’s established
income limits and
the sales price of the home can not exceed CHFA’s
sales
price limits.
CHFA does not finance the purchase of
commercial property. The home you buy must be your
year-round, primary residence. A CHFA-approved
Participating Lender
can advise you whether you qualify for a CHFA loan.
How do I apply for a CHFA loan?
Contact a CHFA-approved
Participating Lender. The lender will assess whether you
meet the requirements for a CHFA mortgage program and will
guide you through the application process.
What
property is eligible for a CHFA loan?
A dwelling
eligible for CHFA financing can be a single family
residence, a two to four family residence or a unit in an
approved condominium complex or planned unit development.
In the case of a two-to-four-family residence, at least one
of the units must be owner-occupied and the building must
have been used as a residence for at least five years.
A newly constructed two-family
home located in a
targeted area may also be eligible for
CHFA financing. CHFA city, town or statewide
sales price
limits will also apply to homes eligible for CHFA
mortgages.
Can I get help with my down payment and closing
costs?
If you qualify for a CHFA first mortgage and lack
sufficient funds to cover the down payment or closing costs,
you may apply for a second mortgage of at least $3000 or up
to 25% of the purchase price of your home under the
Downpayment Assistance Program.
What’s the most I can
earn to qualify for a CHFA mortgage?
Many CHFA mortgage
programs use statewide, city and town
income limits that establish ceilings on the total
household income of an eligible CHFA loan applicant.
However, there are no income limits if you are buying a home
in a
targeted area.
(See, CHFA’s
Homebuyer Programs for
more details.)
How is “household income” calculated?
CHFA
calculates “household income” by counting all sources of
before-tax income from adults 18 or older in the household
as long as they are not full-time students.
Is there a
sales price limit on a home I can purchase with a CHFA
mortgage?
Many CHFA mortgage programs use city or town
sales price limits that establish ceilings on the purchase
price of a home eligible for CHFA financing.
(See,
CHFA’s
Homebuyer Programs for more details.)
Are
CHFA mortgage programs only for first-time homebuyers?
No.
While CHFA mortgage programs are intended primarily to
benefit first-time homebuyers, previous homeowners that meet
the other eligibility guidelines may apply for a CHFA home
loan as long as they have not had an ownership interest in a
principal residence for the past three years. Previous
homebuyers who intend to purchase a home in a federally
targeted area of the state may also be eligible for a CHFA
loan.
Does CHFA inspect the home I purchase?
No, CHFA
does not inspect the home. However, most prudent homebuyers
arrange and pay for an independent inspection of the home
they intend to purchase in order to ensure its structural
and functional integrity and that their interests are
protected in the contract. (See,
First-Time Homebuyer Guide
for more information on home inspections.)
Though CHFA
does not require a home inspection, a property eligible for
a CHFA loan must be appraised, and if needed, repaired to
comply with relevant building codes. The lender will order
the appraisal and any subsequent repairs that may be
required must be completed before the closing of the loan,
except in the case where an escrow has been established to
pay for the repairs.
What’s the difference
between an appraisal and an inspection?
An appraisal is
intended to assess the value of a home based on the value of
comparable homes in the neighborhood to establish the value
of the collateral that will secure the mortgage loan if
approved. All lenders and mortgage insurers require an appraisal to
confirm that the home and the value of the home meet their
requirements.
While an appraisal usually involves a visual
inspection of the home, a home inspection involves a more
detailed and specific assessment of the condition of all
elements of a home, from structural elements to plumbing,
heating and air conditioning. A home inspection is intended
to ensure that a homebuyer is thoroughly informed as to the
condition of the home prior to purchase. (See,
First-Time
Homebuyers Guide for more information on home inspections.)
Do all CHFA loans have to be insured?
Yes, under most CHFA loan programs federal mortgage
insurance is required. The
mortgage must be insured either through the
Federal Housing Administration (FHA), the
Veterans Administration (VA), or
the
USDA Rural Development (RD).
However, no mortgage
insurance is required when a borrower makes a down payment
of at least 20% on a newly constructed home in a federally
targeted area.
In special circumstances private mortgage
insurance is permitted. The borrower can qualify for
private mortgage insurance (PMI) when he puts 15% down on a
home in a
targeted area and the mortgage exceeds the
FHA loan limits but is within the CHFA
sales price limits for
that area. There are also specific loan
programs geared to help with upfront home purchase costs
that allow PMI.
(Your CHFA-approved
Participating Lender
can discuss with you whether you qualify for a limited
exemption to the federal insurance requirement.)
What
is the minimum down payment required for a CHFA loan?
The
minimum down payment of an
FHA-insured mortgage is 3.5% of
the purchase price of the home. No down payment is required
for a
VA or
RD guaranteed mortgage.
Can I buy a condominium with a CHFA mortgage?
Condominium units are considered eligible dwellings for the
purpose of most CHFA mortgage programs. However, a
condominium complex must first be approved by CHFA and be
put on the
condominium list. Individual units within the
approved complexes may qualify for CHFA mortgages if other
eligibility requirements are met.
Since CHFA limits its
ownership interest in condominium complexes, prospective
borrowers interested in purchasing a condominium unit are
encouraged to contact their CHFA-approved
Participating Lender to determine whether any units remain available for
CHFA financing. A lender can also submit a request to CHFA
to add a condominium complex to the approved condominium
list on a borrower’s behalf.
What is the Recapture Tax
and how does it work?
In rare circumstances, CHFA mortgage
loans may be subject to the Federal
Recapture Tax at the time the property is sold. The tax
might apply if a borrower sells his or her home within nine
years of the purchase date, makes a profit on the sale and
has an income that exceeds federal recapture tax limits at
the time of the sale.
Are co-signers allowed if I
can’t qualify for a CHFA loan on my own?
No, co-signers are
not allowed. CHFA loans are only available to borrowers who
purchase a home they will live in year-round as their
primary residence.
Is there a minimum credit score to
qualify for a CHFA home loan?
No. CHFA does not have a
minimum credit score. Applications that require mortgage
insurance will be subject to the qualifying guidelines of
the insurer which may include a minimum credit score. A loan
applicant should discuss this with a CHFA-approved
Participating Lender who can provide additional information
regarding any credit score requirement for the loan
application.
What are CHFA credit guidelines for
qualifying for a loan?
CHFA lenders follow the guidelines of
the mortgage insurer of the loan to determine whether a loan
applicant is credit-worthy. A lender will follow
Fannie Mae
guidelines when a borrower has 20% or more towards a down
payment and mortgage insurance is not required.
CHFA loan
applications are reviewed on a case-by-case basis. An
applicant that has filed for bankruptcy in the past may
still qualify for a CHFA loan so long as two years have
elapsed since his or her debts were discharged.
What are
CHFA employment guidelines for qualifying for a loan?
CHFA
lenders follow the guidelines of the mortgage insurer of the
loan with regard to the employment history of a loan
applicant. Generally, an eligible borrower will have at
least two years of continuous full-time employment in the
same job or occupation. However, lenders review CHFA loan
applications on a case-by-case basis and consider many
factors when assessing a prospective borrower’s
credit-worthiness.