CHFA Changes

Colorado Housing and Finance Authority, commonly known as CHFA, has made a few notable changes we wanted to make sure our readers were aware of.

1. FirstStep & FirstStep Plus
2. No Gifts Allowed for Minimum Contribution
3. No Cosigners Allowed
4. Non-Traditional Credit Must Be Added to Credit Report
5. Risk Score Card
6. No Grossing Up Income

1.  FirstStep & FirstStep Plus

Two new (well a modification from an older CHFA program called MRB First Step) programs to be available starting February 1, 2010.  This program will provide first time buyers, and qualified veterans, with a low interest rate fixed mortgage or down payment assistance in the form of a second mortgage.  This product is funded through the sale of non-taxable mortgage revenue bonds.  What this means to buyers is that typically the rates for these mortgage options are either below market rates or very competitive considering a second mortgage option for down payment assistance is available.

Rates have not yet been released but as they are we will be sure to communicate what they look like.  For additional details you can check out the CHFA website at www.chfainfo.com.

2.  No Gifts Allowed for Minimum Contribution

Effective February 1, 2010 CHFA will no longer allow the borrower’s minimum contribution of $1,000 to come from gift funds.  This will be verified through a 2 month history of bank statements to show the funds were theirs and did not come from other sources.

3.  No Cosigners Allowed

This is not a huge change to CHFA rules.  Up until now CHFA allowed cosigners but the borrower had to qualify independently without the help of the cosigner…what is the point of a cosigner then??  Well, to avoid further confusion CHFA has now eliminated cosigners from being allowed on CHFA mortgages.

4.  Non-Traditional Credit Must Be Added to Credit Report

CHFA is now going to require that any non-traditional credit (credit that is not being reported to a credit bureau – i.e. cell phone, auto insurance, utilities, etc) being used for qualifying must be verified by a credit reporting agency and added to the credit report.  This is something that your mortgage lender will assist with and not something the buyers will do themselves.

5.  Risk Score Card

CHFA has always been one of the most aggressive lenders when it comes to assisting borrowers who have had credit challenges in the past.  CHFA has done well with this approach through homebuyer education requirements prior to closing.  In fact, their foreclosure rate is a fraction of the national average.  To continue to keep their default rate low, CHFA is now requiring lenders to complete a risk score card for all borrowers with a credit score between 580 and 619.  In order to qualify there must be some compensating factors to show that you have the ability to make the payments despite some credit mishaps in the past.

6.  No Grossing Up Income

A common approach for lenders is to gross up income that is not taxed (social security income, child support, etc) since taxable income is used at gross amounts rather than net amounts.  CHFA is no longer going to allow this when qualifying for their mortgage loan options.  Very rarely will this impact someone’s qualifications but something lenders need to know when assisting their customers in qualifying for a mortgage.

Lending a Hand

Scott Wynn

The Wynn Team