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Good News For First-Time Home Buyers Who Need Help With A Down Payment Or Closing Costs.

By Nia Coombs

There's no such thing as a free lunch, it's been said. While I'd agree with this statement in general, occasionally there are exceptions to the rule. If you are a first time homebuyer and would like to receive up to $7,500 in "free money" toward your down payment or closing costs, keep on reading, as I have good news for you.

In 1995 The Federal Home Loan Bank of New York (FHLBNY) launched the First Home Club-a program that helps qualified first-time homebuyers achieve the dream of owning their first home. The program is administered through member banks of FHLBNY, such as Capital Bank of New Jersey. The program will provide a 4:1 match to your savings, up to $7,500. For instance, if you save $1,000 in a dedicated savings account, you will receive a $4,000 grant. To receive the maximum match of $7,500, you'd only have to save $1,875. Not bad, right? So here is what you need to enroll at Capital Bank:

1. You must be a first-time homebuyer. The program defines a first-time homebuyer as an individual (or their spouse, if married) who has not owned a home during the three-year period prior to the purchase of the new home. What if you currently own a vacant lot, might you still qualify for the program? The answer is yes. A household that owns vacant land, on which it subsequently builds a home, can be eligible to receive assistance toward the permanent financing.

2. Your income must be 80 percent or less of the area median income, for your current place of residence. Currently, for example, if you live in Cumberland, Gloucester, Atlantic or Cape May County, your household's income must not exceed $71,120 for one- to two-person households or $81,788 for three-or-more-person households.

3. You must not be a fully matriculated student within six months of enrollment.

4. You must open a dedicated savings account with Capital Bank and agree to save systematically on a monthly basis for a period of 10-24 months. At the end of this savings period, the program will match your savings. For every $1 you save, you will receive $4 in matched funds from FHLBNY, up to $7,500. The grant will be made available to you at closing, and can be applied toward your down payment or closing costs.

5. The household will have to complete a six-hour minimum homebuyer counseling program. Capital Bank will provide a list of local counseling agencies. The program recently began to allow web-based counseling.

6. The household has to qualify and obtain mortgage financing from Capital Bank.

7. And finally, the household must purchase an eligible property, namely a 1-4 family home, a condominium, a cooperative, or a manufactured home permanently affixed to a foundation.

It's worth noting that the program is available only to the residents of the FHLBNY's district area, which covers New Jersey, New York, Puerto Rico and the U.S. Virgin Islands. At the time of enrollment, the household will execute the First Home Club Enrollment Terms & Conditions Agreement.

So what happens if, after successfully going through the program and receiving the grant, you decide to sell your property or refinance your mortgage? Would you have to pay the grant back, or would it be forgiven? At the time of closing, the program requires the household to sign a five-year second mortgage in the amount of the grant. Twenty percent of the grant will be forgiven for each year that has passed after closing. So, after five years, the entire grant will be forgiven.

While the First Home Club program has been around for a long time, it is still not widely known to general public.

To learn more, contact Nia Coombs at 856-457-4868 or ncoombs@capitalbanknj.com.

 

Nia Coombs is a Commercial Loan Officer with Capital Bank of New Jersey, the $320 million Vineland-based community bank. She oversees Capital Bank's First Time Home Buyer Program and SBA Lending.