Montana Board of Housing Loans
Q: Are nonoccupant co-borrowers allowed in MBOH programs?
A: No. All parties who appear on title to the property must meet all qualifying criteria of the MBOH loan programs, which includes occupancy, prior ownership limitations and income limits.
Q: Will MBOH accept loans with co-signers?
A: For MBOH programs, a co-signer must not be an occupant and will not be on the title to the residence. The co-signer will be allowed for credit purposes only, meaning the occupying borrower has the income to qualify per the insurer’s debt-to-income requirements, but does not have adequate credit to qualify. Non-occupying co-borrowers are not permitted. Co-signers are not allowed in the Veterans' Home Loan Program.
Q: Can a borrower use multiple down-payment programs to purchase a home?
A: Yes, provided they meet the criteria established by each program and they contribute the minimum amount of funds required to the transaction. A Bond Advantage Down Payment Assistance loan and a MBOH Plus 0% Deferred DPA loan must be a second-position lien on the property. Additional requirements will apply if other DPA programs include amortizing loans. For instance, payments for all amortizing loans must be included in calculations while underwriting the first mortgage, to prevent a homeowner from being placed in an unsustainable mortgage.
Q: Why can MBOH provide the 3.5% down payment on an FHA loan, when other organizations can’t?
A: The MBOH is a designated "Instrumentality of Government," and as such, is authorized to provide this assistance statewide.Some other organizations also have this same designation, but only within their governmental jurisdiction. Loan originators work closely with local organizations to provide prospective home buyers with all available financing options.
Q: Will lenders provide interim-service on MBOH loans they have originated, pending purchase of the loan by MBOH?
A: No. If MBOH is selected by the lender to be the servicer of any program loans they have originated the loans, the servicing will transfer to MBOH at closing and the first payment and all subsequent payments will be posted by the MBOH servicing department, regardless of when the loan is actually purchased. The loan will then be purchased at the original loan amount.
Q: Are there limits to the amount of land that can be purchased with MBOH funds?
A: The Montana Small Tract Financing Act is followed and limits land purchases to 40 acres. MBOH also has limits. If the loan is for new construction and on private sewer and septic systems, the value of the land cannot be more than 35% of the total appraised value. Also, if the land purchased can be subdivided or has an extra lot not encumbered by the house or garage being purchased, these programs cannot be used. These situations can be reviewed on a case-by-case basis.
Q: Can MBOH loans be assumed?
A: Yes. The new buyer must meet the same MBOH requirements that the current owner did, such as income levels and being a first-time homebuyer, as well as the requirements of the mortgage insurer or guarantee (FHA,VA, RD, HUD 184).
Q: How do borrowers apply for MBOH funding?
A: Borrowers must work with a approved MBOH participating lender to apply for an MBOH loan. Lenders conduct the credit analysis and qualify the borrower and property for MBOH programs. The lender closes the loan and MBOH purchases the loan from the lender once all required documents are received. MBOH or a local lender services the loan.
Q: If the borrower has to move due to hardship, such as an employment transfer, are there any options available regarding their MBOH-funded home?
A: Yes, the borrower can apply for an “Occupancy Waiver.” This allows the borrower to have the home vacant while trying to sell or rent it for a six-month period. At the end of six months, a new waiver must be requested. If the home has been rented for over 12 months, there can be tax consequences. Military occupancy waivers are given for 12-month periods at a time.
Q: What are MBOH rates and will they change?
A: Rates follow the market and depend on the rates at which we can sell our tax exempt bonds. Current rates can be found here. Rates are set on a fixed, 30-year term and will not change during the life of your loan. There is no prepayment penalty.
Q: Whose income gets counted toward the established income limits?
A: Typically, anyone 18 years of age and older living in the household will have their income counted. This includes wages, overtime, bonuses, commissions and raises. Also included in the income calculations will be any Social Security income, pension income, VA benefits or child support income received. Contact a staff member with any specific concerns or questions regarding income calculations.
Q: Are condos eligible in MBOH programs?
A: Yes. Condominiums are eligible for MBOH programs, but not in the Veterans' Home Loan Program. The condo project must be an FHA-approved project and no more than 25% of the condos in a project can be financed by MBOH. Additional insurance requirements may apply.
Q: Will MBOH purchase loans for manufactured homes, including single- wide trailers?
A: Yes, manufactured homes are eligible in MBOH programs; however, only homes that are 1976 or newer, are de-titled and are on a permanent foundation. The foundation must meet FHA standards and be designed by a qualified architect or engineer for that specific home and site , not by a contractor. Beyond these requirements, MBOH follows the requirements of the provider of mortgage insurance or guarantee. Single-wide trailers are not allowed in the Veteran's Home Loan Program.
Q: Can lenders use MBOH Down Payment Assistance loans with a purchase-money mortgage being sold into other markets?
A: No. MBOH DPA loans can only be used in connection with purchase-money mortgages sold to MBOH under the Regular Bond Program.
Q: Can I use a Mortgage Credit Certificate along with a loan funded by MBOH?
A: No. An MCC can be attached to any loan statewide except for a loan financed through an MBOH program – otherwise the IRS sees this as "double dipping" into tax exempt sponsored program funding. An MCC can be issued with a Veterans' Home Loan Program loan.
Q: Are all borrowers required to take homebuyer education?
A: Yes. Each borrower in the MBOH programs who does not qualify for an exception is required to take an approved homebuyer education class. Approved classes can be located at the NeighborWorks Montana website.
Veterans Home Loan Program
Q: Are co-signers allowed in the VHLP?
A: No. Co-signers do not meet the definition of "eligible applicant" in the VHLP.
Q: Are loans on manufactured homes allowed under the VHLP?
A: Yes. Loans on manufactured homes that meet the following criteria are eligible in the VHLP: doublewide or larger; 1976 or newer; are de-titled and are on a permanent foundation. The foundation must meet FHA standards, even if it is not an FHA loan, and be designed by a qualified architect or engineer for that specific home and site, not by a contractor. Beyond these requirements, MBOH follows the requirements of the provider of mortgage insurance or guarantee.
Q: Can the VHLP be used to finance a condominium?
A: No. The Montana VHLP is designed to purchase single family residences that have full ownership of the land they sit on.
Q: Can the VHLP be used to refinance undeveloped land when the land is part of the take-out financing on construction of a new home?
Yes. the VHLP can be used to refinance undeveloped land. Refinancing of land as part of construction of a new home is permissible.
Q: Can a loan under the VHLP use a Mortgage Credit Certificate?
A: Yes. VHLP loans are funded with Coal Tax dollars, not bond funds.Only loans purchased with tax-exempt bond funds are restricted from having MCCs.
Q: Can the borrower utilize gift funds for their $2,500 required investment in the property in the VHLP?
A: Gift funds for down payment and/or closing cost assistance are allowed; however, no portion of gift funds count toward the borrower’s $2,500 required investment.
Q: Do grant funds or Down Payment Assistance funds count toward the borrower's $2,500 required investment in the VHLP?
A: Grant or DPA funds can be used with the VHLP, however, no portion of the grant or DPA funds count toward the borrower's $2,500 required investment.
Q: Do borrowers have to use a VA loan guarantee for the VHLP?
A: National Guardsmen and reservists may not qualify for a VA loan guarantee. Any borrower in the VHLP may use the FHA, VA, or HUD 184 programs for the mortgage insurance on a loan. There is no requirement that the borrower use a guarantee from the VA.
Q: Do you have to be a resident of Montana to use the VHLP?
A: Yes. Documentation of Montana residency is required in order to use the VHLP. Residency for initial qualification for the program requires a copy of a filed Montana tax return showing full year of residence in Montana. If the borrower doesn't have a Montana tax return showing a full year of residence in Montana, additional documentation of residency will be required, such as a copy of a current Montana driver’s license and/or a copy of a current motor vehicle registration.
Q: Does a home inspection count as part of the minimum $2,500 the borrower must invest into the transaction in the VHLP?
A: Yes. Any fees associated with the purchase transaction that are paid for by the borrower from their own funds counts as part of the minimum $2,500 borrower investment.
Q: Our lending institution participates in Mortgage Electronic Registration Systems. Is that allowable in the VHLP?
A: Yes. The VHLP does allow the use of MERS. The alternative is a recorded assignment with the county clerk and recorder's office.
Mortgage Credit Certificates
Q: What is an MCC?
A: An MCC allows the homebuyer to claim a tax credit for some portion of the mortgage interest paid per year, not to exceed $2,000. It is a dollar-for-dollar reduction against their federal tax liability. This credit reduces the federal income taxes of the buyer, resulting in an increase in the buyer’s net earnings. Increased buyer income results in increased buyer capacity to qualify for the mortgage loan. The MCC has the potential of saving the MCC holder thousands of dollars over the life of the loan.
Q: How does a homebuyer apply for an MCC?
A: The homebuyer may obtain an MCC through any of the approved lenders. The homebuyer should apply for the MCC at the same time the buyer makes a formal application for a mortgage loan. After an application is filed, the lender will arrange with MBOH to have the MCC issued. There is a nonrefundable fee to apply for an MCC.
Q: How much is the MCC fee?
A: The MCC fee is $750.00 from the buyer. The lender takes $250.00 and $500.00 is sent to MBOH for processing.
Q: How do you determine the tax credit the homebuyer can receive?
A: The mortgage credit can be calculated by mulitplying the loan amount by the loan interest rate and multiplying that answer by the percentage of credit allowed. For example, on a $150,000 mortgage with an interest rate of 6%, a borrower will pay $9,000 in interest the first year. The MCC would allow that borrower to take a federal dollar-for-dollar income tax credit of $1,800, which is 20% of $9,000. The maximum credit is $2,000.
Q: How long does an MCC last?
A: The MCC will remain in effect for the life of your mortgage loan, as long as the home remains your principal residence and you keep the same loan. The amount of your annual mortgage credit will be calculated on the basis of 20% of the total interest paid on your mortgage loan for that year, with a maximum of $2,000. As the amount of interest you pay on your first mortgage declines, so does the credit.
Q: I was issued an MCC by the MBOH; can I refinance my mortgage loan?
A: Yes, but to use the MCC certificate after refinancing, a borrower must apply for re-issuance of the certificate.
Q: What happens if a homebuyer cannot use the entire amount of the MCC credit for the year in which it applies?
A: If the amount of the MCC credit exceeds the MCC holder’s tax liability, reduced by any other personal credits for the tax year, the unused portion of the credit can be carried forward to the next three tax years or until used, whichever comes first. The homebuyer will have to keep track of the unused credit each year. The current year credit is applied first and then the oldest amount of unused credit applied next.
Q: What loan types can be used with the MCC?
A: The program does not place restrictions on the mortgage financing with regard to type, term or rate. However, only first mortgages qualify. In addition, mortgages funded with a qualified mortgage bond are not eligible. This includes any bond loan funded by MBOH.
Q: When do MCC documents need to be signed?
A: MCC documents are signed before or at closing of the first mortgage purchase loan.
Q: Who is eligible to receive an MCC?
A: The MCC Program is open to borrowers who:
- meet income and home purchase requirements;
- have not owned a home as primary residence in the past three years;
- meet the qualifying requirements of the mortgage loan;
- will use the home as their primary residence.
Q: In a request to re-issue an MCC after refinancing, does the lender doing the refinancing have to be a participating lender?
A: No, the MCC holder is requesting the re-issue of their MCC, not a lender. The MCC holder will have to be sure to get a detailed payoff statement for their request.