DROdio Real Estate

Mortgage payments are made in arrears. Here's what that means:

Let's say that Jane Doe buys a house and she settles on June 15th. Her first mortgage payment won't be until August 1st. Here's why:

Jane will be making a mortgage payment on August 1st to cover the time she was in the house from July 1st to July 31st. This is known as paying in "arrears", where you're paying for time you've already spent in the property.

But then the period from June 15th to June 30th also has to be covered. The way that's handled is that it's charged to the borrower at settlement, on June 15th. So at settlement, the buyer pays for the first 15 days of home ownership, and then on August 1st the buyer pays for the month of July, and it continues from there.

If you're a renter, this might be very strange to you, because rent is paid at the beginning of the month for the upcoming month. But mortgage is paid at the end of the month for the time that just passed.

Because of the way this system works, it's cheaper from a cash-flow perspective to settle at the end of the month than it is to settle at the beginning of the month, because if you were to settle, say on June 10th, you'd have to pay for the period of June 10th to June 30th at the settlement table, with your first mortgage payment due on August 1st, and if you were to settle on June 25th, you'd pay for the period of June 25th to June 30th at the settlement table, with the first mortgage payment still being due on August 1st.

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We really, really encourage our buyer clients to drive by the properties they want to see on their own before we show them. While it may seem counter-intuitive at first, we've found it's absolutely the best way to buy a home. Here's why:

1. We've found that 75% of the time, you can exclude or include a property for further consideration based on a drive-by. You can see where it's situated on the lot (too close to the road, etc), you can see who the neighbors are (any cars in the front lawn?!), you can get a feel for the neighborhood, and what shopping, etc. is nearby, what traffic is like, how close or far it is from your work, etc. We've made this process extremely easy. You can use our search toolsto find homes on the MLS and then borrow our free GPS machine loaner to easily navigate your way to the homes. Driving by on your own first allows you to pick out the homes that you really want to see the insides of, which allows us to be much more efficient when we go see homes, because you'll be seeing the ones you really want to see, instead of a bunch of homes that don't meet your criteria.
2. We enable you with access to tools & information without asking for a commitment from you. Once we start showing you homes and spending time with you, we ask you to sign our buyer representation agreement so we know we'll get paid a commission (it's paid by the seller, not you!) when you buy a home. We think it's a fair trade: You can get educated & informed on our dime, and when you're ready to get serious and you want our time & expertise, we know we'll get compensated by the seller for spending time with you. So, by driving yourself around first, before we meet with you, you can be sure you want to engage our services when you see homes you like. To learn more about how Realtors get paid, click here.

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Here is a good summary comparing & contrasting some of the home buying assistance programs in MD, DC and VA.

Virginia Programs

Virginia has a statewide program from the "Virginia Housing Development Authority". You can read about some of the VHDA loan types here. You may also be interested in the HOMEownership Down Payment Assistance Program

Here are some Arlington County programs and here is an Arlington First Time Buyer's pacekt.

Here are some Loudoun County programs.

Here are some Fairfax County programs. (Note that the 'home stride' program is no longer available in Fairfax county)

Here are some Prince William County programs.

The Homeownership Assistance Program (HAP)
Designed for low-income first time homebuyers. Provides a deferred loan up
to $35,000 for down payment and closing costs. Qualifications - Income,
interest rate, and property eligibility. Requirements - applicant must
live or work in Prince William County for at least 6 months, attend
financial counseling and homeownership training.

HomeStretch Program: Prince William County will be participating in the (VHDA)'s new Home Stretch Program. Home Stretch is a special housing finance program aimed at assisting those who work in the County to purchase their first home or to relocate to the County. (This program does not apply to persons working in the cities of Manassas or Manassas Park.) Prince William County has
received an allocation of this special second trust fund program which will be used to fund closing costs and down payments to enhance the affordability of the home purchase. The Home Stretch Program provides a 30 year second mortgage up to $20,000 with no interest or payments due in the first 3 years. The elimination of the interest and payments during the first 3 years increases affordability for the borrower. Loan payments begin in fourth year at an interest rate of 5%

Manassas Housing Trust Fund, Inc. Homeownership Program Housing Program designed for low to moderate income first time homebuyers, who wish to purchase in the City of Manassas. The MHTF provides a deferred loan in the form of second deed of trust up to $ 25,000.00 for downpayment and closing costs assistance. There are educational classes required to include budgeting, homeownership and avoiding financial Trouble. The client must be income eligible, have good credit, good job stability and property
must meet eligibility requirements.

Maryland Programs

As a first time homebuyer in MD, you qualify for several credits (this is current as of 2007 for Montgomery County):

1) The state transfer tax is lowered from 0.5% to 0.25%, and is paid by the seller

2) The recordation & local transfer taxes are paid by the seller *unless* there is an agreement (which there usually is) that they will be split equally among buyer & seller.

See the attached example of the page in the contract which highlights these items, along with a copy of a HUD-1 on the 2nd page showing the actual taxes being charged.

Also, we make sure the buyer gets what's called a "First time MD homebuyer affidavit" with their closing documents which they can then use to get the homestead deduction (reduced property taxes because the property is a primary residence).

Both VA & DC have similar programs for first time homebuyers. (In fact, DC's programs are great, including a "no interest" loan for low income buyers. You can read more about the DC program here.)

Washington, D.C. Programs

Washington, DC has a number of credit, closing assistance, and grant programs for current DC residents, and for first time home buyers in DC. Here's a summary:

HPAP - Closing assistance program, Not a grant: http://www.gwul.org/published/programs_and_divisions/hpap.html

DC Tax Abatement Program: http://www.federaltitle.com/homebuyers_dcabatement.aspx

The DC Tax Abatement Program provides an exemption from the DC 1.1% Recordation Tax and an allowable credit from your seller(s) of 1.1% equal to the DC Transfer Tax. Additionally, the program provides a five-year real estate tax abatement that begins October 1st following your date of closing. In order to qualify, the total gross household income must not exceed:

$50,400 for 1 person in household
$57,600 for 2 persons in household
$64,800 for 3 persons in household
$72,000 for 4 persons in household
$77,760 for 5 persons in household
$83,520 for 6 persons in household
$89,280 for 7 persons in household
$95,040 for 8 persons in household
In addition to meeting the above salary requirements, the property must be owner-occupied by a first-time homebuyer and the purchase price of the property shall not exceed $320,000.

You will be required to provide the closing agent copies of the following:

Copies of your tax returns from the last two years,
Copies of your W-2s from the last two years,
Copies of your two most recent paystubs.
For more information in this program, please contact Federal Title & Escrow Company or your Realtor.

(Qualifying Income Table Effective: 03/20/2007)

Here's what Melissa Schooler of B.F. Saul Mortgage wrote regarding MD & DC programs:

The following is a few things I came up with to add to it:

1) Under the Maryland programs section you can list some information about the CDA program such as:
The CDA program offers 30 year, 40 year, 5/30, 7/23 and 7/33 fixed rate loan programs at competitive rates for first-time homebuyers. See www.morehouse4less.com for additional information about income restrictions and loan programs.

2) In the DC section list some information about the DC Bond program: The DC Bond program is a loan program that offers a below market interest rate on a 30 year fixed rate mortgage. The loan program is available for first-time homebuyers as well as repeat buyers who are purchasing in targeted areas. (see map – pink areas are targeted) This program can also be used in conjunction with HPAP.

Since HPAP will help pay for up to two points with their closing cost assistance, a buyer can take full advantage of the DC Bond program with minimal investment on their part - depending on HPAP Notice of Eligibility.

Another benefit of using HPAP (with or without the DC Bond program) is that by using the down payment assistance loan, you are lowering your loan-to-value (LTV). This, in turn, lowers or even eliminates the need to pay Private Mortgage Insurance. More details on the DC Bond program can be found at www.dcha.org/home.html .

I have the PDF file attached to this message and a picture is below:

You can contact Melissa at:

Melissa Schooler
Loan Officer

BF Saul Mortgage Company
7501 Wisconsin Avenue
Bethesda, MD 20814
Phone: 240-497-8057
Fax: 240-455-4923

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