Lender Grant Caps with BOA

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  • #43293
    JHarris981
    Member

    @ttrumble I had a question regarding the lender grant based on what you wrote below in a previous thread. Here’s what you wrote:

    “The maximum contribution to points is 7% or $7,000.
    For the 30-year loan, $7,000 – $3000 = $4000 ($4,000 is the highest amount the Member can put to interest rate reduction). $4,000 of the Members money will go to interest rate buy down and the other $4000 will go to principal reduction creating a new loan amount of $96,000 rather than $100,000. The lender will match the $4000 and offer the final interest rate of 2%.”

    In my area the lender is BOA. We are mostly capped at purchasing 5.5 or 5 points because of the $3000 loan origination fee paid by the lender. So in terms of the matching grant — is 5.5 or 5 the maximum amount of points the grant would match, since the homebuyer is maxed at that amount regardless of whether they are putting down more than that amount towards principal reduction? If that is the case it is impossible to bring the interest down to 0.125% with BOA even if you are contributing well of over 5.5% or 5% in principal reduction.
    Can you advise, Tim? If the seller contributes either 1.5 or 2 points on top of the homebuyer’s 5.5 or 5 points (bringing the combined buy down total to 7 points) and then the homebuyer puts another 7% down toward principal reduction, will the grant match the 7%? Could you put down 10% towards principal reduction and the grant match 10%?

    Essentially does the matching grant:

    A) Match your maximum buy down (with BOA the maximum is either 5 or 5.5 points)

    or

    B) Does the grant match your principal reduction amount (i.e., if you’re contributing 5.5 points towards buy down [the maximum allowed] and then an additional 10% towards principal reduction then the matching grant will match the 10% to further bring down your interest rate)?

    The interest rate is currently 4%. One would have to purchase 15.5 points to bring the interest rate down to 0.125 with BOA. A 5-point maximum purchase cap would require a matching grant of 10.5 points. I just want to make sure that if we’re putting down 10.5% towards principal reduction that the matching grant would match that amount to bring us down to a 0.125% interest rate and not just match the 5-point interest buy down cap.

    #43368
    TTrumble
    Member

    Hello JHarris981,

    The grant matches the dollar amount of your contribution that is OVER the seven point limit that you may contribute for your own buy down. Of that amount over seven points, your money goes to reduce the principal and the lender’s matching funds continue to buy the rate down. Your counselor will determine the exact amount you would need for the lender match to get you all the way down to 0.125%.

    Tim Trumble
    Online Operations, NACA
    ttrumble@naca.com

    #43414
    JHarris981
    Member

    @ttrumble — thanks for clarifying that for me! I know there were some changes to how the interest buy down and principal payments work a few months ago. You mentioned that you’d provide an update once you’d digested it all. Can you update us on that?

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