In Buyer and Seller, Economics/Politics

For many parts of the country prospective home buyers have been beset by a couple of diverging trends since the economic and the housing recovery began. First, although the job market has been recovering, incomes have not been rising, and in some areas wages have been falling. Second, in some markets housing prices have been increasing much faster than income growth which has, once again, have put housing affordability outside the range of many families. In the current environment, there are a growing number of families who might otherwise have sufficient income to make a mortgage payment, but who have had difficulty saving enough for a down payment and closing costs. That is where the Sapphire Program comes in. The Sapphire Program is a down payment assistance program created by the National Homebuyers Fund to assist families and individuals who can afford a mortgage, but do not have the resources for the down payment and closing costs.

How the Sapphire Program Works

Homebuyers who meet the eligibility requirements can apply for an FHA or VA loan through the Sapphire program. Upon approval, they can receive a grant for 3% or 5% of the total 1st lien loan amount. The difference between a 3% and 5% grant is the loan interest rate, which is higher on the 5% grant.

The grant can be used for the down payment, closing costs, prepaid items, or earnest money, but it has to be fully utilized. None of the grant money can be returned to the borrower.

What are the Outstanding Features of the Sapphire Program

There are several differences in terms of the qualifying criteria that make the Sapphire Program stand out from other down payment assistance programs.

First, when applying for an FHA loan, borrowers can qualify with a debt-to-income ratio of up to 56.9%, which really opens the program up to borrowers who could not qualify under the stricter requirements of conventional financing.

Second,  borrowers can qualify under the Sapphire Program with a credit score as low as 620 as the middle score of the lowest scoring borrower.

Third, the income qualification is based on qualifying repayment income, not household income. This helps families with multiple income sources keep within the income limit which is 115% of Area Median Income (AMI) for the county in which they live. So, for example, if both spouses work, and they plan on having Grandma live with them; even though Grandma will contribute to the mortgage payment, her income is not considered a part of qualifying income because she is not going on the loan.

Fourth, if the loan is a FHA or VA 30-year fixed, the allowable loan-to-value (LTV) is 96.50%.  So, for a loan of $200,000, the loan amount could be as high as 193,000. The borrower would have to come up with just $7,000 for the down payment, which could be provided through a Sapphire Grant.

How Does the Sapphire Program Work in Practice?

Here is an example of how the Sapphire Program can help a couple pay for the down payment and all closing costs:

A couple applies for a 30-year, fixed-rate FHA mortgage on a home selling for $200,000. They would have to come up with $7,000 for the down payment and additional money for closing costs. A grant of 5% of the first mortgage loan amount would bring $9,650. If the costs exceed the grant, the couple could negotiate with the seller to contribute a percentage to close the gap. Or, they could receive a small gift from their parents.

Get More Information 

To find out more about this extraordinary program, you should visit the expert. Located in Riverside, California, but serving a nationwide constituency, the Power of Now, Inc. is a multimedia company and real estate sales and lending firm that specializes in real estate education for consumers and real estate professionals. The education is disseminated through online podcasts and video conferences offered nationwide on Currently I am featuring the Sapphire Program in a podcast and a recording of my radio show discussing the particulars of the Sapphire Program. Feel free to join The Power Is Now for our live broadcast!


Eric Lawrence Frazier, MBA

President and CEO

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