Help 4 Homeowner's Program

Many of you have asked about the Help 4 Homeowner’s program I talked about during sales meeting on Tuesday, specifically about the “Equity Sharing” portion. You can always go to the HUD website for more information, but here’s an example:

Keep in mind that this is only an example and the actual experience will depend on many things, including how much your home increases or decreases in value. Let’s assume you have a home that you purchased for $250,000 and you currently owe $220,000. You need to move, but the home is only going to appraise for $200,000 (at least a $50,000 loss). Instead of going through a short sale you decide to go through with an H4H loan to protect your credit and stay in your home and decide not to move.

1. Let’s say your home has an appraised value at the time you receive your FHA mortgage of… $200,000
2. And your Mortgage is 90% of this, or… $180,000
3. This means the initial EQUITY is the difference between #1 and #2, or… $20,000

In this example, you and FHA will share that 10% EQUITY (or $20,000) when you sell your home OR REFINANCE your loan. Here’s how that $20,000 would be split:

During year 1 FHA receives 100%, or… $20,000 YOU receive 0%, or… $0
During year 2 FHA receives 90%, or… $18,000 YOU receive 10%, or… $2,000
During year 3 FHA receives 80%, or… $16,000 YOU receive 20%, or… $4,000
During year 4 FHA receives 70%, or… $14,000 YOU receive 30%, or… $6,000
During year 5 FHA receives 60%, or… $12,000 YOU receive 40%, or… $8,000
After year 5 FHA receives 50%, or… $10,000 YOU receive 50%, or… $10,000



So, if you sell or refinance your home immediately after your H4H loan, then FHA will keep all the Equity. At first this may seem a little stiff, but remember that you really would have owed $240,000 on the loan so you’re really not losing anything by doing this.

In addition to EQUITY SHARING, you will be subjected to APPRECIATION SHARING with the FHA. That means that if your home goes up in value, you will share the amount of increase (less closing cost and a portion of the improvements) with the FHA.

1. Let’s say your home has an appraised value at the time you receive your FHA mortgage of… $200,000
2. After 10 years, the home is worth… $300,000
3. This means the APPRECIATION is the difference between #1 and #2, or… $100,000

This appreciation would be shared 50/50 between you and FHA. These examples assume there are no closing costs and no improvements are made to the property.