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What loan types are eligible for inclusion with the First Step Program?
Borrowers may benefit from First Step’s below market rate program through FHA, VA, USDA and Freddie Mac’s HFA Advantage financing.
What are the first mortgage terms?
The First Step 1st mortgage is 30-year fixed rate term.
Where can I find the interest rate for the First Step Program?
The interest rates are posted on the homepage of the AHFA website, www.ahfa.com.
Is there a Commitment Fee associated with the First Step Program?
Yes. The Commitment Fee must be wired to AHFA within 72 hours of the loan reservation. The fee is based on the reservation period:
30-day reservation = .50% of the total loan amount
45-day reservation = .75% of the total loan amount
A commitment fee is not required for the 2nd mortgage.
What is a first-time homebuyer?
A first-time homebuyer is defined as a person who has had no homeownership interest in a principal residence in the three years prior to execution of the initial loan application.
What documentation is used to determine if a person is a first-time homebuyer?
AHFA will review the borrower(s) 1003, tri-merge credit report and the Drive report, Fraud Guard or MERS report. Note: This documentation is only required if the borrower(s) is purchasing a property in a non-targeted area.
Are there any exceptions to the first-time homebuyer requirements?
Veterans & their spouses are exempt from the three-year ownership rule as long as the veteran has not financed a home using MRB or he/she was not dishonorably discharged. See the Veterans Exemption Application Declaration Form.
Are repeat homebuyers eligible for the First Step Program?
Yes. If a borrower(s) is not classified as a first-time homebuyer, they must purchase a property in a targeted area to be eligible for the First Step Program.
What is a targeted area?
A targeted area is a qualified census tract, or an area identified previously as economically distressed. A targeted area may be an entire county or may be a particular census tract or other designated specific area within that county. Other counties may be all non-targeted.
How do I determine if a property is in a Targeted Area?
The interactive map on our website can provide guidance. If the map notes the property to be in an area with mixed targeted and non-targeted areas, AHFA will make the determination. Submit the Target Map ID Request Form to compliance@ahfa.com for a determination.
Can I get a copy of the targeted area map for a mixed targeted and non-targeted area?
Currently the areas that have mixed targeted and non-targeted census tracts are determined by AHFA staff consulting physical historical maps. These maps are too large to copy, AHFA is in process of digitizing these maps and our online mapping tool will become more informative as areas are updated.
What is Recapture Tax?
Recapture tax is a federally mandated tax implemented in 1991 for homebuyers who use certain homebuyer programs financed by tax-exempt mortgage revenue bonds. See the Understanding Recapture Flyer - Recapture Brochure in either location linked below for a full explanation.
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AllRegs Online - Housing Finance Agency Programs > Alabama > First Step Manual > Program Documents > Recapture Brochure
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Lender Online - Marketing Materials > Recapture Brochure
How do I calculate recapture tax?
Recapture tax is figured on a scale based on the number of years the borrower(s) has lived in the house, their income at the time of the sale and the amount of gain on the sale of the home. Because this figure is calculated at the time of the sale of the home and subject to tax law interpretation AHFA staff cannot assist in determining the exact amount of tax that may be due.
Will all household income be used to determine income eligibility?
No. Only the income of the borrower(s) will be used in the income eligibility determination.
Where are the income and sales price limits found?
Refer to First Step Mortgage Revenue Bonds section on ahfa.com for income and sales price limits.
Are there guidelines we can review?
Yes. Our program guidelines are available at AllRegs Online. To enter the library, you will enter your email twice. These guidelines are available 24/7 and have the most current program information.
Are there any restrictions on who can hold title to the property?
Yes. Because income eligibility is based solely on the income of the borrower(s) qualifying of the loan, title may only be held in the names of those persons who sign both the note and the mortgage (borrowers).
What are the prohibited uses of the property?
The subject property cannot be rented, leased, quit claimed or interest transferred at any time. In addition, the property cannot be investment, seasonal, recreational or vacation property. Business use of the property is also prohibited.
Is the 2nd Mortgage forgivable?
No. The AHFA 2nd mortgage is an amortizing loan with a monthly payment. The term is 10 years, and the interest rate is the same rate as the first mortgage. Because it is an amortizing loan it is subject to TRID and an LE and CD are required. Also, because it is a loan, a Note and Mortgage must be signed at closing. You can download those forms here: Standardized Subordinate Documents | Fannie Mae
Can a borrower(s) apply for a standalone 2nd mortgage?
No. The 2nd mortgage assistance must be combined with the First Step 1st mortgage program.
How are funds for the 2nd mortgage reserved?
The funds for the 2nd mortgage should be reserved at the same time as the 1st mortgage reservation. The term for the 2nd mortgage is 10-years. The interest rate for the 2nd mortgage will be at the same rate as the 1st mortgage.
What is the commitment fee for the 2nd mortgage?
There is no commitment fee associated with the 2nd mortgage.
Does the borrower(s) have to use the 2nd mortgage to participate in the First Step Program?
No. They can bring their own downpayment to closing.
Does a refinance eliminate the Recapture Tax?
No, if the mortgage is refinanced and then the home is sold within the first nine years of ownership, the potential for Recapture Tax still exists.
How long can we expect this program to be available?
AHFA anticipates offering this program for the foreseeable future. There will be new allocations of funds made available, while the rate will still be below the market rate of the time, it may be higher or lower than previous allocations as it is determined by the market at the time of allocation.
Will the rate change periodically?
As an allocation of funds is exhausted, new allocations of funds will be made available, while the rate will still be below the market rate of the time, it may be higher or lower than previous allocations as it is determined by the market at the time of allocation.
Is there a minimum required investment from the borrower(s)?
AHFA does not have a minimum required investment from the borrower(s) for any of its programs.
Are there any documents that need to be recorded with the mortgage on the First Step program?
Yes, there are product specific Tax-Exempt Riders that are required to be signed, notarized, and recorded with the first lien mortgage. These documents are available at AllRegs Online and Lender Online. There are no riders to the second mortgage.
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