Georgia Dream Loan: Prepayment Penalty Caveat?

The Georgia Dream Loan Program is a government initiative that provides affordable mortgage financing for eligible first-time homebuyers in Georgia. The program is designed to assist low- and mid-income homebuyers who may not qualify for other loan programs. It offers down payment assistance, special financing interest rates, and homebuyer education. With a Georgia Dream Loan, eligible applicants can receive up to $7,500 in funding for down payments and closing costs. One of the key questions that potential borrowers may have about the Georgia Dream Loan is whether there is a prepayment penalty.

Who is eligible for a Georgia Dream Loan?

The Georgia Dream Loan Program provides assistance and funding for eligible first-time homebuyers based on their income or veteran status. The program offers affordable mortgage financing, down payment assistance, and homebuyer education. To be eligible for the Georgia Dream Loan, applicants must meet certain criteria:

First-Time Homebuyers:

The program primarily targets first-time homebuyers who have not owned a home in the past three years. This requirement may be waived if purchasing a home in certain targeted areas of Georgia.

Income Requirements:

Applicants must meet specific income requirements, including having a household income that does not exceed the maximum limit set by the Georgia Department of Community Affairs (DCA). Additionally, eligible applicants should have liquid assets of no more than $20,000 or 20% of the sales price, whichever is greater.

Credit Requirements:

To qualify for a mortgage loan, applicants must meet certain credit requirements. A minimum middle credit score of 640 is typically needed to be eligible for the Georgia Dream Loan Program.

Purchase Price Limits:

The maximum home sales price under the Georgia Dream Program is up to $425,000. However, the sales price limit may vary by county, so it is important to check with the DCA for specific eligibility details.

Homebuyer Education:

All applicants are required to attend housing counselling sessions or complete a homebuyer education workshop or course. This can be done through approved agencies or online platforms like E-Home America.

Down Payment:

While the Georgia Dream Program offers down payment assistance, applicants must contribute at least $1,000 of their own money towards the down payment.

It is important to note that the eligibility criteria may vary slightly depending on the specific Georgia Dream Loan Program or participating lender. Therefore, it is always recommended to contact a participating lender or visit the DCA website for pre-qualification and to obtain the most up-to-date and accurate information regarding eligibility requirements.

What are the income requirements?

The Georgia Dream Loan Program provides assistance and funding for eligible first-time homebuyers based on their income or veteran status. The income requirements to qualify for the Georgia Dream Loan Program are as follows:

The maximum income varies by county and by the size of your household. For the Georgia Dream program, "income" refers to the total income of all household members. However, some income may not be included, such as the income of students under the age of 18. Discuss your total household income with your lender to determine if you meet the income requirements for the Georgia Dream Loan Program.

To be eligible for the Georgia Dream Loan Program, applicants must have liquid assets of no more than $20,000 or 20% of the sales price of the home being purchased, whichever is greater, at the time of closing. Gifts of substantial amounts, stocks, and other readily salable securities are considered liquid assets, unless restricted by IRA, 401(k), or similar plans. IRAs, 401(k) plans, and other similar qualified retirement accounts are not considered liquid assets.

Additionally, applicants must meet the income limits set by the Georgia Department of Community Affairs (DCA). An entire county or a census tract must meet specific income criteria for the area to be considered a targeted area. In a targeted area, at least seventy percent of the families must have a Household Annual Income that is eighty percent or less of the state-wide median family income. Alternatively, the area must be designated by the State as an "Area of Chronic Economic Distress" and approved by the Secretary of the U.S. Department of Housing and Urban Development and the Secretary of the U.S. Department of Treasury.

To qualify for the Georgia Dream Loan Program, applicants must also meet the mortgage loan credit requirements and contribute a minimum of $1,000 of their own money or documented gift funds into the purchase transaction. Two ratios are used to qualify applicants for a mortgage loan: the housing ratio and the total debt ratio. The housing ratio compares the percentage of your potential new monthly mortgage payment, including property tax and homeowners insurance, to your gross monthly income. The total debt ratio includes your prospective new monthly mortgage payment plus your existing debt payments compared to your gross monthly income. Your lender can calculate these ratios and discuss if you meet the Georgia Dream program ratio requirements.

What is the maximum home price?

The Georgia Dream Loan Program provides assistance and funding for eligible first-time homebuyers based on their income or veteran status. The program offers affordable mortgage financing, down payment assistance, and homebuyer education. The maximum home sales price for the Georgia Dream Homeownership Program is $425,000.

To qualify for the Georgia Dream Homeownership Program, applicants must meet specific requirements. Firstly, they must be first-time homebuyers, or they must not have owned a home in the past three years. Alternatively, they can be purchasing a home in certain targeted areas of Georgia, as defined by the Georgia Dream brochure. These targeted areas are typically counties or census tracts that are in need of economic development or have a high proportion of low-to-moderate-income residents.

Secondly, applicants must meet income and purchase price limits. Their household income must not exceed the maximum household income limit, which can be found on the Georgia Department of Community Affairs (DCA) website. Additionally, applicants must have liquid assets of no more than $20,000 or 20% of the sales price, whichever is greater.

Thirdly, applicants must meet the credit requirements for a mortgage loan. They must have a minimum middle credit score of 640 and meet the debt-to-income ratio requirements set by the Georgia Dream program. The housing ratio, which includes the monthly mortgage payment, property tax, and homeowners insurance, is compared to the applicant's gross monthly income. Similarly, the total debt ratio, which includes the monthly mortgage payment and existing debt payments, is also considered.

Lastly, applicants must complete homebuyer education requirements. They must attend housing counselling classes, workshops, or one-on-one counselling sessions provided by HUD-approved Housing Counselling Agencies. These sessions help prepare applicants for the responsibilities of homeownership and ensure they understand the financial commitments involved.

It is important to note that the Georgia Dream Loan Program does not have a prepayment penalty. The interest rate for these loans is set by the DCA and is typically lower than market rates, with an initial rate of 5.00%. The program also offers down payment assistance options to help qualified borrowers with the biggest obstacle to homeownership.

What is the interest rate?

The interest rate for a Georgia Dream loan is determined by market rates. The initial interest rate is set to 5.00%. The Georgia Department of Community Affairs (DCA) sets the interest rate for all Georgia Dream loans, and a participating lender must use the Georgia Dream rate and approved fees. No uncommon fees or discount points are allowed on Georgia Dream loans.

The DCA acts as the secondary market for lenders who want to provide affordable mortgage products to low and moderate-income Georgians. The loans are secured or guaranteed by FHA, VA, USDA-RD, or conventional uninsured loans. The DCA also offers the Georgia Dream Peach Plus program, which is a down payment assistance program for either first-time or recurring homebuyers with higher income and sales price limitations compared to the Standard Georgia Dream program. The first mortgage interest rate is set slightly higher than the Georgia Dream Standard, and a 0% interest rate concurrent second mortgage is offered as down payment assistance.

The Georgia Dream Peach Select program is a Veterans Assistance loan program that offers qualified military veterans an interest rate typically lower than market interest rates. The sales price and income limitations are the same as the Georgia Dream Standard program. This program cannot be used with the Georgia Dream Second Down Payment Assistance but can be combined with another eligible down payment assistance program.

According to Georgia state law, prepayment penalties are prohibited unless stipulated in the contract. The statute prohibits prepayment penalties or other charges for prepayment on any written mortgage contracts where the interest rate exceeds 8%. The prohibition does not apply to loans insured by federal agencies.

What are the fees?

The Georgia Dream Loan Program is designed to assist low- and mid-income first-time homebuyers who may not qualify for other types of loan programs. The program offers affordable mortgage financing, down payment assistance, and homebuyer education.

The Department of Community Affairs (DCA) sets the interest rate for all Georgia Dream loans. Participating lenders are required to use the Georgia Dream rate and approved fees. No uncommon fees or discount points are allowed on Georgia Dream loans. The interest rate is locked for 75 days, after which it can be changed.

The program provides funding of up to $7,500 for down payments and closing costs. The maximum home sales price is $425,000, although this may vary depending on the county, with prices ranging from $275,000 to $325,000.

To qualify for the loan, applicants must meet certain requirements, including a minimum middle credit score of 640, income and purchase price limits, and limited liquid assets of no more than $20,000 or 20% of the sales price (whichever is greater).

Additionally, there are requirements for verbal verification of employment, with the borrower needing a minimum of 2 months of reserves of Principal, Interest, Taxes, and Insurance (PITI) and documentation of the source of funds according to FHA guidelines.

The Georgia Dream Loan Program also requires all applicants to attend Housing Counseling classes, workshops, or one-on-one counseling provided by HUD-approved Housing Counseling Agencies.

It is important to note that the specific fees and requirements may vary depending on the lender and the borrower's individual circumstances. Therefore, it is recommended to contact a participating lender to get pre-qualified and receive specific information about the fees associated with the Georgia Dream Loan Program.

Frequently asked questions