The program
The loan behind it
There is a real FHA mortgage under this program. Here is exactly what it is, who owes it, and what it costs.
Who owes the money
The agency does. Tule River Homebuyer Earned Equity Agency takes out the FHA loan and is the borrower on it. Your name is not on that note.
That is not a technicality, it is the entire mechanism of the program. The agency's ability to get financing stands in for yours until yours catches up. Everything else in this program follows from that one fact.
The first mortgage
| Loan type | FHA 203(b) |
| Term | 30 years |
| Rate | Fixed |
| Amortization | Full amortization only |
| Transaction | Purchase only. No refinances |
| Units | 1 to 2 |
| Occupancy | Primary residence only |
| After closing | The loan must be purchased by the master servicer |
The two amortizations are not the same number
The FHA first mortgage runs 30 years. Your homeownership agreement payment is calculated on a 40-year schedule.
That difference is why your monthly payment is lower than a 30-year mortgage on the same balance would be, and it is also why your principal comes down slowly. In the early years most of what you pay is interest.
Two clocks, not one
Fixed rate, full amortization
Your monthly payment is calculated on this schedule
In the early years most of what you pay is interest. Your equity comes mainly from appreciation and from what you brought at closing.
High balance
The FHA first mortgage may be high balance, which means above the standard county limit. High balance loans in this program always receive an LLPA adjustment, a loan level price adjustment that shows up in the pricing.
Source: Matrix 3.2.2.
The soft second
Alongside the first mortgage there is a second lien reported at 1% of the loan amount. It carries no payment and bears no interest, and it is reported as forgiven after 10 years.
We are flagging this one honestly: we could confirm the structure but not every detail in the source documents we read. Treat the 1% and the 10 years as reported, not as verified, and ask your originator to show it to you on the disclosure.
Mortgage insurance
FHA charges mortgage insurance on its loans, and that cost is inside your monthly payment. It is the agency's loan carrying the MIP, and you pay for it the same way any FHA borrower does.
What the lender cannot do
Total origination and Section A fees may not exceed 3% of the purchase price. Discount points that are not bona fide count against that 3%.
Charges on the seller financing agreement that benefit the originator beyond what the agency charges must be 1% or less of the total FHA loan amount, disclosed as a Program Participation Percentage line. That fee cannot be added after the Clear to Close.
Interest credit is not allowed at all.
Source: Matrix 3.15.2, 3.15.3, 4.20.
The disclosure you actually receive
On the loan side there is an initial Loan Estimate and Closing Disclosure with the transaction fees, and those go to the agency.
What you receive is a Homebuyer Cost Disclosure, the CCD, created by Arrive Home. Your correspondent may never hand you a CCD that did not come from Arrive Home. If someone gives you a cost sheet they made themselves, that is not the disclosure.
Source: Matrix 3.15.1.
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Every application goes through a licensed loan originator.