Happy couple sitting on the front porch of their new home

Regular Bond Loan Program

Loans that are insured or guaranteed by the Federal Housing Administration Mortgage Insurance Program (FHA), the Veterans Administration Mortgage Guarantee Program (VA), the Rural Development Loan Guarantee (RD) or the Housing and Urban Development (HUD) 184 Native American Housing Program (HUD 184) allow for an alternative to conventional loan products that often require large down payments. The programs partner well with most down payment assistance, Montana Housing regular bond and set-aside loan programs.

 

Program Offers

  • Loan insured or guaranteed by FHA, VA, RD or HUD-184
  • 30 year, low fixed rate, fully amortized loan
  • Serviced locally by lender or Montana Housing
  • MH pays 1% of the origination fee to the lender

Borrower Eligibility

  • Must be a first time homebuyer
    • Not owned a principal residence any time in past three years
    • Homeownership requirement not applicable in targeted areas
      • Counties: Blaine, Sanders, Deer Lodge, Silver Bow, Flathead, Mineral, Missoula & Hill
      • Census Tracts: Gallatin County 6 & 11.01 and Lincoln County 2
      • City of Great Falls
  • Must be at or below annual household Income limits
    • Includes ALL people 18+ years expected to live in residence
  • Buy/Sell amount cannot exceed Purchase Price Limits

Program Requirements

  • Purchase loans only (No refinances)
  • NO cash back at closing; principal reduction only
  • Owner-occupancy required for life of loan
  • Hazard Insurance deductibles cannot exceed the greater of $1,500 or 1% of dwelling coverage
    • Except for Wind/Hail which cannot exceed the greater of $2,500 or 1%
  • IRS Recapture tax provisions apply

Property Requirements

  • Single family, “fee simple” residential property
  • Attached land of residence must maintain basic livability & not provide income source
  • Manufactured homes eligible if Post-1976, de-titled & on a permanent foundation
    •   Appearance & functionality of a stick build house
  • Condominiums & Townhomes in multiple dwelling units structure
  • New construction allowed; property & improvements must be completed prior to closing

 

Additional Useful Information:

 

Regular Bond and Setaside Program Terms and Conditions (2018)

Frequently Asked Questions

First Time Homebuyer Education

Quick Reference Guide

Whole Loan Submission Voucher Details

 

Except as outlined above, all terms, conditions, definitions and program criteria applicable to the Regular Bond Program, set out in the Mortgage Purchase and Servicing Agreement and the Terms and Conditions of the 2017 Homeownership Program .  Additional resources not linked to on this page are available by contacting Montana Housing at 406-841-2840 and asking for a Program Specialist.

Federal Housing Administration (FHA) Mortgage Insurance Program

Brief description: FHA insurance program provides mortgage insurance for homebuyers, allowing an alternative to conventional loan products that often require large down payments. FHA loans have small down payment requirements and partner well with most down payment assistance, Montana Housing regular bond and set-aside loan programs.

Montana Housing Guidelines for FHA insured loans

Borrower Eligibility Criteria:

  • Income limits
  • First-time homebuyer(s); waived for targeted areas.
  • Home must be primary residence for the life of the loan.
  • No asset limitations.

 Property Criteria:

  • Single family home, townhouse, de-titled manufactured home on permanent foundation or FHA-approved condo unit (Montana Housing will purchase loans on up to 25% of units in a project).
  • Purchase Price Limits
  • Limit of 15% for business use.
  • Land limited to 35% of value of property on new construction that has private water or sewer.
  • Maximum parcel size of 40 acres, with no subdivision of land possible.

Loan Criteria:

  • 30-year fixed rate loan
  • IRS recapture potential
  • Buy existing or build new home
  • Hazard insurance $1,500 or 1% of dwelling coverage deductible except Wind/Hail can be $2,500 or 1%
  • Escrow for tax and insurance

Underwriting Criteria:

  • Per FHA guidelines
  • Need any multi-lot/repair issues on appraisal addressed before closing

Down Payment Sources:

  • Must be FHA approved sources only-approved non-profits require at least 3.5% from borrower, local governments and a HUD-approved non-profit instrumentality of government can provide 100% financing
  • Montana Housing pays a portion of closing cost for the borrower.

Mortgage Insurance Information:

  • Requires FHA coverage

Veteran Administration (VA) Mortgage Guarantee Program

Brief Description: The VA guarantee program provides lending opportunities to eligible veterans. The loans have no down payment requirements and partner well with most closing cost assistance in the Montana Housing regular bond and set-aside loan programs.

Montana Housing Guidelines for Veterans Administration Guarantee Loans

Borrower Eligibility Criteria:

  • Income limits
  • First-time homebuyer(s); waived for targeted area and eligible veteran.
  • Home must be primary residence for the life of the loan.
  • No asset limitations.
  • Must be certified eligible by the VA.
  • Full guarantee only with no prior entitlements used and not restored.
  • Homebuyer education required for non-conventional borrowers, i.e., those with credit scores below 680 or front end ratio above 31% or back end ratio above 41%.

Property Criteria:

  • Single family home, townhouse, de-titled manufactured home on permanent foundation or condo unit (Montana Housing will purchase loans on up to 25% of units in a project).
  • Purchase Price Limits
  • Limit of 15% for business use.
  • Land limited to 35% of value of property on new construction that has private water or sewer.
  • Maximum parcel size of 40 acres, with no subdivision of land possible.
  • Must meet applicable building code and have infrastructure.

Loan Criteria:

  • Rates depend upon finance option.
  • 30-year fixed rate loan.
  • IRS recapture potential.
  • Buy existing or build new home.
  • Hazard insurance $1,500 or 1% of dwelling coverage deductible except Wind/Hail can be $2,500 or 1%
  • Escrow for tax and insurance.

Underwriting Criteria:

  • Per VA guidelines.
  • Need any multi-lot/repair issues on appraisal addressed before closing.

Down payment Sources:

  • Must be approved for use with VA financing.
  • Montana Housing pays a portion of the closing costs.

Mortgage Insurance Information:

  • Requires VA Certificate of Eligibility.

Rural Development (RD) Mortgage Guarantee Program

Brief Description: The RD guarantee program provides a loan guarantee for homebuyers in rural areas, allowing an alternative to conventional loan products that often require large down payments. As of January 2006, all of Montana is eligible as a rural area, with the exception of the properties lying within the city limits of Billings, Bozeman, Great Falls, Helena and Missoula. The RD-guarantee program partners well with most down payment assistance and Montana Housing regular bond and set-aside loan programs.

Montana Housing Guidelines for RD guarantee loans

Borrower Eligibility Criteria:

  • Income limits
  • First-time homebuyer(s); waived for targeted area
  • Home must be primary residence for the life of
    the loan
  • No asset limitations

Property Criteria:

  • Single family home, townhouse, de-titled manufactured home on permanent foundation or condo unit (Montana Housing will purchase loans on up to 25% of units in a project).
  • Purchase Price Limits
  • Limit of 15% for business use.
  • Land limited to 35% of value of property on new construction that has private water or sewer.
  • Maximum parcel size of 40 acres, with no subdivision of land possible.
  • Must be in rural area eligible for RD loans.
  • Manufactured home must be new, from approved dealer, on a foundation engineered both site-specific and home-specific.

Loan Criteria:

  • Rates depend upon finance option
  • 30-year fixed rate loan
  • IRS recapture potential
  • Buy existing or build new home
  • Hazard insurance deductible is the greater of $1,500 or 1% of dwelling coverage except for Wind/Hail is the greater of $2,500 or 1% of dwelling coverage; escrow for tax and insurance.

Underwriting Criteria:

  • Per RD guidelines

Down payment Sources:

  • Montana Housing requires $1,500.00 of closing costs or down payment to come from borrowers personal funds (CANNOT USE GIFT FUNDS)
  • Reduced to $500 for borrowers completing approved Home buyer Ed courses.
  • Other sources must be approved by RD


Housing and Urban Development (HUD) 184 Native American Housing Program

Brief Description: HUD Section 184 Indian Housing Loan Guarantee Program is designed to offer homeownership, property rehabilitation, and new construction opportunities for eligible Native American individuals or families who want to own a home. Montana Housing partners with HUD, who administers the program, to provide affordable mortgage rates for HUD 184 insured loans.

Montana Housing Guidelines for HUD 184 loans

Borrower Eligibility Criteria:

  • Income limits
  • First-time homebuyer(s); waived for targeted area.
  • Home must be primary residence for the life of the loan.
  • Must be a member of a federally-recognized tribe.
  • No asset limitations.

Property Criteria:

  • Single family home, townhouse, de-titled manufactured home on permanent foundation or condo unit (Montana Housing will purchase loans on up to 25% of units in a project).
  • Purchase Price Limits
  • Limit of 15% for business use.
  • Land limited to 35% of value of property on new construction that has private water or sewer.
  • Maximum parcel size of 40 acres, with no subdivision of land possible.
  • Must meet applicable building code and have infrastructure.
  • Must have tribal approval if on lease or tribal trust lands; BIA if allotment; fee simple is allowed.

Loan Criteria:

  • 30-year fixed rate loan, with no origination or discount points charged at closing.
  • IRS recapture potential.
  • New construction or existing home.
  • Hazard insurance $1,500 or 1% of dwelling coverage deductible except Wind/Hail can be $2,500 or 1%
  • Escrow for tax and insurance.
  • Tribe must have approved legal procedures for evictions, priority of lien, leasing, and foreclosure.

Underwriting Criteria:

  • Per HUD 184 guidelines
  • LTV cannot exceed 97.75 or 98.75 of appraised value.

Down payment Sources:

  • Tribal resources or approved HUD source.
  • Montana Housing pays a portion of closing costs on behalf of borrower.

Mortgage Insurance Information:

  • Requires HUD 184 coverage.

Loan Information:

  • If done at the Set-aside rate, higher income limits are available for households of 9 or more people, and Montana Housing pays lender origination fees for the borrow.
  • If done as a regular bond loan, Montana Housing regulates points and fees that can be charged. Consult Board staff with any questions.
  • Reservations valid 60 days for existing homes or 180 days for new construction.
  • 0.25% fee charged for extensions, 0.50% for cancelation.

 

Reservation Process for HUD184:

PREFER

Input on Lender On Line web based reservation system
Fax Borrow Stat Sheet and Homebuyer Education Certificate
 

OR

Fax reservation to Montana Housing including:

  • Reservation cover sheet and required documentation listed

Special Reservation Criteria

Must submit HUD 184 approval documentation to Montana Housing before reservation can be approved.

This is a summary of the Montana Housing program only. For a complete copy of the terms and conditions see Mortgage Purchase and Servicing Guide or Terms and Conditions for Whole Loans .

 

 

Frequently Asked Questions

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The Montana Small Tract Financing Act is followed and limits land purchases to 40 acres.  Montana Housing also has limits.  If the loan is for new construction and on private sewer and septic systems, the value of the land cannot be more than 35% of the total appraised value.  Also, if the land purchased can be subdivided or is an extra lot not encumbered by the house or garage being purchased, these programs cannot be used. These situations can be reviewed on a case-by-case basis

Yes, if the new buyer meets the same requirements that the current owner did (i.e. income, first time homebuyer, etc.).

No, we require statements from the actual employer for income verifications.

The IRS requires that we inform users of our program of a possible Recapture Tax. This is an IRS tax – NOT a Housing Housing tax. The recapture tax very rarely comes into play with our loans & the borrower has to sell the home within the first 9 years of ownership, have made a substantial profit from the home sale and be above the allowable income limit at the time of sale. Since so few Montanans ever fall into the category of having to pay this tax, it should not be used as a deterrent to utilizing Montana Housing programs.

No, refinancing does not automatically trigger a possible recapture tax. The borrower will want to consult with a tax expert when the home is actually sold to determine if any action is required regarding their taxes.

Applications are taken like any other loan. Lenders should conduct the credit analysis, and qualify the loan under FHA, RD VA HUD-184 and our qualifications. The lender submits a reservation for funds through an on-line process called Lender OnLine (LOL) or by faxing in required documents. A “borrower stat sheet” must accompany all reservations and, if using a setaside waiver program, a letter from the down payment assistance sponsor. The lender closes the loan and then Montana Housing purchases the loan from the lender once all required documents are received.

Each participating lender that is approved for use of Lender On Line (LOL) has an administrator who is responsible for adding or deleting loan officers and setting the level of access they have. Different levels can be accessed depending upon the authorization given by each lender’s administrator. We will set up an administrator for a new lender once they’ve been approved to participate in our programs.
  

Down payment requirements vary depending on the type of loan the borrower chooses. RD and VA loans don’t have down payment requirements – though we do require a $1500 investment on RD loans by the borrower ($500 if approved homebuyer education is completed). FHA loans have down payment requirements that depend on factors such as credit scores and are a percentage of the loan amount. Some fees are charged by the mortgage insurer/guarantor but can usually be financed in with the mortgage.

Yes, the borrower can apply for an “Occupancy Waiver”. This allows the borrower to have the home vacant while trying to sell or rent it for a 6 month period. At the end of 6 months, a new waiver must be requested. If the home has been rented for over 12 months, there can be tax consequences. Military occupancy waivers are given for 12 month periods at a time.

Definitely. On-line live training is available upon request. See our staff page for more information.

Montana Housing does not set requirement overlays for the purchase of a loan. However, if the borrower's mid credit score is >680 OR the front-end ratio is >31% OR the back-end ratio is >41%, the borrower must complete an approved Homebuyer Education Course.   NeighborWorks Montana's partner organizations can be found by clicking here to learn more about the services they offer, register for a class and schedule a counseling session.

An online homebuyer education class is offered where no homebuyer education classes are available.

They include the following:
 

  • Income and Purchase Price Limits

  • A ‘first-time’ home buyer rule, which means you must not have owned a home considered “real property” in the past three years (some exceptions apply such as “targeted areas” and waivers for set aside programs”

  • The property must be owner-occupied; it cannot be used as a rental

  • Business use of the home is allowed, as long as it remains under 15 percent of the area of the home

  • The IRS may impose a recapture tax at the time the home is sold if a substantial gain in income occurs, the home is sold in the first 9 years, and a profit is made from the sale.

  • The loan is a “purchase-money” loan. Refinancing is only eligible in the case of construction of other interim financing that does not exceed 24 months.

Rates follow the market and depend on the rates at which we can sell our tax exempt bonds. Current rates can be found at: Interest Rates. Rates are set on a fixed, 30 year term and will not change during the life of your loan. No penalty for pre-payment exists. No re-amortization of the loans is possible if large sums are paid on the loan.

Montana Housing has low, fixed-interest rates with some or all of the borrower’s fees to the lender paid (Quick Reference Guide). They must be insured or guaranteed by FHA, RD, VA or a HUD-184 guarantee. Currently, we do not accept Private Mortgage Insurance.

There are no pre-payment penalties attached to our loans.

Typically, anyone over the age of 18 living within the household will have his/her income counted. Also included will be any social security income or child support income received. Contact a staff member with any specific concerns or questions regarding income calculations.

We will purchase loans that have co-signers on the note. If the person co-signing will not be occupying the home, then we don’t count their income toward the income limits and don’t want them signing the Buy/Sell or Deed of Trust. We require that the loan be underwritten so that the borrower is able to make the monthly payments without relying on the co-signer.

Montana Housing will purchase Condos but have special requirements for them. No more than 25% of the condos in a project can be financed by Montana Housing. Additional requirements such as proper insurance and FHA project approval must also be provided and can be found at: (Condominium Unit Approval and Hazard Insurance Guidelines).

Montana Housing will purchase manufactured home loans if they qualify. All manufactured homes:

• Must have been constructed after June of 1976

• Must be insured by either FHA, VA, HUD-184 or RD

• Must be detitled.


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MONTANA HOUSING | MONTANA DEPARTMENT OF COMMERCE
301 S. PARK AVE, STE 240 | PO BOX 200528 | HELENA, MT 59620-0528 | P: 406.841.2840 | F: 406.841.2841 | TDD: 406.841.2702 | TOLL FREE: 800.761.6264