is a fixed interest rate, 15-year to 30- year residential mortgage that requires a down payment of at least 3% of the appraised value of the property and has a 97% Loan-to-Value (LTV) ratio. It can be used to purchase owner-occupied single unit detached homes, condominiums, and town homes.
The LEMCM has a minimum Housing-to-Income ratio of 35% and a Total Debt-to-Income ratio of 45%. The big difference between the LEMCM and a traditional mortgage is that it takes into consideration the transportation-related savings that are achieved by an urban household that uses public transportation and relies on local services such as shops, stores, schools, as well as entertainment and recreation amenities. For many urban households, the LEMCM can mean thousands of dollars of additional home buying power.
Who developed the LEMCM?
The LEMCM results from a three year long research program led by three non-profit organizations: the Center for Neighborhood Technology, the Natural Resources Defense Council, and the Surface Transportation Policy Project. Together they have formed a new non-profit organization called the Institute for Location Efficiency (ILE). ILE's research was funded by the U.S. Department of Energy, the Federal Transit Administration, and the U.S. Environmental Protection Agency, as well as Nathan Cummings Foundation, the Joyce Foundation, the John D. and Catherine T. MacArthur Foundation, and the Surdna Foundation. The market test of the LEMCM is sponsored by Fannie Mae, the nation's largest source of home mortgage funds.
What will the LEMCM do besides increase buying power?
Aside from increasing a homeowner's buying power, this new mortgage will
- Increase home purchases in a variety of urban communities;
- Boost public transit ridership;
- Support neighborhood consumer services and cultural amenities;
- Reduce energy consumption; and
- Improve local and regional air quality.
Where is the LEMCM available?
The LEMCM is now available in Chicago, Seattle, the San Francisco Bay Area, and Los Angeles County.
Where can I apply for a LEMCM?
- In Los Angeles, the LEMCM is offered by Countrywide Home Loans Inc.
- In the San Francisco Bay Area, the LEMCM is offered by Countrywide Home Loans Inc.
For your convenience, there's a user friendly LEMCM Worksheet available to help you determine whether the LEMCM could help you purchase the home of your choice now for sale in Chicago.
Where must the home be located?
You could use the LEMCM to purchase a home in more densely populated areas of the four cities listed above. However, the LEMCM's increased buying power depends on neighborhood conditions such as the households density and how close bus stops and/or train stations are to the home you choose. That means that there will be a difference in savings and buying power from place to place. On each website, you can use the LEMCM Worksheet to find out how much additional homebuying power you have with the LEMCM.
What kind of home can I buy?
The LEMCM can be used to buy owner-occupied condominiums, town homes, or single family detached homes.
How does the LEMCM increase my buying power?
Research has shown that people who live in compact, urban neighborhoods served by public transit own fewer cars per household and drive fewer miles than people who live in suburban or rural areas. This is because they don't need a car as often. The total vehicle miles traveled by a household are also effected by income and household size. The LEMCM's computer program can measure this difference and predict the savings that will result from living at a particular address rather than in a significantly less accessible suburban location.
The LEMCM's underwriting standards allow this savings to be taken into consideration. It's added to household income in the qualifying ratios and the ratios themselves are more liberal. The result is that the LEMCM enables a borrower to qualify for a larger mortgage, as long as they meet the other requirements.
What are the LEMCM's requirements?
The LEMCM includes standard criteria to evaluate qualified applicants:
- Credit and income history;
- Employment history and stability; and
- Debt-to-income ratio calculations used in the application process.
Are there other requirements?
Borrowers must participate in face-to-face, pre-purchase counseling about homeownership and location efficiency. Borrowers are encouraged to use public transit as often as possible. Finally, borrowers are asked to participate in an annual survey conducted by the Institute for Location Efficiency, the non-profit organization that researched and developed the LEMCM.
How can I find out whether the LEMCM will help me buy a home in my favorite neighborhood?
On each city's website, you can use the LEMCM Worksheet to select a community area and it will calculate your maximum possible LEV, based on the information you provide. The worksheet actually calculates your LEV based on your information and local conditions. You can use this function to "shop" for a location efficient community that is attractive to you.
More info: www.locationefficiency.com.
