BECOME A BMR HOMEOWNER!

Transcription

1 BECOME A BMR HOMEOWNER! History of the City of Morgan Hill BMR Program The City of Morgan Hill contracted its Below Market Rate (BMR) Program to NHSSV in May 2012 in response to the State s elimination of Redevelopment Agencies. When the State of California eliminated Redevelopment Agencies (RDA) as of 2012, Cities lost $1.7 billion in funding part of which supporting the Housing Department in the City of Morgan Hill. The City of Morgan Hill s Housing Department in cooperation with Neighborhood Housing Services Silicon Valley (NHSSV) operates the Below Market Rate (BMR) Housing Program to provide greater housing opportunities at affordable prices. NHSSV is a non-profit Realtor, Lender & Housing Counseling Center. Residential Development Control System, the Housing Element & BMR Homes in Morgan Hill Authority for the BMR Program is found in provisions contained in the Residential Development Control System (RDCS) in the Municipal Code (Chapter 18.78) and its goals and policies of the adopted Housing Element of the Morgan Hill General Plan. The Residential Development Control System (RDCS) was enacted by the citizens of Morgan Hill in 1977 to regulate the growth of the major residential developments of five or more units. The number of building allotments available in a single year is limited. In order to determine which projects receive allotments, projects are evaluated according to a series of standards and criteria in a particular category. Generally, those projects which receive the highest number or points are awarded building allotments. Neighborhood Housing Services Silicon Valley & The City of Morgan Hill BMR Program To encourage the production of affordable housing, homes are sold through the Below Market Rate Housing Program which is administered by Neighborhood Housing Services Silicon Valley (NHSSV). NHSSV manages buyer application evaluation and selection processing, HomeBuyer education, mortgage counseling and financial servicing, facilitation of buyer/developer interaction, compliance monitoring, calculating pay-off demands, and day-to-day administration such as responding to public inquiries. About the BMR Program The intent of the Below Market Rate (BMR) Program is to offer HomeBuyers an opportunity to purchase a home they wouldn t ordinarily be able to afford. HomeBuyers must be eligible and apply to the BMR Program with a loan pre-approval before purchasing a home. BMR Affordable Sales Prices The City of Morgan Hill s BMR Program requires that units sell at an Affordable Sales Price and remain affordable for 45 years. New BMR HomeOwner units are subject to a 45-year BMR Deed Restriction (home must be owner occupied and owner must re-sell to another BMR eligible buyer) secured by a Promissory Note and Deed of Trust that is recorded on the title of the property. The property cannot be resold at Market Value. The property cannot be refinanced at Market Value. BMR Deed Restrictions

2 BMR Deed Restrictions involve a written promise/agreement between BMR HomeOwners and the City that confirms the buyers will occupy the property will only resell to another BMR eligible buyer at the BMR price during the length of the promise/agreement. BMR Monitoring BMR properties are routinely monitored to ensure buyers maintain owner occupancy requirements. BMR HomeOwner Basics BMR HomeOwners purchase a home at a reduced price with BMR Deed Restrictions which in return: Gives the City/NHSSV the first option to purchase (or assign its option to an eligible buyer); Mandates BMR HomeOwners must maintain their BMR home as their primary residence; Limits re-sale value; Limits total loans on title; Limits refinances; Limits liens placed on title; Requires HomeOwners to follow City code ordinances; and Transfers of title must be made in accordance to applicable recorded BMR Deed Restriction BMR Eligibility & Preference for Buyer Selection BMR Eligibility Requirements First Time HomeBuyer Applicants must be a First Time HomeBuyer. A First Time HomeBuyer is defined as those: I. Who have not owned a home in three years or; II. Have owned or a own a home and are a widow, widower, divorced, displaced homemaker, or domestic violence victim; III. Who are a Morgan Hill resident or employee and own rental property in another county Income Limits Applicants must be at or below the gross annual income limits applied to each property. Income Limits for 2013 HomeOwnership Education Applicants must have an 8 hour HUD HomeBuyer Education Certificate Preference for Buyer Selection Due to current market conditions, the City Council of Morgan Hill suspended BMR buyer selections preference categories for BMR buyer selection. Buyer Selection Process All homes will be initially offered for purchase via lottery, and then if no eligible buyers apply for the lottery, the homes will be offered first come, first served. Future buyers can apply for homes via lottery that match their loan pre-qualification amount from their bank with the home s assigned income limits (see below). Frequently Asked Questions about Program Eligibility Question: Are mobile HomeOwners eligible to apply?

3 Answer: Yes. Those who own mobile homes are not considered home owners under the BMR Program and are eligible to participate if they meet eligibility criteria. However, the future funds from the future sale of a mobile home cannot be listed as the required 3% downpayment; these funds (the 3%) must be immediately available. Question: Can non-u.s. citizens apply? Answer: Although proof of U.S. citizenship is not required to apply for the BMR Program, non-permanent residents will need to obtain information from their lender on requirements for non-permanent residents to obtain financing. Question: How much of down payment do I need? Answer: The BMR Program requires a minimum down payment of 3%. However, we do encourage you to put as much as possible down. The lender may determine an amount above the City s requirement of 3%. Be aware: this 3% does not include closing costs. Question: Does the City offer financing? Answer: Yes. However, the City s Citywide Downpayment Assistance Program (Citywide DAP) is on hold pending the result of the Governor s proposal to end California s redevelopment agencies; the Morgan Hill Redevelopment Agency currently funds the City s DAP Programs. Please, check our recommended lenders list as there are other funds available such as the Housing Trust of Santa Clara County, HOME funds administered by the County of Santa Clara Office of Affordable Housing, Mortgage Credit Certificate, etc. Start the BMR Process Future HomeBuyers can start the BMR process in 5 easy steps. The first step is to attend a BMR Orientation. STEP ONE: Attend the REQUIRED HomeBuyer Opportunity Orientation (HOO) Attend an Orientation to learn more about the BMR Program and the application process; Sign Up for a HomeBuyer Opportunity Orientation via at HOO@NHSSV.org; Register to attend the required HUD Certified 8-Hour HomeBuyer class (certificate of completion required before close of escrow); dkausek@nhssv.org for HUD Certified 8 Hour HomeBuyer Class registration information. $25 fee per person must be paid in advance with registration; and Determine If You Are Eligible to Purchase a Below Market Rate Home STEP TWO: Understand the Basics of the Below Market Rate Program The Below Market Rate Program provides an opportunity to purchase a home at an affordable price; Each property has its assigned income limit; Applicants must disclose total household income for everyone 18 years old or older for BMR eligibility regardless of who is applying for the mortgage loan; Property must be owner occupied during Program participation (length of Deed Restriction); During Program participation, owners can only sell to qualified BMR buyers at the affordable price according to the Deed Restrictions sales price is not based on market value; and Must have loan pre-approval before beginning home selection process STEP THREE: Get Loan Pre-approval

4 Share the page BMR Application with Lending Requirements from the BMR application with your lender; Verify your lender can participate in Below Market Rate Lending (the below listed lenders already do); After receiving your loan pre-approval, look for a BMR property that meet your income and loan limits; and Visit to view available BMR properties STEP FOUR: Apply for the BMR Program Apply for a BMR home of your choice (lottery for more than one applicant); and NHSSV will review your application and issue approval (if qualified) and inform you of next steps for lottery. STEP FIVE: Meet with the BMR Real Estate Agent to get into Contract to Purchase Your BMR Home Learn About Financing Your BMR Home BMR Buyers must be mortgage loan ready. Your mortgage professional can give you all the information you need to access a loan for your new BMR home. Some of the qualifications they may look for in a borrower may be: 2 years of steady employment 3 4 years since a short sale or foreclosure 620 FICO score or higher 3% or more of the purchase price from borrower s contribution towards your downpayment 3% or more of the purchase price from borrower s contribution towards your closing costs Lenders Familiar with our BMR Programs Jeanette Hedgecock, NHSSV Loan Officer Jhedgecock@nhssv.org John Norgard, Guild Mortgage Loan Officer NMLS # Cell: Jnorgard@guildmortgage.net Brandon Azevedo & Victoria Long, Chase Bank Brandon: & Victoria: Brandon.azevedo@chase.com & victoria.m.long@chase.com City of Morgan Hill BMR Financing Requirements Buyers must commit at least 3% of their own funds (cannot be financed) towards the purchase transaction.

5 Buyers of re-sale homes may also be required to contribute $10,000 of their own funds towards the Real Estate Transaction Fee. The $10,000 can be included in the 3% contribution requirement upon lender s mortgage loan approval. Buyers must also pay for all closing costs Buyers must commit at least 3% of their own funds (cannot be financed) towards the purchase transaction. Maximum Mortgage Loans cannot exceed 100% of the sales price + 5% for closing costs Interest List & Offerings Interest List NHSSV maintains an Interest List of persons interested in purchasing BMR units. This is not a waiting list, rather a general interest list. Periodic updates are sent to notify applicants about an upcoming sale or changes to the Program. Buyers must attend a HomeBuyer Opportunities Orientation (HOO) to be placed on the interest list. To sign up for an Orientation, please HOO@NHSSV.org HomeBuyers are encouraged to regularly search BMR listings for homes that match their qualifications. NHSSV is not responsible for notifying interest list applicants about upcoming listings. HomeBuyers must research upcoming lotteries to track BMR home availability. BMR Offerings View BMR Homes for Sale at BMR POLICIES & PROCEDURES FOR CURRENT HOMEOWNERS Reviewing Your BMR Documents BMR Deed Restrictions are specific to each property. In order to fully understand your BMR agreement with the City, you should review your signed Deed Restrictions. HomeOwner Occupancy Requirements BMR HomeOwners are required to live in their home as their primary residence. NHSSV will routinely monitor homes for owner occupancy. Deed Restriction Defaults If HomeOwners are thought to be in default of the owner occupancy requirement, or any other BMR requirement per the Resale Agreement (Deed Restriction), the home owner will be given the opportunity to cure the default or the City/NHSSV could exercise its Option to Purchase and the HomeOwner will be asked to sell their home to a new BMR HomeBuyer. Military Leave & Vacated BMR Home Exemption BMR owners who currently serve in the U.S. Armed Forces and are deployed out of state and cannot occupy their BMR home for more than 90 days but less than (3) years will be allowed to rent their BMR home through the BMR Rental Program. The BMR owned home will be subject to the rules and regulations of the City s BMR Rental Program Policies and Procedures.

6 BMR HomeOwner(s) on Military Leave will need to: Provide the City with a copy of their deployment orders; Obtain the tenant from the City s Rental Program Waiting List; Sign an Amendment to the Resale Agreement for rental due to military service with an expiration date which the City will record against said BMR home; Low Income BMR will rent to Low Income Tenant at the Low income rent in accordance with the Federal Tax Credit rent. Low income are those households at or below 80% of median, adjusted for family size; Median Income will rent to Median Income Tenant at the medium income rent in accordance with the Federal Tax Credit rents. Median Income is those households at or below 100% of median, adjusted for family size. Contract with a property management company to maintain the property during deployment. Will adhere to the BMR Rental Program Guidelines. Will be required to re-occupy the BMR Home within 90 days from the end of deployment and provide the City with a copy of any lease/ rental agreement. The lease/ rental agreement may not be for a term in excess of the period of time owner(s) will be deployed out of the area. The BMR Rental Program requires that the owner of the home provide the tenant with a minimum of 90 Day Notice to Vacate; should the original rental timeline be less. If there is an active lease/ rental agreement between the owner and the tenant, then the owner must wait till the end of the lease agreement to move back in. However, upon a mutual agreement between the owner and the tenant, the least may be terminated at any time. Should there be disagreement between the owner and tenant, the City will refer both owner and tenant to a landlord/ tenant arbitrate, such as Project Sentinel for further assistance. Refinancing BMR HomeOwners are allowed to refinance their home provided it is done within the parameters of their signed Deed Restrictions. BMR Refinance Amount HomeOwners must review their Resale Agreement (Deed Restrictions) to understand their maximum refinance price. BMR homes can be refinanced up to 95% of their resale value. In most cases, resale price is valued at the percentage change in CPI Index between the date the BMR Restrictions were recorded and the resale date. In other cases, resale price is valued with the percentage change in the Area Median Income (AMI) between the date the BMR Restrictions were recorded and resale date. BMR Refinancing Requirements A BMR home that is 100% financed and the owner requests a refinance to substantially reduce the housing payment will be permitted ($200 per month or more). Second Mortgages Second mortgages or lines of equity are not allowed under the BMR Program. BMR HomeOwner Refinance Reminders Call NHSSV before talking to a lender about refinancing Refinancing is only allowed with prior approval from NHSSV The refinance approval process can take up to 3 weeks or more to process DO NOT sign loan documents without receiving NHSSV s approval letter; and

7 HomeOwners may refinance up to 95% of the current BMR value (in accordance with the formula listed in the Resale Agreement) Title Transfers - Including Through Inheritance HomeOwners must review their BMR Documents in order to determine if and how their homes title can transfer. If you have any questions about your transferring title, please speak to a NHSSV BMR employee. BMR Home Improvements & Re-sale Prices Substantial home improvements made to a BMR unit are allowed with prior City approval for any capital improvements to BMR homes. Common improvements include backyard landscaping, installation of air conditioning, window coverings and water treatment systems. The value of these improvements may be added to the resale price of the home at the time of sale only. Calculating BMR Home Improvements BMR HomeOwners need to aware that in order for improvements to be calculated into the resale value of the home they must: Show receipts for all items for which they want to receive credit (must be legible) Receipts cannot be handwritten Provide proof of all required building permits including final inspection Show City approval was obtained prior to improvement for which they want credit Reviewing Improvements Claims When reviewing the receipts provided by the HomeOwner, the City will determine which receipted items are eligible for credit towards the resale price. Items that are improvements shall be added. Items which are considered to be maintenance and/or preference items will not receive credit. Maintenance Items vs. Improvement Items Maintenance items are those that are required for the upkeep of the HomeOwner s property. Improvement items are those that enhance the value of the property. Examples are: Maintenance Exterior, interior paint Light bulb replacements Plumbing repairs Electric repairs Carpet replacement Improvements Installation of air conditioning Backyard landscaping Patio covers Tub enclosures (upgraded material) Garage door openers Reselling a BMR Home BMR HomeOwners who wish to sell their home before the Deed Restrictions have expired must sell their home to a BMR Program applicant. BMR homes may only be placed on the open market if the Deed Restrictions have expired. The City of Morgan Hill has assigned its Option to Purchase to NHSSV who can purchase the home or assign its option to purchase to the next eligible applicant. Real Estate commission fees are the responsibility of the seller unless otherwise indicated in the Deed Restrictions.

8 The process for reselling a BMR unit resembles that of the initial purchase of the BMR home. BMR HomeOwners and NHSSV have certain responsibilities to fulfill when it comes to the resale of a BMR home. Seller must comply with all terms and conditions that determine re-sale process indicated in the recorded BMR Deed Restrictions. BMR Resale Price HomeOwners must review their Resale Agreement (Deed Restrictions) to understand their resale price. In most cases, resale price is valued at the percentage change in CPI Index between the date the BMR Restrictions were recorded and the resale date. In other cases, resale price is valued with the percentage change in the Area Median Income (AMI) between the date the BMR Restrictions were recorded and resale date. Seller s Responsibilities The seller must review their Deed Restrictions and follow the procedures indicated in the document to resell their home. When a BMR HomeOwner decides to sell his/her/their home, he/she/they must notify NHSSV in writing as soon as possible. The HomeOwner s letter needs to include receipts for any improvements (that were City or NHSSV approved) made to the home if the seller wishes to have them added to the home s resale value. In accordance with California real estate laws, seller will disclose all aspects of the unit including but not limited to HomeOwners Association (HOA) dues, Mello Roos Assessment Fees, structural issues, etc. Real Estate commission fees are the responsibility of the seller unless otherwise indicated in the Deed Restrictions. Buyers of Previously Owned (Resale) BMR Homes Buyers for BMR homes that are being resold back into the Program will be chosen in the same manner the initial buyers were selected. Buyers will be required to execute a new Deed Restriction.