How To Get A Home In Novato

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1 Hello Novato! Info + Insights on Affordable Homeownership in Novato Hello Housing is a non-profit organization working on behalf of the City of Novato to manage their Below Market Rate Homeownership Program. Our goal of this newsletter is to provide helpful information and resources that may benefit you and your household and to provide answers to your most Frequently Asked Questions. Inside this Issue Resources for Financial Hardships Perspectives: Buying a BMR vs. Renting Frequently Asked Questions (Includes the latest policy changes approved by City Council on September 30, 2014) Home Maintenance Checklist HOA Maintenance Checklist Tax Benefit Checklist Won t You Join Us? Upcoming Workshop January 20 on Refinancing a BMR at 6:30PM in the War Room at Meadow Park, 500 Palm Drive, Novato. The City has a New Home New City of Novato offices are located at 922 Machin Ave, Novato, CA The City is closed every other Friday. Visit cityofnovato.org to hear about top local stories and upcoming events. Experiencing a Financial Hardship in your Household? Life throws curveballs. And in one of the most expensive regions in the country, it can be hard to cover basic expenses, much less unexpected ones. Keep Your Home California (keepyourhomecalifornia.org) offers multiple resources for people directly hit by the housing and economic crisis. Low and moderate income homeowners who have experienced hardships such as unemployment, disability, illness or death in the household may be able to benefit from Keep Your Home California. Let us introduce HERA Housing & Economic Rights Advocates Have legal questions about your home that need to be answered? Curious if you would qualify for a loan modification? HERA is a statewide non-profit organization that provides legal services, advocating that all people are protected from discrimination and economic abuses, especially in the realm of housing. Focusing on the lowincome, elderly, immigrants, people of color and people with disabilities, HERA is a great resource for a range of homeowners. Visit hereaca.org for more info. Not sure where to turn? Hello Housing can help. We are part of a network of service providers who are trained to assist homeowners facing various challenges. In virtually all situations, it is better to act early and fast than to wait until problems get bigger and harder to solve. What are your three favorite things about owning a home in Novato? Send your answer* to hello@hellohousing.org by January 15, and be entered into a drawing for a $50 gift certificate to Cooper s Public Market. *ANSWERS MUST BE A MINIMUM OF 25 WORDS TO QUALIFY! Have questions? We have answers! Please Andrea at andrea@hellohousing.org or call (415) x109. We d love to hear from you.

2 Perspectives Do you wonder if buying a Below Market Rate home was a good financial decision? Your answer will depend on many factors, but here is an example to help you answer this question for yourself. An Owner s Perspective Cash out-of-pocket: $171,058 The Gonzalez Family bought a 3-bedroom 2-bath condo at Meadow Park in Novato in They purchased it for $300,000, put in a $10,000 down payment, and received a forgivable loan for closing costs. Their mortgage payment has been $1647 per month. Since 2006, they paid out $215,697 in mortgage payments, private mortgage insurance, HOA dues and property taxes. However, by taking advantage of the mortgage interest deduction, property tax deduction and the homestead deduction, their real housing cost since 2006 is $171,058.* A Renter s Perspective Cash out-of-pocket: $185,760 The Smith Family rented a comparable 3-bedroom 2-bath apartment in Novato in Their rent was $1600 a month. Their landlord increased their rent by $30 each year, so by 2014, the monthly rent was $1840 a month.** Since 2006, the Smith Family has paid $185,760 to their landlord. Home Equity: $60,859 If the Gonzalez Family decided to sell their home today, they would have built $60,859 in equity in their home from paying down their mortgage, their original down payment and taking advantage of the City s allowable home appreciation at resale. There are transaction costs associated with selling a home. In a traditional sale, the seller pays 5-6% of the sales price in broker fees. In the City of Novato BMR program, sellers typically pay a reduced 3.25% of the sales price in fees. Home Equity: $0 By renting instead of owning, the Smith Family has built no equity since However, they were less vulnerable to the challenges facing homeowners during the foreclosure crisis. The value of this flexibility will be different for each and every person, and will evolve over time. So, in the example of the Gonzales Family: Original Purchase Price $300,000 Allowable Resale Price $306,630 Equity in the Home $ 60,859 Transaction Costs - 9,965 Cash to Seller $ 50,894 *For the purpose of this example, both the Smith Family and the Gonzales Family were responsible for their utilities. ** Median Novato apartment rents from 2006 through 2012 sourced from the City of Novato Housing Element from Other Reasons to Buy a BMR Greater housing stability compared to renting Freedom to make your home just how you like it Better access to quality school districts Better access to a safer community Homeownership a personal goal A shorter commute

3 Frequently Asked Questions How much can I sell my home for? Depending on the market conditions, your sales price will be limited by either (1) the Eligible Buyer Purchase Price as defined in the restrictions recorded on your home or (2) be limited by how much an eligible buyer is willing and able to pay for your home. Please take a few minutes to review the following information so you can understand these limiting factors and take them into consideration when contemplating the sale of your home. 1 Your sales price is limited by the Eligible Buyer Purchase Price as defined in the recorded restrictions. The Affordability Covenant, signed by you when you purchased your home, is the document that governs the BMR program in the City of Novato. Section 4.5 of this Covenant includes a formula that calculates the Eligible Buyer Purchase Price based on your specific circumstances. You can think about the Eligible Buyer Purchase Price as the maximum amount you can sell your home for according to a calculation in the program documents. Key variables in this calculation include: The original price you paid for your home The year you purchased your home The year you are selling your home The change in the Area Median Income (AMI) as defined by the U.S. Department of Housing and Urban Development (HUD) between your purchase year and your sales year. The depreciated value of any City-approved capital improvements, if applicable, at time of sale. AMI is published annually by HUD, typically in February. In 2014, the AMI in Marin County actually went down compared to The following chart shows you the change in AMI between your original purchase year and For example, if you purchased your home in 2009, and were selling in 2014, you would use 0.3% as the percentage change in AMI. Please note that if the change in the AMI is negative, the City will use 0% when calculating the Eligible Buyer Purchase Price. To calculate your maximum sales price, you would multiply 0.3% by your original purchase price, then add that amount to your original purchase price along with any depreciated value of approved capital improvements. Please check the Hello Housing website in February for updated AMI percentages which could result in a higher allowable resale price in 2015 compared to Year of Purchase % change in AMI as of 2014 % change for use in your resale formula 2.21% 2.21% 2.21% 2.21% 2.21% 0.3% 2.3% 4.6% 6.1% 4.2% 0% 2.21% 2.21% 2.21% 2.21% 2.21% 0.3% 0% 0% 0% 0% 0% 2 Your sales price may be further limited by how much an eligible buyer is willing and able to pay for your home. In a traditional sale of a home, sellers can compare their home to similar homes recently sold to determine a sales price. Below Market Rate (BMR) homes have unique restrictions, so sellers of BMRs do not have the benefit of looking at comparable homes recently sold in the area use when determining a sales price. In fact, even similar homes within the same BMR development (e.g. same number of bedrooms and bathrooms) may not serve as comparable sales because they are restricted for sale to households with varying income levels. It is this restriction that allows the City to provide long-term affordable homeownership opportunities to future generations. The City s preferred lender can provide you with a sales price range, but ultimately it depends on how much an eligible buyer is willing and able to pay for your home. January 2015

4 Frequently Asked Questions Can I rent out my home? No. The development of affordable housing requires significant public investment. These public resources come with conditions that must be met after the homes are built. Your home was developed to be lived in by a homeowner. In contrast, there are affordable developments in Novato that can only be rentals. Hello Housing is finishing up its second annual compliance monitoring Please spread the word that on September 30, 2014, City Council authorized City staff to take action in cases where homeowners are renting out their home in violation of the program. Can I renovate my home? Yes, however any improvements you make to your home must meet all local and state building code requirements and be approved by your Home Owner s Association (HOA). If you would like the opportunity to recoup some portion of the costs of your renovation when you sell your home, you must get written approval of your proposed improvements from Hello Housing on behalf of the City of Novato, prior to performing the work. Hello Housing will provide you with a depreciation schedule for approved improvements. This means that as time passes since your renovation is complete, the dollar value you can add to your resale price declines. You must provide legible copies of all receipts to Hello Housing. We always recommend you make your decisions about improvements based on your enjoyment of the home, not based on increasing the resale value. Will refinancing my home save me money? Interest rates remain relatively low, so if you are an original buyer, you may be able to reduce your monthly payments by refinancing your first mortgage. However, if you have been making principal and interest payments on your 30 year mortgage for a number of years and you refinance, you will be starting your 30-year payment term all over again. While this can reduce your monthly payments, it will increase the total amount of interest you pay to your lender(s) during your tenure as the owner of your home. This is because homeowners pay far more interest than principal in the earliest years of your mortgage term. When you know better, you do better. Maya Angelou What else should I know about refinancing? Until December 31, 2015, you may be eligible for a refinance through a federal program commonly referred to as HARP (Home Affordable Refinance Program). HARP is a useful refinance program, especially for homes that may still be underwater meaning the total dollar value of the loans on your home exceeds the appraised value. There are a few conditions which must be met to qualify, one of which being that your first mortgage was purchased or or guaranteed by Fannie Mae or Freddie Mac on or before May 31, You can check to see your status by entering your address and last four digits of your social security number into the Fannie Mae and Freddie Mac loan look-up websites. knowyouroptions.com/loanlookup and ww3.freddiemac.com/corporate/. If you have explored a HARP refinance in the past and been told by a lender or Hello Housing that you are ineligible, a recent policy exception approved by the City of Novato City Council on September 30, 2014 may be able to help. Please contact Matt Warner with Hello Housing to learn more. Can I refinance and get cash out? The program documents prohibit taking cash out. However, on September 30, 2014, City Council approved a termlimited policy exception allowing limited cash out to eligible owners. Please contact Matt Warner at matt@hellohousing.org to learn more and to learn whether you may be eligible. January 2015

5 Home Maintenance Checklist MONTHLY Fire Extinguisher: First, make sure you have one and know where it is! Then, check that it s fully charged; recharge or replace if needed. Sink/Tub Stoppers and Drain Holes: Clean out debris. Running warm water helps loosen debris. Garbage Disposal: Flush with a mixture of hot water and baking soda to keep it running properly. Forced-Air Heating System: Change filters monthly if your system uses fiberglass filters. EVERY 2 MONTHS Range Hood: Clean the grease filter. EVERY 3 MONTHS Faucets: Clean debris and mineral deposits out of the aerator (a small screen screwed onto your faucet) to keep water flowing smoothly. Garbage Disposal: Tighten drain connections and fasteners. Range Hood: Clean fan blades and housing. ANNUALLY Water Heaters: You should flush your water heater out annually to remove and residue from piling up in the bottom of the tank. Please follow manufacturer s instructions for flushing the system. Windowsills, Doorsills, Thresholds: Fill cracks, caulk edges, repaint; replace if needed Window and Door Screens: Clean screening and repair or replace if needed; tighten or repair any loose or damaged frames and repaint if needed; replace broken, worn, or missing hardware; tighten and lubricate door hinges and closers. Checklist adapted from Sunset Books JoAnne Liebeler s Do It Herself by Hello Housing Tub Drain: Clean out debris. Outdoor Drain Grates: Clean out debris to ensure proper drainage around your home. EVERY 6 MONTHS Smoke Detector: Test batteries and replace if needed. We recommend you do this before that dreaded beeping sound wakes you up in the middle of the night. Toilet: Check for leaks and water run-on. That running sound means you are wasting water and money. Interior Caulking: Inspect caulking around tubs, showers, and sinks; replace any if missing or cracking. Caulk helps keeps water from your relaxing bath from rotting the wood studs and plywood behind your wall and floors. Forced-Air Heating System: Replace the filter if your system uses high-efficiency pleated or HEPA-style filters. Saving up for 2015? The best way to keep home repair costs low is to preform preventative maintenance. If you see tasks on this list that you aren t sure how to tackle, there are instructional videos online that describe how to do just about everything. Check out websites such as of to learn how to do basic repairs.

6 Your HOA Checklist HOAs are typically responsible for the following maintenance items, but they can do a better job with your help. Roof, Gutters and Downspouts: Notify your HOA immediately if you notice a roof leak or if gutters and downspouts are not draining properly. Our recent rains provide a rare opportunity to check for such problems! Trees: It is a good idea to inspect for any branches that are at risk of falling on your home or touching your home and then notify your HOA for trimming. Our drought conditions followed by recent heavy rains make this especially important. Siding, Foundation, Exterior Trim, Exterior Doors, Decks, Exterior Stairs and Driveways: Your HOA will maintain and repair all of these areas. Please notify your HOA with any request for repairs. Mold: Exterior mold should be remediated by your HOA. Please notify your HOA if you notice any areas that have mold sooner rather than later. Common Area Landscaping and Walkways: Your HOA is responsible for maintaining all landscaped areas and walkways in the common areas only. If you notice any broken sprinkler heads, dead plants, cracked concrete, or even termites or pests, please contact your HOA immediately. Common Area Electrical: All common area electrical and fixtures are the responsibility of your HOA. Please notify your HOA if you see any nonfunctioning lights or exposed wires. Sanitary Sewer and Storm Drains: Sewer and storm drains are maintained by your HOA in all common areas. Fire Sprinkler System: Your HOA will maintain the fire sprinkler system in your home. Please notify them immediately if you see any problems with the sprinkler heads in your home. Exterior Caulking: Inspect caulking and notify the HOA if you notice any of the caulking is missing or deteriorating which may allow water or pests into your home. Termites: Inspect the perimeter of your home for evidence of termites, such as mud tubes around the foundation. Make sure that there is at least six inches of clearance between any soil or mulch and the bottom of your siding. If you see evidence of termites or other pests, contact your HOA immediately. Your Tax Benefit Checklist Homeowner s Property Tax Exemption Now is a great time to make sure you are taking advantage of the Homeowner s Property Tax Exemption. This program is administered by the County Assessor in accordance with State law. Residents of dwelling units owned and occupied as a principal place of residence as of January 1, 2013 are eligible for an exemption of up to $7, of assessed valuation, resulting in reductions on your tax bill ranging from $70.00 to $94.93 depending on applicable tax rates. For information on how to obtain the exemption, inquire at the Marin County Assessor-Recorder s Office at (415) Home Mortgage Interest Deduction The Home Mortgage Interest Deduction is one of the greatest financial benefits of homeownership. Home mortgage interest is any interest you pay on a loan secured by your home. You can deduct your home mortgage interest payments from your taxable income under certain conditions. To learn more, visit IRS.gov and search for Publication 936 or consult with a tax professional. Property Tax Payment Deduction In addition to your home mortgage interest deduction, you may be able to deduct what you pay each year in property taxes. Deductible real estate taxes are generally any state, local, or foreign taxes on real property levied for the general public welfare. They must be charged uniformly against all real property in the jurisdiction at a like rate. To learn more, visit IRS.gov and search for Topic 503 or consult with a tax professional.