CITY OF PERRIS HOUSING DIVISION 135 N. D STREET, PERRIS, CA TEL: (951) FAX: (951)

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1 CITY OF PERRIS HOUSING DIVISION 135 N. D STREET, PERRIS, CA TEL: (951) FAX: (951) HOMEBUYERS ASSISTANCE PROGRAM F.A.Q S for Buyers What is the Homebuyer Assistance Program (HAP)? The Homebuyer Assistance Program is designed to provide qualified families with up to $25,000 in down payment and closing costs assistance necessary to secure financing towards the purchase of home. H.A.P is positioned as a second mortgage loan. What is a first time homebuyer? A first time homebuyer is any person who has not owned a home or held ownership interest in the previous three years. Any person who has owned a home in the past, but has not owned a home in the last three (3) years qualifies as a first time homebuyer. I am a first time homebuyer but my spouse/significant other is not. Can we still qualify for H.A.P? Unfortunately all buyers applying for H.A.P. assistance must be first time homebuyers at the time Lender submits a Request for Funds. What are the H.A.P fees? There is a $370 loan servicing and processing fee which will be added on top of the requested and approved H.A.P loan amount. Who qualifies for H.A.P? Three minimum criteria for eligibility of the Homebuyer Assistance Program are: (1) buyer must be a first time homebuyer(s) or have not held ownership interest in a property within the past three (3) years; (2) buyer s annual gross income must not exceed HUD income limits (120% of the area median income for Riverside County) see H.A.P brochure; (3) home being purchased must be located within the incorporated City limits of Perris. What are the other buyer requirements? (1) The buyer must have sufficient income and creditworthiness to qualify for a first mortgage through one of the City Approved Participating Lenders. The First Loan must be the maximum the applicant can qualify for and still be in compliance with affordable housing cost limitations. The lender must apply the maximum amount of funds that the applicant qualifies for under the criteria to the first lien. Homebuyer Assistance Program- F.A.Q s 3/17/2010 Page 1

2 (2) Once pre-qualified by a City approved lender for H.A.P, prospective buyers must complete an 8-hour Homebuyer Education Workshop that is HUD approved. Free monthly Saturday workshops are held in the Public Library in the City of Perris by the Fair Housing Council of Riverside County. Call to reserve your seat for the next workshop. What are the requirements of the first mortgage loan? H.A.P. may be used with conventional, FHA, FNMA, & FHLMC and privately insured loans; year terms. Fixed interest rate. Variable/adjustable rate loans (FHA or Conventional) or negative amortization are not permitted. The interest rate shall not be more than the current market rate for the type of property being financed. No balloon payment loans. What are the terms of the Homebuyer Assistance Program? No monthly payments 0% interest Principle Loan Forgiveness Capital Improvement Credits Equity Sharing What is the process to apply for the Home Buyer Assistance Program? 1. Prospective buyer(s) meets with approved lender & is pre-qualified for 1 st mortgage & H.A.P. 2. Lender submits a Request for Funds. 3. City staff reviews request and responds within 72hrs. 4. Reservation is issued. Lender has 45 days to submit Copy Packet of information. 5. Lender requests a City Inspection of home. 6. Lender submits Copy Packet; staff has 7-10 working days to review and complete underwriting. 7. Final Loan approval issued. 8. Staff contacts buyers escrow & requests updated HUD & Vesting information to draw H.A.P Loan Documents & schedule program meeting for buyer(s). 9. Program meeting with buyer(s) is conducted and H.A.P loan docs are signed. 10. Escrow picks up signed H.A.P loan docs and forwards to Riverside County for recording. 11. Staff coordinates with buyers escrow for funding date. How much H.A.P assistance will I receive & how is it determined? H.A.P assistance is up to $25,000 and the amount may vary. Your lender will determine how much assistance you will need. What costs can be paid by the Homebuyer Assistance Program? H.A.P is designed to assist homebuyer with Down Payment & Closing Costs to secure financing for the purchase of a newly constructed or existing home. Homebuyer Assistance Program- F.A.Q s 3/17/2010 Page 2

3 What is the minimum Credit Score for H.A.P? H.A.P does not have a minimum credit score requirement. However, the buyer(s) must qualify for a first mortgage loan from an approved City Lender based on FHA regulations. How long after filing bankruptcy do I have to wait to apply for H.A.P? For H.A.P, the bankruptcy must be completely discharged at the time a Request for Funds has been submitted. What are the qualifying incomes? In order to be eligible for this program, the buyers annual gross income shall not exceed 120% of the area median income for Riverside County, as determined by HUD, adjusted for family size. In addition, assets shall not exceed these limits. Currently, the income limits are as follows: Maximum Annual Household Income Adjusted for Family Size FY 2009 *Income Limits subject to change without notice Family Size Annual Income Limit 1 $53, $61, $69, $76, $82, $89, $95, $101, Whose income is used to determine the maximum household income? All adult (18 yrs old and over) income who will be living in the home will be used to determine the total household income. I have an adult child living with me but they do not pay any bills or pay rent. Does their income count? Yes. All adults (18 yrs old and over) income who will be living in the home will be used to determine the total household income even if they do not contribute towards the household bills. I have a relative who will be living in the home who does not work and receives Social Security or Supplemental Income and does not pay any rent or bills. Does their income count? Yes. All adult (18 yrs old and over) income who will be living in the home will be used to determine the total household income even if they do not contribute towards the household bills. I receive child support. Does that count? Yes. That is considered income and will be counted. I get Social Security for my child. Does that count? Yes. That is considered income and will be counted. Homebuyer Assistance Program- F.A.Q s 3/17/2010 Page 3

4 I have an adult child who attends school part/full time and works part time/full time. Does that count? No. A letter from the school registrar s office or school transcripts of current enrollment must be provided. I have an adult child who attends school part/full time and receives grants and/or financial aid. Does that count? No. Assistance for higher education does not count towards household income. How much down payment do I need to qualify? H.A.P guidelines require a minimum down payment of 1% of the total purchase price of the home. For Example: Total Purchase Home Price $160,000; 1% down payment is $1,600 What are the repayment terms of the H.A.P loan? There are no H.A.P monthly payments. Repayment of the loan is due at the time of title change, resale, refinance with cash out, an equity line of credit is opened, or non compliance with program guidelines. Should payment become due, payment is based on the forgiveness calendar. The principle balance can be reduced if the minimum amount of approved capital improvements is made on the home after purchase. When is the loan forgiven? The City of Perris will forgive a percentage of the H.A.P loan principal balance based on the number of years the property remains owner occupied (see table below). Borrowers are still responsible to repay any outstanding loan principle and equity sharing. Loan Principle Forgiveness Owner Occupied % Forgiven % % % % For Example: Principle Loan Forgiveness: based on the $25,370 maximum HAP loan amount (including title servicing fee) Owner Occupied (years) % Forgiven Amount Owed % $19, % $12, % $6, % $0.00 What is Equity Sharing? Equity Sharing is a percentage of any equity appreciation that is repaid to the City s Homebuyer Assistance Program at the time of repayment due to sale of the home or voluntary prepayment. Total H.A.P loan Amt Total Purchase Price = Equity Share% Homebuyer Assistance Program- F.A.Q s 3/17/2010 Page 4

5 For Example: HAP Loan amount $13, Total Purchase Price $150, = 9% Equity Share Why is there Equity Sharing? Equity Sharing is implemented because the City offers 0% interest on H.A.P loans and requires no monthly payments. Equity Sharing is designed to return funds to the Homebuyer Assistance Program in order to assist other families purchasing a home in the within the incorporated City limits. How do I know how much I have to pay back in equity share? Once you sell the home or wish to voluntarily pay the H.A.P loan, the following formula will be used to determine how much you will pay based on your equity share percentage and the appreciation value of the home at that time: For Example: Equity Share% X appreciation vale = $returned to H.A.P 9% Equity Share X 50, appreciation value = $4, returned to H.A.P Equity appreciation value can be reduced if the minimum amount of approved capital improvements is made on the home after purchase. The monies returned will be deposited back into the Homebuyer Assistance Program account in order to assist future homebuyers. Can I end up paying more in Equity Share than what my original H.A.P loan amount was? If so, why? There may be an instance where this may happen. This will only happen if the property value of the home increases dramatically. You may refer to the set equity share formula to determine the value at any time. What are Capital Improvement Credits? Capital Improvements are credits given for upgrades & additions done to the home after purchase that will add value to the home. These are not reimbursements. Credit is not given for recreational items. Before doing any work, buyers will submit a Capital Improvement Request Form (available online) to the Housing Division for approval. Once approved work has been completed, buyers will submit all receipts, invoices and permits to the Housing Division for credit. A running total of credits will be kept. A minimum of fifty percent (50%) of the H.A.P loan must be met in order for the Capital Improvement Credits to be applied for principle & equity appreciation reduction. The maximum of Capital Improvement Credits that will be given is 150% of the H.A.P loan. What is the maximum home price? There is no set maximum home purchase price. However, a family cannot pay more than a given percentage of their total monthly gross income and/or exceed the Homebuyer Assistance Program- F.A.Q s 3/17/2010 Page 5

6 maximum affordable housing costs based on the bedroom size of the purchased unit toward the proposed housing costs. What are the qualifying property locations? Any home that is for sale within the Incorporated City Limits of Perris is eligible for H.A.P. Any home that has an address with four (4) numbers or less in the address is eligible. If a home has five (5) numbers or more in the address it pertains to Riverside County. For homes not within incorporated Perris limits, contact the Riverside Economic Development Agency for housing programs at (951) or (800) What kinds of properties are eligible? Single Family homes Detached Condominiums Mobile Homes on permanent foundation Foreclosures Short Sales Sold by Owner New Construction Will the City inspect the home? Yes. Once a reservation has been made the Lender is responsible for contacting the Housing Staff to schedule an inspection. Inspections are only done on Tuesdays and Wednesdays. The Inspector will be inspecting the health and safety of the home as well as ensuring there are no garage conversions or illegal/non permitted construction. What if the home has a Code Violation? Can H.A.P funds be used to correct it? No. H.A.P funds cannot be used to correct any code or health and safety violation. Can I use any Lender? No. All buyers must use one of the contact persons listed on the City Approved Lender List (available online). Buyers must consult with the listed contact person. The entire office staff and its branches are not approved, just the listed contact person. Can I rent my home? No. The home purchased with the assistance of the Homebuyer Assistance Program must be used as a primary residence/owner occupied. Can I put the property into a Living Trust? The City will allow properties to be held in a living trust on a case by case basis pending acceptable review of the living trust documents by Housing Staff. If I pass away, what happens to the home? That depends on how the estate will be handled. If the person who inherits the home wants to put the home in their name, they will have to repay the H.A.P loan. Homebuyer Assistance Program- F.A.Q s 3/17/2010 Page 6

7 What happens if I go into Foreclosure? The H.A.P Mortgage will go into foreclosure concurrently with the first mortgage and you will go into repayment with the City. Does the City monitor its homebuyers? Yes. Once a year you will be required to mail back a Self Certification postcard attesting to the fact that you are still occupying the home as your primary residence. Where can I get information to attend the First Time Homebuyer Workshop? The First Time Homebuyer Education Workshop is announced monthly on our City website ( Workshop flyers are also posted in the City library, Chamber of Conference, Bob Glass Gymnasium, and the Developmental Services Building. What if I can t attend the Homebuyer Workshop in Perris? Are there other workshops available? If you cannot attend the Perris workshop there are several other options. Contact the Fair Housing Council of Riverside County at or visit HUD at for education providers. A list of agencies that provide Homebuyer Education is available on our City website ( All Homebuyer Education must be HUD approved. Can I do an online Homebuyer Education Class? Yes, only if the online class is HUD approved. What is the cost for the Homebuyer Education Workshop? There is no cost for the monthly workshops held in the Perris library. There may be a fee associated with other agencies providing Homebuyer Education. Please call the particular agency and inquire about their fees. Is there a deadline to apply for this program? The Housing Division will accept Request for Funds from approved lenders on a first come first, serve basis, until program funds are depleted. Homebuyer Assistance Program- F.A.Q s 3/17/2010 Page 7