City of Perris First Time Homebuyer Homebuyer Assistance Program (HAP) Lender Training

City of Perris First Time Homebuyer Homebuyer Assistance Program (HAP) Lender Training 2010

Agenda Staff Introductions HAP Program Summary HAP Program Requirements HAP Program Procedures Becoming an Approved Lender Questions & Answers

HAP Program Summary The HAP Program makes available a limited number of deferred payment second mortgages for low and moderate income applicants who would not otherwise be able to purchase a property without the City s assistance The City of Perris must hold second position

HAP Program Summary HAP Program is specifically designed to provide qualified families or individuals with down payment/closing cost assistance necessary to secure financing towards the purchase of an existing or newly constructed single family home in the City of Perris Qualified homebuyers may receive up to $25,000 towards the purchase price of the home $370.00 00 City Fees are added on top of the requested HAP loan amount. Do not include this fee with your requested amount. At the time of funding, this amount will not be included d in the wire to buyers escrow. Funding is based on the availability of fiscal year funding

Summary Applicants must meet Eligibility Requirements Purchase Price Requirements Property must be existing or newly constructed single family home or mobile home on permanent foundation Only single family homes with one dwelling unit on a lot are eligible. Homes with two or more units on a lot are not eligible

Summary The HAP Program is a deferred/equity appreciation loan secured by a second deed of trust There are NO monthly payments and the loan is due and payable when the property is sold, refinanced with ih cash out, a change in title occurs, at the end of 20 years, or other non compliance of program guidelines. Equity appreciation loan. At the time of repayment, the City will share in equity gained. The percentage of equity shared is equal to the percentage borrowed from the HAP Program

Loan Principal Forgiven The City will forgive all or part of the principal balance based on the following chart Years 5 9 25% of principal i balance forgiven Years 10 14 50% of principal balance forgiven Years 15 19 75% of principal i balance forgiven Years 20+ 100% of principal balance forgiven

Principle Loan Forgiveness & Equity Share Calculation *Based on man HAP loan amount Principle Loan Forgiveness: Owner Occupied (years) % Forgiven Amount Owed 5 9 25% $19,027.50 10 14 50% $12,685.00 15 19 75% $6,342.50 20 100% $0.00 Capital Improvement Credits: $38,055.00 max. (Cannot exceed 150% of HAP loan $) $12,685.00 min. (minimum amount to obtain credits) Equity Sharing: please note, equity share is based on the appreciation value of your home at the time of repayment of HAP loan. If 50% of Capital Improvements are made, the appreciated value of the property may be reduced by the same value of the improvements. HAP Loan amount $25,370.00 Total Purchase Price $191,000.00 = 13% Equity Share EXAMPLE: % Equity Share X appreciation value = $ Returned to HAP HAP Loan amount $13,120.00 Total Purchase Price $150,000.00 = 9% Equity Share 9% X 50,000.00000 00 = $4,500.00

Improvement tcredits Applicants may apply for Capital Improvement Credits when eligible improvements are made to the property Improvements must be made to the property during the Participant s ownership of the property The value of the eligible improvements may be deducted form the appraised value of the property at the time of sale, transfer, refinance with cash out, or repayment in full and therefore reduces the amount of Equity Sharing Notification to the City prior to construction of improvements is required to ensure improvements are eligible to receive credits Qualifying improvements must equal or exceed 50% of the amount of the City Loan and shall not exceed 150% of the City Loan

1 st Mortgage Requirements HAP funds may be used with conventional, fixedloans, and with FHA, FNMA, FHLMC and privately insured loans with up to 40 year terms Loan must have fixed rate for the full term of the loan Variable/adjustable rate loans or negative amortization are not permitted No balloon payment loans h i hll b h h The interest rate shall not be more than the current market rate for the type of property being financed

Homebuyer Requirements At a minimum, the borrower s deposit monies must be equal to one percent (1%) of the total purchase price from any source. All Applicants will be required to satisfactorily complete lt an 8 hr HUD approved homebuyer educational workshop. The workshop is designed to educate homebuyers on the process of becoming a responsible homeowner A Homebuyer Training Certificate will be accepted for up to one (1) year after the date of training

Property Requirements The home to be financed by HAP funds must be inspected by a City inspector and must meet Minimum Housing Quality Standards HAP assistance will not be funded if major building code violations, such as illegal construction, illegal additions, garage conversions or any sever health and safety hazards are found. HAP funds cannot be used to correct code violations It is the lenders responsibility to schedule the inspection with the Redevelopment Project Coordinator Inspections only conducted on Tuesdays & Wednesdays Prior to loan closing City staff will conduct a meeting with borrower(s) to review major terms of the City assistance & execute HAP loan documents

HAP Program Requirements Applicant Eligibility Requirements In addition to meeting the credit and underwriting criteria established by the Participating Lender providing the first mortgage gg loan, the applicant must independently meet the requirements for HAP funding 3 Year Requirement 1. The applicant may not have held any ownership interest in a property within the past 3 years 2. HAP Applicant must occupy the acquired property as their Principal Residence. The applicant and anyone holding title must use the property being purchased as their principal residence. Lender will obtain from the borrower, using the programs affidavits, a statement of the borrower s intent t to use the residence as his/her Principal i Residence

Income Requirements Qualified Applicants must have an annual gross household income not exceeding current Moderate Income levels based on County of Riverside id median income levels l (subject to change without notice) Household Size One $52,100 Two $59,500 Three $67,000 Four $74,400 Five $80,400 Six $86,300 Seven $92,300 Eight $98,200 Maximum Income

Determining Household Income Income includes the income of all adult household members 18 years of age or older who will be living in the principal residence If adult is part/full time sude student, income documentation o is not required. Instead, school transcripts of current enrollment is required. Income of a co signer who will not be occupying the financed home will not be used in qualifying the applicant Cosigners occupying the home must also be on title Anyone holding title must reside in the financed property as their principal residence and must meet all other program requirements

Affordable Housing Costs Applicant must meet all applicable Affordable Housing Cost Standards, as defined by California Redevelopment Law Affordable Housing Costs are based on the percentage of the family s monthly gross household income and/or bedroom size of the unit Applicant s total housing expenses cannot exceed the Affordable Housing Cost

Determining Affordable Housing Cost Step 1: Calculate applicant s total housing expenses Step 2: Determine household h income category Step 3: Step 4: Calculate affordable housing cost according to household category Determine whether or not the total housing expenses exceeds the Affordable Housing Cost If total housing expenses exceeds the affordable housing cost, Applicant DOES NOT qualify

Step 1: Borrower Gross Annual Income: $ Monthly Income: $ Household Size: Buyer s Bedroom Size:

Step 2: Calculation 100% HUD Income Limits: $ Income Limits 1 Person 2 Persons FY 2009 Income Limits Summary Riverside County, California 3 Persons 4 Persons 5 Persons 6 Persons 7 Persons 8 Persons Very Low $23,300 $26,650 66 $29,950 $33,300 $35,950 $38,650 86 $41,300 $43,950 (50%) Extremely Low (30%) Low (80%) $14,000 $16,000 $18,000 $20,000 $21,600 $23,200 $24,800 $26,400 $37,300 $42,650 $47,950 $53,300 $57,550 $61,850 $66,100 $70,350 Low Moderate (100%) $44,760 $51,180 $57,540 $63,960 $69,06 0 $74,220 $79,320 $84,420 Moderate $53,712 $61,416 $69,048 $76,752 752 $82,872 872 $89,064 $95,184 $101,304 (120%)

Step 2: Calculation % AMI (Gross Annual Income/100% HUD Income): 30% (79% AMI or less) or 35% (80% 120% AMI): Borrower s Income Threshold (Monthly x 30% or 35%): Affordable Housing Cost (See Chart for Buyer s Unit Affordable Housing Cost (See Chart for Buyer s Unit Size below) :

Step 2: Calculation AFFORDABLE HOUSING COST (AHC) 2008/2009 Unit Size Of Purchase Category (2,3) Low Income (monthly) Below 80% AMI Category (4,5) Moderate Income (monthly) 80% 120% AMI Studio $733 $1,344 1 Bedroom $837 $1,534 2 Bedroom $942 $1,726 3 Bedroom $1,047 $1,919 4 Bedroom $1,131 131 $2,073 5 Bedroom $1,215 $2,228 6 Bedroom $1,298,9 $2,382

Step 2: Calculation Actual Housing Cost (add the following): $ P&I: $ Mtg Ins: $ Hazard Ins: $ Taxes: $ HOA: $ Maintenance: $50 Utilities (See Chart below): $ Housing Authority of the County of Riverside Utility Allowances for Tenant Furnished Utilities and Other Services Effective: 07/01/2008 Locality: West County 0BR 1BR 2BR 3BR 4BR 5BR 6BR $74.00 $103.00 $133.00 $163.00 $206.00 $237.00 $265.00

Step 3: Affordability Is the Actual Housing Cost of $ less than Borrower s Income Threshold of $? Yes, the Actual At Housing Costs meets HAP Requirements (if not, see Option 2). Is Borrower s o Income Threshold of $ less than Affordable Housing Cost of $? (if no, reduce purchase price). If you answered Yes to 1 & 2, identify if the larger amount between the Borrower s Income Threshold or the Affordable Housing Cost (bedroom size) and use in Step 3 as the Affordable Housing Cost. Is the Actual Housing Cost of $ _less than the Affordable Housing Cost (Borrower s Income Threshold or Affordable Housing Bedroom Size) of $? Yes, Actual Housing Costs meets HAP Requirements.

Examples of Determining Affordable Housing Cost Example 1: Applicant Household of 6 Property SFR with 3 bedrooms Total Gross Annual Income $78,084 Total Gross Monthly Income $6,507 Term of 1 st Trust Deed Loan Loan Amount $265,353.00 Loan Type Conventional Term 30 year Interest 6375% 6.375% Fixed Step 1: Determine Housing Expense $1,655.46 Principal & Interest $355.00 Property Taxes $130.40 Insurance $50.00 Maintenance $156.00 Utility Allowance $2,326.80 (back out $50 = $2,276.80) Step 2: Determine Household Category Category: 80% 120% AMI Step 3: Calculate Affordable Housing Cost $1,919.00 based on # of bedrooms $2,277.45 based on 35% of monthly income BUYER QUALIFIES

Examples of Determining Affordable Housing Cost Example 2: Applicant Household of 5 Property SFR with 3 bedrooms Total Gross Annual Income $54,516 Total Gross Monthly Income $4,543 Step 1: Determine Housing Expense $1,550.92 Principal & Interest $280.61 Property Taxes $177.75 Insurance $50.00 Maintenance $156.00 Utility Allowance Term of 1 st Trust Deed Loan Loan Amount $269,388 Loan Type FHA Term 30 year Interest 5625% 5.625% Fixed Step 2: Determine Household Category Category: Below 80% AMI Step 3: Calculate Affordable Housing Cost $1,047.00 based on # of bedrooms $1,362.90 based on 30% of monthly income $2,215.28 BUYER DOES NOT QUALIFY

HAP Program Procedures RESERVATION PHASE Lender determines if Applicant is eligible for HAP loan approval based on income, first time homebuyer s determination, affordability housing limits and related HAP requirements If Applicant preliminarily qualifies, lender requests from City a HAP Reservation by completing and submitting a HAP Request for Funds

HAP Program Procedures City responds to Lender on Lender s Request for reservation of HAP funds (either provides reservation, request more information for reservation, or rejects within 72 working hours Money is reserved for 45 days Lender has 45 days to Submit complete loan application copy package Schedule City HAP inspection Receive final commitment form from City Allow five working days to draw City Loan Docs Schedule Program Meeting for buyer(s) Allow escrow to pick up signed HAP loan docs & forward to County for recording Allow 2 days for City to prepare p wire & fund Close Escrow

HAP Program Procedures APPLICATION PHASE Lender certifies that applicant and the mortgage transaction comply with HAP program restrictions on Income, Affordability, and First Time Homebuyer status Lender certifies that lender has underwritten the maximum principal loan applicant qualifies to receive Lender submits Copy Package to City for underwriting During the Reservation Phase, Lender must immediately notify the City in writing of withdrawals for request of funds

Copy Packet FNMA Form 1003 Application, completed and signed MCAW or 1008 Form, completed and signed Escrow instructions, certified copy Preliminary title report Household members worksheet kh Appraisal Household members worksheet Credit report Tax Returns from previous (3) years, completed and signed for all adults who will occupy the home W2 s from all adults who will occupy the home (1) month current pay stubs from all adults who will occupy the home (3) months bank statements for all sources from all adults who will occupy the home VOR s form VOE s form Gift letters (if applicable) Explanation of derogatory credit HUD 1 Settlement Statement by escrow Statement of Information

HAP Program Procedures CITY REVIEW Step Deliverable Deadline Escrow Closing Date 4 01 2010 1 Issuance of Request for Funds 2 16 2010 2 City Inspection 2 23 2010 3 Copy Packet 3 15 2010 4 Final Loan Approval 3 25 2010 5 Program Meeting 3 29 2010 2010 6 Loan Docs 3 29 2010 7 Wiring 3 30 2010 45 Day Reservation Deadline (Calendar) 4 01 2010

HAP Program Procedures LOAN CLOSING/FUNDING Program Staff will contact buyers Escrow directly to request the following: Vesting Information Updated Escrow Settlement indicating all final costs Pick up of executed HAP loan documents Determine scheduling of funding

Becoming an Approved Lender Lenders must attend a HAP Program Training before being able to participate in the HAP Program Lender must read and sign Lender Agreement after training seminar to be placed on the approved lender list Lender must be in good standing with California Department of Real Estate Lender must obtain a City of Perris Business License due in 2 weeks (March 9, 2010) Continued qualification for the Program will require participation in future lender meetings

Approved Lenders If the individual who attended the HAP Lender Training is not with the same Lending Company, the individual must notify staff in writing & submit an update Lender Agreement within 2 weeks of this change. If Lender fails to comply with the terms and conditions of the Lender Agreement, the City may immediately terminate the Agreement and prohibit the Lender from participation in the HAP Program

Lender Responsibility Lender will process and review the application for any potential borrower in order to determine eligibility for the HAP Program Lender shall disqualify applications in which the submitted information indicates that either the applicant of the home does not qualify for the program Lender is responsible for submitting required information to City and complying with Program Guidelines

QUESTIONS