BELOW MARKET PURCHASE (BMP) PROGRAM ELIGIBILITY REQUIREMENTS AND PURCHASE PROCESS

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1 BELOW MARKET PURCHASE (BMP) PROGRAM ELIGIBILITY REQUIREMENTS AND PURCHASE PROCESS Program Overview The City of Santa is offering first time homebuyers an opportunity to purchase newly constructed homes in various developments within the City of Santa Clara through its Below Market Purchase (BMP) Program. The City of Santa Clara has partnered with Housing Trust Silicon Valley (HTSV) to assist in the administration of this program and in facilitating the buyer selection process. The BMP Program offers new condominiums, single family and townhouse style homes for sale at lower than market rate price for low to moderate-income households. A BMP home is subject to a 20-year City loan, secured by a Promissory Note, Deed of Trust and Security Agreement, and the BMP Covenants, Restrictions, and Option to Purchase which are recorded upon the initial sale of the property. The 20-year City loan is the principal amount of the Promissory Note. The principal amount of the Promissory Note is the difference between the appraised unrestricted Initial Market Value (IMV) of the home and the restricted Affordable Sales Price (ASP) when the BMP home is initially sold. For homes to remain affordable, a home purchased through the BMP Program carries the following resale restrictions for a twenty (20) year term. Year 1 through 5 of ownership: A BMP homeowner who decides to sell their home must sell at a restricted sales price to an eligible homebuyer as defined by the resale restrictions. The principal amount of the BMP Promissory Note is forgiven and another principal amount is established for the new owner. Equity share is capped. Year 6 through 20 of ownership: A BMP homeowner can resell their home to whomever they choose at the current, unrestricted fair-market price. The BMP homeowner will pay off the principal amount of the BMP Promissory Note at the sale of the home. The BMP homeowner shall pay a share of the increase in equity in the home to the City. After the 20 th year of ownership: Resale restrictions expire. The homeowner is required to pay back the outstanding principal of the BMP Promissory Note. The homeowner is able to realize all of the market-driven appreciation in the home above its initial market value. No equity share to the City is required. EQUITY SHARE EXAMPLE For this example assume a Principal amount of City Note $115,000 Assumed Unrestricted Resale Price $600,000 Less capital improvements approved by City - 5,000 Net Unrestricted Resale Price = $595,000 Less Initial Market Value (at time of Original Purchase) -$500,000 (BMP Sales price=$500, ,000= $385,000) Appreciation Amount = $95,000 City's Equity Share (20-6)/20 times the Appreciation Amount or 70% ($66,500) Seller's Equity (Appreciation Amount less City's Share) $28,500 (Seller gets 5%/yr increase in shared Appreciation Amount) Rev 10/16 1

2 OR (Interest Calculation on BMP Note) Appreciation Amount $95,000 7% simple interest on BMP Note ($115,000 principal) ($48,300) Seller's Equity (Appreciation Amount less City's Interest) $46,700 Information about this program and requirements can be found on: Eligibility Requirements Be a first-time home buyer as described by the City of Santa Clara BMP program guidelines, as amended; Gross Household income cannot exceed 120% of the Area Median Income (AMI), adjusted for household size. AMI levels may vary according to the development see table below; Maximum Household Incomes as determined by the State of California s Housing & Community Development Department % $59,400 $67,900 $76,400 $84,900 $91,650 $98, % $74,950 $85,700 $96,400 $107,100 $115,650 $124, % $82,445 $94,270 $106,040 $117,810 $127,215 $136, % AMI $89,950 $102,800 $115,650 $128,500 $138,800 $149,050 Must qualify for a first mortgage with a thirty-year, fixed-rate conventional loan. Credit-Minimum FICO is 640 (middle score) o No short sales or bankruptcy within the last 4 years o No foreclosures within the last 7 years Must have less than $100,000 in financial assets (excluding retirement assets). Attend a City of Santa Clara BMP Orientation & Application Workshop hosted by Housing Trust Silicon Valley. Attend a HUD Approved 8-Hour Homebuyer Education Class through Project Sentinel and obtain a Homebuyer Education Completion Certificate. Minimum 3% down payment required from borrower. Additional down payment may be required. Approved BMP lenders may require at least 5% down payment from the borrowers. Currently there is no down payment assistance available. Must have funds for closing costs and prepaid items. Lenders may require additional reserves. Steps 1. Complete a Pre-Qualification Intake Questionnaire with Housing Trust Silicon Valley staff-htsv will review intake forms by Priority Levels and send out an to potential applicants of pre-eligibility. If you haven t attended an Orientation and Application workshop or the 8 Hour Homebuyer Education class, you may want to consider registering and attending as soon as possible. 2. Attend a BMP Orientation & Application Workshop held by Housing Trust Silicon Valley Rev 10/16 2

3 For applicants who have not attended this workshop and submit an application, a workshop may be arranged during HTSV business hours at its convenience. A Household s application cannot receive eligibility approval until the completion of this workshop. An applicant household who has not completed this workshop or the 8 Hour Homebuyer Education class will not have first come, first serve status for developments with this designation and will be on a waiting list until all requirements are met. 3. Register and attend an 8-hour Homebuyer Education Class from an approved HUD Certified agency Borrowers/Co-borrowers (including non-borrowing spouses) and any co-applicants who are household members and will be on title and/or the first mortgage loan must attend. A Homebuyer Education Certificate is valid for up to 2 years from its issuance at the date of accepted eligibility application. Applicants who have not attended an 8-hour Homebuyer Education Class and are submitting an application must submit a copy of the registration confirmation from approved HUD certified agency for a workshop date within 10 calendar days of the application submission date. The approved HUD Certified agency for the 8 Hour Homebuyer Education Class is Project Sentinel. You can contact Project Sentinel by phone (408) or at sjworkshops@housing.org. Its website address is 4. Preview the Available Properties and Development: Review the property and income information of the homes available by the development on the BMP webpage. Drive by the development (if still under constructions or visit model homes if available). Each new development will have a website through the builder. Preview the floor plans and amenities of the homes on the builder s website. 5. Determine Household Eligibility by: Reviewing Eligibility requirements on the webpage: If you meet the qualifications and have the required funds for deposit and closing costs, contact HTSV staff to assist with BMP lender referral. HTSV staff will review the information you submitted on your pre-qualification intake form. Obtain Prequalification/Pre-approval from Approved BMP Lender. Complete BMP Eligibility Application and gather all required documents to submit at an open application period. Make an appointment with HTSV to submit your application during an open submission period for the announced development. o You cannot transfer your Eligibility Application for another development during the process or after approval. Rev 10/16 3

4 o You can cancel your application at any time and resubmit for another development during its open submission period. o HTSV will not make copies of application packages submitted. You will be required to submit all new documentation and pay the application fee. 6. Housing Trust reviews application for preliminary eligibility The applicant s priority level will be determined as follows: o 1 st Priority Level- At least one household member* who both lives within the City Limits of the City of Santa Clara and operates a business or is employed by a business or a public or quasi-public agency in Santa Clara o 2 nd Priority Level- Household lives with the City Limits of the City of Santa Clara o o 3 rd Priority Level- At least one household member operates a business or is employed by a business or a public or quasi-public agency in the City of Santa Clara 4 th Priority Level- Any other qualified applicant household without regard to residency or employment *The qualifying household member must be the person or a dependent of a person whose name will appear on title and who will live in the unit as their primary residence. City of Santa Clara residency is defined as established residency of six or more months. Eligible applicants must maintain their eligibility until a BMP home is available. o Income and asset information received at application are valid up to 90 days from the issue of the Eligibility letter. o After 90 days, income, asset and residency documentation will be outdated. o It is the applicants responsibility to maintain their eligibility by submitting updated documentation. The City of Santa Clara and/or Housing Trust Silicon Valley may change program or selection process at their sole discretion at any time without notice. An Applicant submitting an eligibility application containing misrepresentations or falsifications will be subject to immediate disqualification from the BMP program for the City of Santa Clara for a set period of time as determined by the City of Santa Clara. 7. Pre-Approval and Mortgage Eligibility Down payment assistance is not specifically available for new construction BMP homes in Santa Clara at this time. Borrowers may be required to bring in 5% or more for down payment. FHA loan guidelines are not compatible with the BMP program. Applicants with a pre-approval application from a non-approved lender cannot submit an Eligibility Application until the non-approved lender seeks and receives approval from BMP administrator and the City first. 8. Final Program and Mortgage Eligibility Review Applicant will then be matched with a BMP home according to availability household size, household members and occupancy standards. Rev 10/16 4

5 9. Selection of BMP Home Lottery Policy Eligible applicants selected from the highest priority level will have the first opportunity to purchase the assigned home. Selected eligible applicants are responsible for setting a viewing and purchase contract appointment within 3-5 days of confirmation with the Developer s sales staff. As homes become available, they will be matched first to Program eligible applicant ranked in the Highest Priority Level and by Household Size per the number of bedrooms in the home as determined by the Occupancy Standards. Builder upgrades to the home will not be permitted. The Builder will choose all exterior design features and homes are sold on an as-is-basis. Any previously selected applicants choosing to pass on their second opportunity to purchase a home will lose any priority level ranking and have their application moved to the end of the list of eligible applicants for this project. Although a real estate agent is not necessary for the purchase of a BMP home, you may hire a Realtor at your own expense. A lottery is held when more than one Eligible Household with the same Priority Level ranking exists. Eligible applicants will be notified a lottery for their priority level exists and given the date the lottery will be held. HTSV will privately conduct the lottery to select an approved Applicant Household. o Several HTSV staff members and occasionally a representative from the City of Santa Clara is present at the drawing Selected applicants may pass only once on an assigned home within the development without losing their priority level ranking unless eligibility is not maintained. 10. Purchase Contract and Sale Application The Purchase contract, related disclosures and real estate documents for the home are signed with the Developer s sales staff. A deposit check for 3-5% of the purchase price (may vary based on development) will be collected from the applicant at the signing of the purchase contract. A BMP Purchase Application is completed by the selected eligible applicant and submitted to lender. o A $500 non-refundable purchase application fee from the applicant made payable to Housing Trust Silicon Valley will be due upon receipt of the BMP Purchase Application package from the lender. 11. In Person Review of BMP Loan Documents, Disclosures and BMP Acknowledgment All borrowers/co-borrowers including non-borrowing spouses must attend an appointment to review and sign the BMP Promissory Note, Deed of Trust and Security Agreement, BMP Covenants, Restrictions and Option to Purchase, and BMP disclosures. All borrowers/co-borrowers including non-borrowing spouses are required to take a BMP test acknowledging their understanding of the BMP program. Rev 10/16 5

6 12. Loan Approval Lender will submit your complete loan application to their mortgage underwriter for final approval of your first home mortgage loan. Your lender may require supplying updated income and asset documentation from all borrowers in your household as necessary by deadline. Builder/Developer will schedule a walk thru and a property orientation. 13. City of Santa Clara Review and Approval The Housing and Community Services Division reviews your signed BMP documents and application file for approval by designated City of Santa Clara staff. This process may take up to 10 business days. Documents are then forwarded to the title company. 14. Close of Escrow The Escrow Officer for the Title Company will coordinate an appointment with you to sign the escrow and loan documents for the first mortgage. You will deposit the funds needed for any remaining balance of the purchase of the home and any associated closing costs. All funds prior to close of escrow must be in the form of a cashier s check and or wire. After signing the loan documents, the documents are returned to the lender for review and funding approval. Upon verification of funding and recording, ownership of the home is transferred from the builder to the buyer(s). Rev 10/16 6

7 Occupancy Standards To determine the size of BMP home (number of bedrooms) an Applicant may be eligible to purchase, the number of people in his/her household, and their age, gender and familial relationships (siblings, couples/spouses, parent, child, etc.) are considered. The maximum occupancy allowed in a BMP home is two people per bedroom, plus one additional person. The minimum allowed is no less than one person per bedroom, however couples and/or household members (particularly young siblings) of similar age and same gender may be required to share a bedroom. Reasonable accommodations to these standards may be requested in the case of medical or disability needs, and will be considered on a case-by-case basis. Number of Bedrooms in BMP Minimum Household Size Maximum Household Size Home One 1 3 Two 2 5 Three 3 7 Four 4 9 Five 5 11 Some households may qualify for a range of bedroom sizes (e.g., a 3-person household may qualify for a 1-, 2- or 3-bedroom home), depending on specific household characteristics, and may choose to buy whichever sized home they prefer, among those for which they qualify, assuming they can afford the home s price. Program staff will review household composition details provided in Eligibility Applications and notify Applicants in their initial Eligibility Determination letter what home sizes they are eligible to buy. If Applicant s household size and/or composition changes between date of Eligibility Application and date of Application to Purchase (according to information provided in Applications), Applicant may be determined to qualify for a different home size(s) than that stated in initial Eligibility Determination Letter. Rev 10/16 7