Dallas Homebuyer Assistance Program

Transcription

1 Dallas Homebuyer Assistance Program Funded by: U.S. Department of Housing and Urban Development (HUD) David Silva/Tammi Southall Housing/Neighborhood Revitalization City of Dallas Program Website:

2 Presentation Overview Program Overview How to Apply Source Documentation Definition of Household Members Eligible Taxable Income Income Calculation Household Annual Gross Income Limits Program Rules Minimum Property Requirements/MHS Property Review Amount of Loan Homebuyer Written Agreements Affordability Period Requirements Heirs Underwriting and Approval Process Lender Next Steps Loan Registration Loan Submissions Required documents Program Benefits 2

3 Program Overview Dallas Homebuyer Assistance Program (DHAP) provides loans to income eligible homebuyers for down payment, closing costs and principle reduction for home purchases in the city limits of Dallas. Homebuyers must prequalify for income eligibility directly with DHAP. Prequalification is valid for six months for which closing must occur. If the homebuyer is unable to close within that timeframe, requalification will be required. Program requirements are subject to change. *Household anticipated annual gross income must be at least 60% of the Dallas Area Median Family Income (AMFI) but not exceed 80% of the AMFI. *Gross Taxable Income. Complete an eight (8) hour homebuyer education course from an HUD/DHAP approved education provider. Online courses are not eligible. Obtain primary mortgage prequalification from a DHAP approved mortgage lender. Maximum Sales Price Existing Properties $212,000/ New Construction $241,000. 3

4 How to Apply Source Documentation (All Adults) Two months of the most recent paystubs Documentation for other sources of taxable income to include pension/annuity payments, unemployment compensation, taxable social security, prizes, royalties, awards, lottery winnings etc. Most current bank statement for all checking/savings accounts (all pages) Tax Return for last tax period and W2 s or 1099 s. (1040EZ forms are not accepted, a tax transcript from the IRS must be obtained) If self- employed, provide two years tax returns and a profit & loss statement for the current year Homebuyer Education Certificate (or pending date) Mortgage lender Prequalification letter List of all monthly debts to include credit card payments, bank/car loan payments, student loan payments. 4

5 Definition of Household Members Income for ALL adults who will be in the residence or part of household when assistance is received. Includes related and unrelated household members. Shared custody of children who live in the household at least 50% of the time. Temporary absent household members. Incarcerated for a short time and will return to household Seasonal workers who will return Active military members who will return to household Permanently absent members Nursing home residents Students temporarily away at school Household chooses to exclude them or not 5

6 Eligible Taxable Income All wages and salaries Overtime pay Commissions Fees Tips and bonuses All compensation for personal services Taxable interest Dividend income Taxable refunds or credits Alimony received Business income (or loss) Capital gain (or loss) Other gains (or losses) Taxable amount of individual retirement account (IRA) distributions Taxable amount of pensions and annuity payments Rental real estate, royalties, partnerships, S corporations, trust, etc. Farm income (or loss) Unemployment compensation Taxable amount of Social Security benefits Cash value of stocks, bonds, Treasury bills, certificates of deposit, mutual funds and money market accounts Other income (prizes, awards, gambling, lottery or raffle winnings) 6

7 Income Calculation All sources of taxable income for the household must be documented and will be used to determine the Annual Household Income. Income eligibility will be determined by using HUD s definition of the IRS Form 1040 Adjusted Gross Income Method. This will require the Tax Return for the last tax period and two months of the most recent paystubs or other documents of sourced income listed as eligible taxable income. The Form 1040 that was submitted to the IRS for tax purposes and is less than six (6) months old will be used to determine eligibility. If circumstances as reported on the 1040 form have changed or will change in the upcoming 12 months, i.e. pay increases, the homebuyer s current income will be used to determine eligibility. 7

8 Household Annual Gross Income Limits Household annual gross income must be within the HUD income limits as stated in the following income chart: Household Size Minimum Household Income** Maximum Household Income* 1 $32,424 $43,250 2 $37,056 $49,400 3 $41,688 $55,600 4 $46,320 $61,750 5 $50,026 $66,700 6 $53,731 $71,650 *Income figures as published by HUD effective June 1, 2018 **Minimum Income Requirement for DHAP 8

9 Program Rules 1. Homebuyer must be a U.S. citizen or permanent resident, with a valid Social Security Card. Permanent residents must provide a copy of their unexpired immigration documents. 2. Homebuyers must owner-occupy the property as their homestead. 3. Homebuyers requesting assistance must conform to IRS filing requirements. 4. Homebuyer must have continuous, satisfactory employment history for the past six months. 5. Homebuyer must contribute at least $1,000 toward down payment and closing costs. 6. Homebuyer with liquid assets in excess of $10,000 must invest assets into the purchase of the property. Funds in life insurance policies, tax-deferred retirement savings accounts (pension, 401k, IRA, etc.) college savings plan (529 account) or health savings accounts are excluded. 9

10 Program Rules cont. 7. Homebuyer must have two months reserves (mortgage payments) in liquid assets after closing. 8. Homebuyers may obtain a Conventional, FHA, Portfolio or VA loan (fully amortizing 30-year fixed rate loan) through an approved lender. Lender MUST establish an escrow account for Taxes and Insurance. 9. Unallowable: High Cost or Sub-Prime Loans, Adjustable Rate Mortgages (ARM), Interest only loans, Discount Points paid by Borrower, and Cash Back at Closing. 10. Homebuyer s Housing Expense to Income ratio is at least 28% and not exceed 30%, while the Homebuyer s total Debt to Income ratio may not exceed 43%. 11. Consideration of ratios outside of the guidelines with compensating factors will be at the discretion of DHAP staff. 10

11 Program Prequalification DHAP applicants who prequalify are issued a conditional letter of income eligibility. Conditional eligibility is valid for six months for which the applicant must close on a home purchase. Failure to close within this timeframe will require the applicant to requalify for the program. Program qualifications and restrictions are subject to change. 11

12 Program Prequalification Conditional Letter of Eligibility The letter of eligibility is conditional upon the completion and/or submission the following items: 1. Final review and approval of the first lien mortgage loan for closing of a fully executed and binding purchase contract including closing disclosure, and final approval of underwriting for DHAP loan; 2. Purchaser s creditworthiness; funding cannot be used to reduce the buyer s housing payment when overburdened by excessive debt. 3. Completion of eight hours of homebuyer counseling by an approved DHAP counseling agency. The homebuyer counseling certificate must be obtained within 30 days from the date of the letter; 4. No changes to household composition and source documents to include income once application is submitted; 12

13 Program Prequalification Conditional Letter of Eligibility Continued 5. U.S. Department of Housing and Urban Development (HUD) environmental review clearance for the property selected for purchase; 6. Full execution of the City s homebuyer written agreement and loan documents prior to closing; 7. As required by HUD, property being purchased must pass a minimum housing standard inspection conducted by a representative of the Housing and Neighborhood Revitalization Department; and 8. Appraisal of the property to be purchased. 13

14 Minimum Property Requirements Properties must be single-family, detached structures; condominium units; town houses; or one-to-four unit developments. Property must be located within the city limits of Dallas. Properties may be occupied by the owner or borrower. If occupied by a tenant, the property must be vacated for a period of 60 days prior to execution of sales contract. Property must meet the City s Minimum Housing Standards (MHS). MHS reviews will be completed by an authorized representative of the City of Dallas. It is important that MHS reviews are ordered during the option period of the purchase contract. All MHS required repairs must be completed prior to closing. 14

15 Minimum Property Requirements (cont.) Homebuyers are not allowed to make MHS required repairs to the purchase property. Properties constructed before January 1, 1978 must meet the HUD lead-based paint regulations The City of Dallas has no responsibility or liability for any deficiencies or repairs to the purchased property before, during or after closing. Property must appraise for at least 100% of sales price. HUD Homes built after January 1, 1978 are eligible for DHAP subsidy. HUD Homes must meet all DHAP guidelines. All MHS required repairs must be completed prior to submission of DHAP loan file. FHA 203K loans are not eligible for DHAP funding. 15

16 MHS Property Review Process Initial Review Once the purchase contract has been executed, DHAP lenders will be allowed to register a homebuyer with DHAP. This should be done swiftly, to ensure that the MHS review is performed during the option period of the purchase contract. To request an MHS review, the party attempting to initiate the review must do so by completing and submitting the form located at under the MHS Review Process tab. The form must be completed, signed by the homebuyer and seller and forwarded to the City, along with the attached MHS Review Seller Disclosure to: mapinspections@dallascityhall.com. Electronic or stamped signatures are not accepted. Within 48 hours of the submission of the request, a representative from the City of Dallas will contact the requesting party to confirm the time and date of the review. 16

17 MHS Property Review Process Final Review MHS required repairs should be completed by the seller prior to closing. To request a Final MHS Review once all required repairs have been completed, the City must be notified via , and provided with the completed MHS Final Request Form to: mapinspections@dallascityhall.com. Within 48 hours of the submission of the request, a representative from the City of Dallas will contact the requesting party to confirm the time and date of the final review. 17

18 How much assistance? The actual amount of the assistance provided will be determined based on need dependent upon the property being purchased, lender down payment requirements, closing costs and underwriting for final approval from the City of Dallas. The applicant must have an executed real estate sales contract and mortgage lender approval for a first lien mortgage loan using the program ratio requirements. The assistance is a second lien deferred loan, interest-free with no monthly payments, but is due and payable in full upon sale, lease, transfer or other disposition of the property. No commitment is made or to be implied until the City of Dallas has approved, in writing, funding of each application. Due to funding limitations, no applicant should assume any commitment even when an applicant must expend personal funds to meet application requirements. 18

19 Homebuyer Written Agreements Homebuyers will be required to sign homebuyer written agreements with the City of Dallas for funding provided through the HOME Investment Partnership Program and/or Community Development Block Grant Program (CDBG). The agreements will disclose the determined amount of assistance provided, affordability period (primary residency term limits) and other requirements to fulfill in the receipt of federal assistance. 19

20 Affordability Period Terms Homebuyer assistance with HOME Investment Partnership/CDBG funds under $15,000 will be subject to a five (5) year affordability period. The homebuyer shall, at all times, maintain the property as his/her primary residence during such five (5) year affordability period. Homebuyer assistance with HOME Investment Partnership/CDBG funds of $15,000 to $40,000 will be subject to a ten (10) year affordability period. The homebuyer shall, at all times, maintain the property as his/her primary residence during such ten (10) year affordability period. Homebuyer assistance with HOME Investment Partnership/CDBG funds of more than $40,000 will be subject to a fifteen (15) year affordability period. The homebuyer shall, at all times, maintain the property as his/her primary residence during such fifteen (15) year affordability period. 20

21 Affordability Period Default In the event of a homebuyer s uncured violation of the principal residency provisions during the affordability period, the homebuyer will be required to repay the entire HOME/CDBG investment in the property. The entire HOME/CDBG investment includes any direct homebuyer assistance and possibly additional HOME/CDBG funds used by a developer to reduce the sales price of the property to below Fair Market Value. 21

22 Heirs 1. The DHAP loan may be transferred to the heir(s) of the borrower if the heir(s) meet the income requirements and borrower eligibility of the program and utilize the assisted property as their primary residence whether the loan is still within the affordability period or not. 2. If the heir(s) do not meet the income requirements and borrower eligibility of the program, the loan is due and payable in full to the City. 22

23 Underwriting and Approval Process 1. Once the mortgage lender has underwritten and approved the homebuyers primary mortgage loan, they will submit a loan file to DHAP for underwriting and approval of the 2 nd lien. 2. DHAP will underwrite the loan file, calculate the total amount of subsidy for the 2 nd lien. When the 2 nd lien amount is determined and preliminary loan documents from the lender are approved, the homebuyer will be contacted to sign the city s homebuyer written agreements. 3. A final approval and a request for closing instructions will be issued to the mortgage lender once the loan file has full City approval, fully executed homebuyer written agreements and the property has passed all inspections. Processing time for final approval is approximately days after the underwrite approval of the loan. 23

24 Underwriting and Approval Process, cont. 4. The City will forward the lender s closing instructions to the City Attorney s Office who will prepare and forward closing documents to the title company performing the closing of the DHAP transaction. DHAP closing documents will be sent to the title company on Mondays and Thursdays only, so closing instructions must be submitted to DHAP staff at least 48 hours in advance so that the 2 nd lien documents may be drafted in time to meet the delivery days to the title company. 5. Only DHAP approved title companies will perform the closing of DHAP transactions. The wire will be made available for the day of the closing. 6. The title company must a copy of the fully executed Closing Disclosure Forms and all other required documents specified in the closing instructions to maploans@dallascityhall.com. If all documents are complete, the City will give the title company a funding authorization number to close and fund the loan. No loan will be funded without a funding authorization number from the City. Title companies will be personally liable for the full amount of the DHAP loan if it is funded without the City s authorization. 24

25 Lenders Next Steps Loan Registration Process Once a DHAP prequalified homebuyer has an executed sales contract, the following must occur: All DHAP loans will be registered online at: Approved loan officers will be assigned a user name and password to access the DHAP Loan Registration System. Once the online loan registration is complete, the lender will save the registration confirmation, which includes the assigned DHAP Loan Number. An including the assigned DHAP loan number will be sent to the lender to confirm the registration. It is the lender s responsibility to contact the City if it does not receive a loan number. 25

26 Lenders Next Steps Loan Submission Process Lenders will submit a Loan Package to DHAP once the 1 st lien has been approved by their underwriter. Loan Package Submissions will ONLY be accepted via in PDF format, and must be directed to maploans@dallascityhall.com. The DHAP Lender Loan Submission Form, along with the program application and forms is located click Exhibits and Forms. All loan packages (underwritten and approved by lender) must be received by the City within 30 days of registration for existing properties and within 120 days of registration for new construction properties. If a lender s loan package fails to arrive at the City, within the 30 day or 120 day timeframe, the DHAP Loan Registration will expire and be deemed null and void. Once the City has acknowledged receipt of a complete loan package, the lender will receive a loan status notification within 48 hours. 26

27 Required Lender Documents and Forms Required documents include: DHAP Registration Confirmation Approved Underwriting Transmittal Summary (1008) Uniform Residential Loan Application (1003) Preliminary Closing Disclosure Form (Must include all closing costs, prepaids, credits etc.) Credit Report(s) & OFAC (Borrowers & Non Purchasing Spouse) Hazard Insurance Declaration Fully Executed Sales Contract and Addendums Uniform Residential Appraisal Report Notice to Real Property Owner/Seller Form Title Commitment Title Company Wiring Instructions Lenders Loan Submission form and all program forms are available at Click Exhibits and Forms. 27

28 Benefits of Using DHAP Greater fair housing choices Access to good education Less out-of-pocket funds More home and amenities than could purchase alone Good quality home Education on home purchasing Trustworthy relationships QUESTIONS? 28