PALM COAST NSP QUESTIONS and ANSWERS

PALM COAST NSP QUESTIONS and ANSWERS Updated March 21,2011 1. Developers and their agents find homes then what? The City inspects and rejects or recommends the unit for further consideration. A checklist must also be submitted by the City to the State for clearance before a closing can be set. 2. If you are accepted do the developers help you find a home? Developers have been selected to participate in the program. You may contact a developer from the City s approved developers list in seeking the right foreclosed home for you. Many of the developers currently have a list of move in ready homes available. 3. Are the developers going to purchase homes after applicants are qualified? This is up to the developer, but is possible. At this point in the program Developers have already purchased various homes which are available for approved applicants to view. These homes are move in ready for approved applicants with the proper financing. The main thing is to get qualified first to participate in the program. Make sure you work with the County on completing your application so that you can begin to consider foreclosed homes. 4. So, the city has been given money to hire investors to rehab homes then sell them to applicants? More than that, the City must use the funds to assist in acquiring, repairing and reselling the units to income qualified families. After you qualify, you must pick a foreclosed home that is eligible, and you must be able to get primary mortgage financing with assistance from NSP. This is not a source of primary mortgage funding. Like many other sources, it is a soft second mortgage that can help with subsidy of the primary mortgage cost. 5. What is the benefit of going through the NSP program? The soft second mortgage is a deferred payment loan with no interest and no payments unless you resell the unit within the soft second mortgage note period. The period will typically be from 10-15 years depending on how much subsidy you receive. 6. Is this money you do not have to pay back? If you stay in the unit as your primary residence for the term of the soft second mortgage, the NSP loan is forgiven. If you resell within that time frame, the full NSP mortgage will have to be repaid to satisfy the note, much like other subsidy/second mortgage loans. 7. Will houses be picked for the applicants by the developers? Developers already have move in ready homes for approved applicants to consider. All homes on the developer inventory are NSP eligible and have been inspected and approved by the County. What can I use the $30,000 for? Down payment assistance (up to 50% of what the bank requires) and purchase assistance (commonly called buy down) are the primary options. The primary note can be reduced by NSP assistance. 8. If I get approved and the time frame does not work for me (the applicant) because of a lease I may have, will the home be held for me? The City cannot guarantee that. How is the value of 1

the home established? Certified Florida Appraisal no more than 60 days before offer of contract or total NSP investment put into the home whichever is less 9. If you put $1,000 down do you automatically get $30,000 dollars of assistance? No. You must complete your NSP application and the HUD counseling. The file is monitored by the City or City s agent when complete before a qualification letter is provided. The City must also determine need. $30,000 is just the max. 10. How is this program being funded? Through USHUD (Housing and Urban Development) and through a HUD/State agreement FDCA (Florida Department of Community Affairs). From there FDCA has an agreement with the City. 11. If homes are appraised could they be appraised for more than the price being asked for? The program requires that the initial selling price to the developer must be at least 1% less than the appraised value and the City will monitor this requirement. Also, fees charged by the developer are capped and all NSP costs must be reasonable. The price for resale will be either the appraised value or total NSP investment whichever is less. 12. What is the value range for homes applicants can purchase with NSP funds? The City is targeting homes that will be affordable for the area, preferably less than $150,000. What is more important, is that the primary mortgage and NSP assistance are sufficient to cover the cost of the foreclosed home and that your total mortgage cost are not more than 30% of your income. Please take a look at the developer inventory list for exact pricing. 13. Are condominiums covered under NSP? If they are foreclosed and meet all the criteria, yes. Developer inventory does not currently have any condominiums available. 14. How many spots are available for NSP? The City of Palm Coast currently has 10 homes available through developers under NSP. 15. Is the Area of Greatest Need already designated? Yes. Please refer to the map of the area of greatest need on the City s web site. The link is www.ci.palmcoast.fl.us/government/departments/community_development/neighborhoodstabilization.as px 16. What is the maximum amount of rehab money that can be provided by NSP? The rehabilitation costs shall not exceed 50% of the as is appraised value of the housing unit. Developers are responsible for the rehab; all homes available have been rehabbed by developer. 17. Will buyers be notified of structural defects of the home chosen? Yes. The program requires the homes to be assessed and repaired before occupancy for any such code related items. 18. Is there a required amount of time the applicant has to live in the home when using NSP funds? There is an affordability period that will be the same as the term of the NSP second mortgage. This must be repaid, in full, if the unit is sold. 19. What if you die before your NSP home is paid off? The note comes due. It can be transferred to another income eligible family if they qualify; or your heirs if they qualify. 20. Does the NSP grant become a taxable event? A homebuyer should consult a tax attorney for this question. 2

21. What if your NSP home is your primary residence but you have to go overseas because of military obligations? Will that affect anything? No. You must file and maintain homestead on the foreclosed home you purchase with NSP assistance. If being abroad will not prevent you from keeping the foreclosed home you purchase as the homestead (primary residence) in the City, then it should not be a problem. 22. Can the home you buy with NSP Funds be registered as your primary home and be rented out? No. This is conversion and triggers default and repayment. 23. Can NSP be used in conjunction with a VA certificate? There is no NSP prohibition against this, but you must be able to meet both program requirements. 24. Could I keep the cost of rehabbing the house by doing some work myself? Only cosmetic items may be addressed by the applicant (paint, carpet, weeds, etc). Any code or safety items must be addressed by the developer before you close on the new home. 25. Once you pay off the 1st mortgage is the home 100% yours? The first and second mortgage are not linked. The NSP mortgage remains in effect for 10-15 years based on the amount of assistance. 26. Will developers be looking out for Chinese drywall? Yes. 27. Is the applicant responsible for getting the bank pre-approval on their own? Yes. 28. Before we turn in the application do we need to have the pre-approval? Yes. 29. Is there a demographic target? For example are families chosen over singles? No. 30. If I use a VA certificate which requires no down payment can I use the NSP money to buy down the mortgage? Yes. 31. With this program am I allowed to refinance the home? Only if NSP maintains a second position and the City approves it. 32. When the application requests income do we provide modified, adjusted income or gross income? Adjusted gross is all income after taxes and similar federal withholdings as and is documented by (tax returns, W2s and similar documentation) refer to your application for full requirements). 33. When will the applicant know if they have been approved? Once the file is complete, the City will monitor the application within 7 business days, make a determination and let you know within about 10 days. 34. Can I turn in copies of my supplementary documents or do they need to be originals? Copies of financial and other personal documentation are fine. Originals of the application and signatures on that application are required. 35. What if I live in somebody else s house, who do you include in household? Those persons who will live with you in the new home. If related, you must document temporary living arrangements. 36. Is child support included in income? Yes. Review the form carefully for income that must be disclosed. 3

37. Does the 30% calculation for mortgage payments include home insurance? Taxes and insurance are included. 38. Is there a cut off amount for liabilities? No. All information in the application must be disclosed and the entire application must be considered when determining eligibility. 39. Is there a minimum credit score requirement? No. The NSP Program is an ever changing program, and that requirement has been dismissed. Credit score will effect eligibility to be approved for a primary mortgage by a lender, but that will have to be determined by the bank were the loan is being executed. 40. Will rehabilitation affect the second appraisal of the home, in turn raising the mortgage payment for the homebuyer? No. It is expected with today s real estate market that second appraisals are going to be lower than the amount of money used to rehabilitate the home. The City, State and Federal government is expecting to have to put more NSP funds into the soft second loan to subsidize the difference. 41. Are there age restrictions for potential applicants? Absolutely not. This is a fair housing program and there are no discriminatory restrictions. 42. Are all banks eligible to qualify applicants? Yes, they are eligible to qualify applicants for primary mortgages, but not all of the banks choose to participate in the NSP program. The City encourages applicants to research their bank of choice and speak to a representative that is familiar with the program to ensure that the bank will participate prior to applying for a prequalification letter. 43. Are gifts calculated toward annual household income? It depends on the frequency of gifts received. If the applicant receives gifts consistently, weekly or monthly, then yes they are calculated as annual income. However, if cash gifts are only received annually or on a nonconsistent basis, they are not counted toward the annual income. 44. What if an applicant has been saving to purchase a new home, and currently has a sum of more than $5,000 in a savings account, will that affect an applicant s income eligibility? Yes. All current assets must be taken into account when determining income eligibility. The current 2009 Area Median Income Limits are used to determine whether an applicant earns less than 120% of the Area Median Income by household size and income. The amount of assets that is counted toward annual household income is determined differently. In order to ensure that the income section of the application is completed correctly, the applicant should contact Valerie Bradley, SHIP Administrator for Flagler County at (386) 313-4037 to verify correct calculation procedures. 45. Does the annual income of a college student living in the home, but not contributing to the monthly bills, count toward the annual household income? It depends on the amount of money that is earned by the college student. There are specific federal mandated procedures that are used to calculate whether or not certain income is calculated toward the annual household income or not. Valerie Bradley, SHIP Administrator will be available to guide you through the income sections of the application to ensure that all required income is reported correctly. 4

46. Why is child support calculated into the annual household income, but not on tax returns? Child support is considered a consistent accrued income; therefore it must be calculated toward the annual household income. This is a Federal and State requirement. 47. Does current homeownership disqualify an applicant from the NSP Program? No. A qualified homebuyer must make the NSP home his or her primary residence (homestead) for a minimum period of 15 years, but he or she can own other property elsewhere. However, asset income (rent) and assets of this nature can affect your qualifications for NS assistance. 48. Do pay stubs, bank statements and verifications (employment and income) need to be reviewed more than once during the application process? At contract signing of the NSP home (prior to closing) pay stubs and bank statements are reviewed again for income eligibility, but third party verifications typically are not. 49. What type of home is the NSP Program targeting? Developer partners will be working with the City and County to target houses that meet the needs of qualified homebuyers. Generally, the housing stock in the Areas of Greatest Need throughout the City are 3 bedroom 2 bathroom or 4 bedroom 3 bathroom that are about 3 to 4 years old. Developers will be encouraged to research homes with minor code repairs up to $15,000. 50. Will banks ask for a price range of homes when an applicant applies for a pre-qualification letter? Typically no, banks will approve a potential homebuyer for a maximum primary mortgage amount based on income-to-debt ratios, credit history, income history and related items. 5