City of Galveston - HOMEBUYER ASSISTANCE PROGRAM GUIDELINES (HAP)
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HOMEBUYER ASSISTANCE PROGRAM
(HAP)
GUIDELINES
City of Galveston
Grants & Housing Department
Home Investment Partnerships Program
Correspondence:
City of Galveston
Grants & Housing Department
Homebuyer Assistance Program
P.O. Box 779
Galveston, Texas 77553
Office: (409) 797-3820
Fax: (409) 291-4553
E-mail: Grants@GalvestonTX.Gov
Office Location:
2508 Ball Avenue
Alice T. Law
Director
Tel: (409) 797-3820
E-mail: ALaw@GalvestonTX.Gov
Table of Contents Pg.
Welcome Home ..................................................................................... 1
Where does the money come from? ....................................................... 2
How is the Program organized? .............................................................. 3
Who is a First Time Homebuyer? ............................................................ 4
How can I qualify for the Program? ........................................................ 4
HOME Program Income Limits ............................................................... 5
Underwriting Standards ......................................................................... 6
Additional Qualifying Issues ................................................................... 7
Eligible Houses..............................................................................………. 7
Minimum Property Standards, Home Inspections, Re-inspections and
9
Required Repairs ...................................................................………………
Program Required Repairs..............................................................……… 10
Amount of Assistance and Eligible Uses...........................................……… 10
Use a Participating Mortgage Lender ....................................................... 11
Responsible Lending…………………………………………………………………………… 12
Lenders Agreement ……………………………………………………………………………. 12
Resale Provisions ………………………………………………………………………………. 13
Recapture Provisions …………………………………………………………………………. 14
Loan Subordination……………………………………………………………………………. 16
Choose a Knowledgeable Real Estate Professional ...............................… 16
Entering Into a Contract .........…...................................………………………. 16
Contract Requirements....................................................................…….. 17
The Application Process ......................................................................... 17
Preparing for Closing ............................................................................. 19
Let’s Review ......................................................................................... 19
Definition of Gross Annual Income and Net Family Assets ........................ 20
WELCOME HOME!!
The City of Galveston has developed a housing Verification of Residency confirmation, which
tool that will enable low to moderate-income is conducted every year throughout the month
individuals or families to own their own home. of June. Homebuyers are also required to
Through the use of Home Investment attend an eight-hour homebuyer education
Partnerships (HOME) Program funds, provided class.
by the U.S. Department of Housing and Urban
Development (HUD), the City of Galveston has
established the Homebuyer Assistance Program
(HAP).
The program provides down payments and
closing costs assistance to first time
homebuyers purchasing a home within the
corporate city limits of Galveston. The
assistance is secured as a forgivable second
mortgage loan at zero (0%) percent interest.
HAP is available to assist individuals, families
and households earning 80% or less of the Area
Median Income (AMI), for the Galveston area,
to purchase their first home. Income of the
homebuyers is calculated as the gross annual
current and anticipated income to be received
by all persons who will occupy the home as their
primary residence.
Homebuyers must be able to qualify for a
mortgage loan with a mortgage lender and
contribute a minimum of $500.00 toward the
purchase of the house. The homebuyers must
occupy the assisted home as their primary
residence for the duration of the affordability
period as well as participate in the HAP Annual
Page | 1
WHERE DOES THE level for use in the development of affordable
housing units, or to assist income-eligible
FUNDING COME FROM? households in purchasing, rehabilitating, or
Annually, Congress appropriates funds to be renting safe and decent housing. The HOME
administered by HUD, for a variety of Program helps to expand the supply of decent,
established programs that provide annual affordable housing for low and very low-
grants on a formula basis to entitled cities, income families by providing grants to
urban counties and states for States and local governments
development of viable urban called participating jurisdictions
communities by providing decent (PJs).
housing and a suitable living
environment, and by expanding Since 1996, the City of Galveston
economic opportunities, principally for has received federal funding from
low- and moderate-income persons. HUD through the Home
Investment Partnerships Act-
The economic expansion of the HOME Program, as a
1990s obscured certain trends participating jurisdiction. The
and statistics that point to an increased, not Grants & Housing Department has a great deal
decreased, need for affordable housing. HUD's of flexibility in designing the local HOME
definition of affordability is for a household to program activities and is responsible for using
pay no more than 31% of its annual income on the HOME grant to fund housing programs
housing. Families who pay more than 31% of meet local needs and priorities, within the
their income for housing are considered cost guidelines established by the HOME program
burdened and may have difficulty affording statute and final rule (24 CFR Part 92). A need
necessities such as food, clothing, was identified to assist homebuyers with down
transportation and medical care. At the tail end payment and closing cost assistance, thus the
of the nation's longest economic expansion, 12 creation of the City of Galveston Homebuyer
million renter and homeowner households paid Assistance Program (HAP).
more than 50 percent of their annual incomes
for housing costs.
The expansion of the supply of affordable
housing for low-income families is at the very
core of HUD's mission. HUD’s Office of
Affordable Housing Programs (OHAP) bring
federal resources directly to the state and local
Page | 2HOW IS THE PROGRAM
ORGANIZED?
HAP provides eligible home buyers with Buyers are required to purchase a
down payment and closing cost home within the city limits of
assistance through the form of a Galveston and all houses must meet
forgivable second mortgage loan at specific housing guidelines. Once a
zero percent (0%) interest. The buyer house is selected by the buyer(s), a
repays the assistance by occupying the Grants & Housing Staff Member will
house, as their primary residence, for a inspect the property to ensure it meets
minimum of five years based on the the Minimum Property Standards. The
total amount of HOME funds the buyer seller must repair all items noted on
uses. the inspector’s report. HAP funds may
not be used for making repairs to the
HAP funds are allocated to eligible house.
buyers, on a first-come first-serve basis,
through a formal application process. After all repairs have been completed
An application packet, which consists of and the loan closing is scheduled, a
several documents, is submitted to the representative from the Grants &
Grants & Housing Department for Housing Department will attend the
consideration and eligibility closing and bring the check providing
determination for HAP participation. the HAP assistance. Homebuyers will
also sign a Deed of Trust and
Once eligibility has been determined, Promissory Note, executing the start
funds will be set-aside for the home of the required residency period
buyer(s). Buyers must work with a Real known as the affordability period.
Estate Agent and a financial
institution/mortgage lender to obtain a
mortgage. The buyers have 180 days to
purchase a home; otherwise, the funds The City of Galveston
will be returned to the HAP fund pool Wishes You the Best in
for further distribution to eligible your Home Buying
buyers.
Endeavor!!!!
Page | 3WHO IS A FIRST TIME administered by the U.S. Department of
Housing and Urban Development (HUD)
HOMEBUYER? and is based on two primary factors; the
“total” number of household members,
and the gross annual income expected to
A First Time Homebuyer is an individual,
family or household who is
looking to buy their first home
within the corporate city limits of
Galveston.
Requirements for this program
are:
1) The buyer(s) must be a Legal
Resident/Citizen of the
United States.1
2) The buyer(s) must meet
credit eligibility
requirements and be able to qualify for be received by those members for the
a Mortgage Loan through a mortgage upcoming twelve months.
lender (Sub-prime lenders are subject to
additional verification and documentation). 1) A household member is considered
to be one who will reside/live in
3) The buyer(s) cannot have owned a the house as their primary
home or property in the past three (3) residence.2
years. The following household
members and income received
4) The buyer(s) are obligated to occupy from them IS NOT to be
the home purchased, as a primary considered in determining
residence, for a period of five (5) years. Program Eligibility:
▪ foster children
HOW CAN I QUALIFY ▪ live-in aids and children of
live-in aids
FOR THE PROGRAM? ▪
▪
unborn children
children being pursued for
legal custody or adoption,
Qualifying for assistance through the HOME which are not currently
Program is governed by regulations residing at home3
1 expiration of the period of stay authorized by the
ALL members of the household are required to be those
who are lawfully present in the United States. An "alien United States Attorney General or who otherwise
not lawfully present in the United States'' means an alien violates the terms and conditions of admission, parole
who is not ``lawfully present'' as defined in 8 CFR 103.12 or authorization to stay in the United States.
2
and includes: (1) An alien present in the United States Primary Residence is defined as "residency exceeding
who has not been admitted or paroled into the United 21 calendar days from the date of arrival".
3 A child that is subject to a shared-custody agreement
States pursuant to the Immigration and Nationality Act
and whose stay in the United States has not been in which the child resides with households at least 50
authorized by the United States Attorney General, and (2) percent of the time can be counted as a household
An alien who is present in the United States after the member.
Page | 4as a basis for repayment of the
2) The buyer's gross annual income for the primary loan.
next 12 months cannot exceed 80% of the
Area Median Income as determined by the ▪ Any real property owned by
participant(s) will be included in the
U.S. Department of Housing and Urban
income calculations based upon its
Development (HUD). income potential.
▪ Co-borrowers/Co-mortgagors
Gross Annual Income to the household is will not be permitted.
determined by current and anticipated
income from all household members, To determine gross annual income for
subject to 24 CFR 5.609 definition of Gross the household for HAP eligibility, the
Household Income as adjusted, according definition includes:
to the number of household members as
shown on the HOME Income Limit Chart for ▪ Wages (Bonuses and
all persons who will use the home as their Commissions)
primary residence. ▪ Salaries (including Overtime Pay)
▪ Tips
▪ ALL income to the household, current and ▪ Child Support*
anticipated, from the persons who will
▪ Taxable Interest
occupy the home as their primary
residence, and as defined by 24 CFR 5.609 ▪ Dividends
unless specifically excluded, will be ▪ IRA Distributions
considered to determine the applicant(s) ▪ Pensions
eligibility to participate in HAP. ▪ Annuities
▪ SSI and Social Security, Disability
▪ ALL income received on a regular ▪ Unemployment Compensation
basis must be disclosed and verified ▪ Other income received on a
whether or not it is to be considered regular basis
*Child Support will be counted at the value that is Court Ordered regardless of receipt of payment.
HOME Program Income Limits
GALVESTON, COUNTY – 167
MSA = Galveston-Texas City, TEXAS
AREA HOUSEHOLD SIZE / # PERSONS IN HOUSEHOLD
MEDIAN
INCOME
LEVEL 1 2 3 4 5 6 7 8
30%
$16,650 $19,000 $21,400 $23,750 $25,650 $27,550 $29,450 $31,350
AMI
50%
$27,750 $31,700 $35,650 $39,600 $42,800 $45,950 $49,150 $52,300
AMI
80%
$44,350 $50,700 $57,050 $63,350 $68,450 $73,500 $78,600 $83,650
AMI
Effective June 1, 2021
Page | 5UNDERWRITING Back-End Ratio: A ratio that indicates
what portion of a person’s monthly income
STANDARDS goes towards paying debts. Total monthly
debt includes expenses such as mortgage
It is the City’s intent to ensure that the payments (made up of PITI), credit-card
prospective homebuyer is not in an payments, child support and other loan
untenable situation due to the financial payments. This ratio should not exceed
assistance received through the HAP 43% as recommended by the Federal
Program and that the home is affordable. Housing Administration (FHA). Lenders use
this ratio in conjunction with the front-end
ratio to approve mortgages.
Affordability will be determined as follows:
Back-End Ratio =
• The City will calculate and provide the
Total Monthly Debt Expenses X
homebuyer with the affordable amount
100 Gross Monthly Income
of monthly payment including principal
and interest of a mortgage loan,
property taxes, homeowner’s • Lender will provide the applicant and
insurance, and mortgage insurance. the City with the mortgage approval
The affordability is calculated as amount. The specified monthly
follows: payment on the Good Faith Estimate
should not exceed the Maximum
Maximum Monthly Payment = Gross Monthly Payment, this amount includes
Monthly Income X 31% Principal, Interest, Taxes, and
(HUD’s Recommended Affordability Insurance (PITI). In all cases, the ratio
Amount) should not exceed 31/43.
Front-End Ratio: A ratio that indicates Applicant household’s assets may not
what portion of an income is used to make exceed $15,000.00. Any amount over
mortgage payments. It is calculated as an $5,000.00 will be used towards the
individual’s monthly housing expenses purchase and subtracted from the City’s
divided by his or her monthly gross income contribution (will be reviewed on a case by
and is expressed as a percentage which case basis). This includes gifts; liquidation
should not exceed 31%, as recommended of 401k’s and funds from the sale of
by the U.S. Department of Housing and personal property. Retirement funds are
Urban Development (HUD). Monthly gross not included.
income is simply annual income divided by
12 (months). Lenders use the front-end Applicant may not receive any gift funds
ratio in conjunction with the back-end ratio towards the downpayment of a home in
to approve mortgages. conjunction with the City’s assistance.
Front-End Ratio =
Monthly Housing Expense
Monthly Income
Page | 6ADDITIONAL QUALIFYING company or “closing agent” at the time a
contract for sale is executed.
ISSUES…
A minimum of eight hours of pre-purchase
In receiving the federal assistance through homebuyer education is required before
the HOME Program, buyer(s) and closing.
household members must be dedicated to All buyers must confirm, with the HOME
the commitment required by HAP. Program, that they are maintaining the
house as their primary residence by signing
This commitment, made by the buyer(s), and returning the verification card each
consists of: year in the month of June.
• House payment cannot exceed 31% The required length of time the buyer must
of the buyer’s calculated gross live in the house, as a primary residence,
monthly income. will be for five (5) years.
• Contributing a minimum of $500, to
be used as earnest money for the The HAP assistance is secured as a second
purchase of the home. lien4 against the property, with a Deed of
• Eight (8) hours of homebuyer Trust and Promissory Note. In the event
education classes. that the house is sold within the first five
• Participating in the Annual years from date of purchase, the buyer(s)
Verification of primary residence, must repay the entire amount of the HAP
and assistance to the City of Galveston Grants
• Occupying the home for the & Housing Department. Failure to occupy
required length of time, known as the house as a primary residence5 will also
the affordability period result in the buyer repaying the HAP
• The Buyer must maintain Flood, assistance to the City of Galveston Grants
Fire, and Windstorm & Hail & Housing Department.
Insurance on the property for the
duration of the Period of If repayment of the assistance is required,
Affordability. the buyer(s) must make the payment, due
in full, within 30 days of notice from the
The buyer(s) commitment will be program.
acknowledged by signature on the program
information disclosure form.
The maximum allowed P.I.T.I. cannot OBTAINING A PRE-QUALIFICATION LETTER
exceed 31% of the buyer’s gross monthly FROM THE GRANTS & HOUSING
income as calculated by HAP. DEPARTMENT DOES NOT GUARANTEE YOU
WILL SECURE OUTSIDE FINANCING FOR THE
The contribution of funds for earnest PURCHASE OF A HOME. IT JUST ENSURES YOU
money will be deposited with the title HAVE MET OUR PRELIMINARY GUIDELINES
TO PROCEED WITH THE PROGRAM.
ELIGIBLE HOUSES
4 5
A Deed of Trust and Promissory Note will be filed with Rental or leasing of the unit, at any time during the
Galveston County placing a second lien on the property first five years constitutes non-compliance,
assisted with the federal Home Investment Partnerships triggering repayment of the entire amount of
Program funds. assistance.
Page | 7Every house assisted by HAP must be The buyer and tenant are the
located within the corporate city limits of same, or
Galveston, meet specific minimum Prior to leasing and occupying
property standards, be inspected by the property, the current tenant
Grants & Housing Staff, and have certain must have been provided with
program required repairs made before written notification of the
the buyer(s) can actually purchase the possible sale of the property
house. These details are outlined and AND that relocation assistance
prescribed in the following paragraphs. would not be provided
(Required to be in written form
from the Property Owner to the
HOUSING TYPES AND WHERE TO FIND
Tenant).
THEM…
Due to regulations established by HUD and
The acceptable type of housing for HAP the City of Galveston's Federally assisted
consists of single family, detached, housing programs, ALL homes to be
conventional construction dwellings ONLY. purchased through the Homebuyer
Modular, Mobile and Manufactured housing Assistance Program, MUST meet the
is not allowed. Since the City of Galveston requirements set forth in the HOME
Grants & Housing Staff or HAP does not act Program Housing Guideline and at a
as a real estate agent or broker, the buyer(s) minimum 24 CFR 982.401 (Minimum
must rely on a Real Estate Agent to assist in Property Standards), and the City of
identifying available houses in the local real Galveston Code of Ordinances. These
estate market. standards ensure a safe, structurally sound,
decent and healthy environment for all
The City of Galveston may provide HAP inhabitants of the home. HAP funds can
funds to assist the buyer(s) in the purchase assist the buyer(s) in purchasing a new or
of a house being leased, under the following existing house provided it meets the
conditions: required criteria.
Page | 8MINIMUM PROPERTY STANDARDS,
HOME INSPECTIONS & RE-INSPECTIONS,
and REQUIRED REPAIRS
The Minimum Property Standards set the
standard for approved dwellings.
Minimum Dwelling Space requirements
prohibit overcrowding and are applied to
each assisted dwelling unit. There is a
minimum amount of space required in
Sleeping Rooms, which requires every
dwelling unit of two or more rooms, and
every room occupied for sleeping
purposes by one occupant to contain at
least seventy (70) square feet of floor
space, and every room occupied by more
than one occupant to contain a minimum
of an additional fifty (50) square feet of components of the lead-based paint test
floor space for every occupant thereof. and stabilization/abatement/reduction
and clearance test MUST be performed
HOUSES BUILT PRIOR TO 1978… under contract by licensed, certified
Structures built before 1978 must be free workers and is subject to approval by the
from lead based paint hazards. These Texas Department of Health. HAP will not
structures are subject to a Lead-Based pay for the stabilization, reduction, and
Paint Health Hazards Addendum and abatement of Lead Based Paint Hazards.
inspection to determine the amount of
lead on the property and in the home.
Acceptable levels of lead may be present, ENVIRONMENTAL
as regulated by HUD, the HOME
Investment Partnerships Act, 24 CFR Part
REVIEW
35 Subpart K, or the Texas Department of COMPLIANCE
Health.
The City must conduct the Regulatory
ALL homes assisted through the program Required Environmental Review Process.
that are built prior to 1978 are required to This process must be completed prior to
have a visual assessment for Lead Based committing any HOME Program funds
Paint Hazards. If any hazards are towards the downpayment and closing
discovered, they will have to be addressed cost of the eligible property.
in accordance with the Federal, State and
Local regulations.
A Contractor trained in safe – work
practices must perform the necessary
repairs and at completion a clearance test
must be performed to ensure the lead
levels are at an acceptable level. All
Page | 9PROGRAM REQUIRED Once the buyer(s) has been determined
REPAIRS… Once the "HAP eligible for the assistance, and have
Inspection" has been completed, a letter agreed to the occupancy and affordability
will be issued providing NOTIFICATION commitment, the City of Galveston will
OF REQUIRED REPAIRS (if applicable), provide the buyer(s) with a loan6 for down
itemizing ALL REQUIRED REPAIRS to the payment closing costs assistance for the
unit in order for the buyer(s) to receive purchase of the house.
the federal funding from the City of
Galveston Homebuyer Assistance Up to $14,500 to eligible participants
Program. These repairs will be considered whose income is up to 80% of the
as “lender required” repairs. If all repairs Area Median Income as adjusted for
are not completed, as required by the household size
program, the buyer cannot use the HAP
assistance to purchase the house. The total amount of assistance, which is
determined by the number of household
The “Required Repairs” letter will be members and the anticipated gross
forwarded to the Buyer, Buyer’s Real annual income of the household, cannot
Estate Agent/Broker, and Mortgage exceed the allocated amount.
Lender. When ALL repairs have been
completed, the buyer will need to notify ❖ HAP funds cannot be used to pay for
the Grants & Housing Department to repairs to the house.
conduct the required re-inspection of the ❖ HAP funds cannot be used to pay for
home, which will confirm that all required
repairs have been completed. lender required debt relief.
ELIGIBLE USES OF ASSISTANCE
HAP funds can be used for Closing
Costs and Prepaid items and Down
Payment assistance with the following
restrictions:
1. Closing Costs and Prepaid Items:
HAP can be used to pay for the buyer(s)
customary closing costs Discount points
are an eligible cost under HAP.
AMOUNT OF All of the following closing costs are
eligible for financing, in some degree,
ASSISTANCE AND through HAP:
ELIGIBLE USES application fee
loan origination fee
title insurance
AMOUNT OF ASSISTANCE TO THE
title search
BUYER(S)
6A Deed of Trust and Promissory Note will be filed assisted with the federal Home Investment Partnerships
with the county placing a second lien on the property Program funds.
Page | 10credit report fee provided, to income eligible households,
courier fees as a reduced interest rate mortgage loan
appraisal fee to first time homebuyers. Often times, this
lender's inspection fee program will include additional funds for
survey fee down payment and or closing costs equal
recording fees to a set percentage. TDHCA also offers a
attorney's fees down payment and closing cost assistance
home warranty program providing $7,500).
document preparation fee
discount points Because these programs may be funded
settlement or closing fee through federal sources, buyers are not
allowed to “stack” funds from multiple
Limitations on Closing Costs and funding programs.
Prepaid Items: (Maximum)
30 days interest Buyers may use the “bond mortgage”
14 months hazard insurance program offered through the state or local
Three (3) months property taxes housing finance corporation in
Market rate for Independent conjunction with the HAP assistance.
Home Inspection and Re-
Inspection fees. Under no circumstances will the City of
$85 for a Pest Inspection, Galveston over subsidize assistance
Maximum. provided to a buyer. The program only
provides what is necessary to close the
2. Down Payment: The downpayment loan.
amount cannot exceed
• the maximum HAP allocation amount;
or USE A PARTICIPATING
• the minimum amount allowable under
the financing program (i.e., FHA),
MORTGAGE LENDER
whichever is less. Now that you have decided to purchase
your first home, it is important that you
In some instances, a mortgage loan does work with a mortgage lending institution
not require a down payment, HOWEVER, (mortgage lender) that will help you
under the HAP program, the buyer is secure the loan for your new home. In
required to contribute a minimum of $500 general, contacting multiple mortgage
toward the purchase of the house. lenders will not provide you with “more
buying power”. Your monthly income and
RELATIVE ISSUES… FROM OTHER
your monthly debt (how much money you
ASSISTANCE PROGRAMS
make and how much you pay to creditors)
There are plenty of homebuyer assistance will determine the amount of money you
programs available offering a variety of can borrow to purchase a house.
assistance to first time buyers (i.e., State
of Texas Department of Housing and When contacting a lender, you will need
Community Affairs (TDHCA)) periodically the basic information about your
offers a mortgage loan program that is household income and expenses including
made available through the sale of tax- the most recent pay stub from your
exempt bonds with the proceeds being employer, statement from Social
Page | 11Security/SSI, Child Support Court Order, prepaids, escrows and title
Retirement, Disability, etc.; bank company charges, but DOES NOT
statements and most recent income tax include discount points or financed
return. (This is not an all-inclusive list and mortgage insurance; and
additional documents may be required.) • The HAP program has the right to
Most lenders require a small fee to cover deny funding if the buyer’s current
the cost of the credit report. financial position represents too
much of a credit risk, or that the
If, after the mortgage lender issues the first lien program is not in the best
buyer(s) a commitment letter, and the interest of the buyer.
buyer(s) decides to change mortgage
lenders/companies, the buyer(s) MUST
IMMEDIATELY NOTIFY the Grants &
LENDERS
Housing Department. The transaction is
halted until the buyer(s) provides a COPY
AGREEMENT
of the new loan application, mortgage
Any Mortgage Lender can participate in
analysis/qualifying worksheet and good
the City of Galveston’s Homebuyer
faith estimate to the Grants & Housing
Assistance Program, but must agree to
Department. At such time the Grants &
the following terms:
Housing Department will transfer the
assistance to the new lender providing the
mortgage loan.
1. Lender will uphold its “Fiduciary
Duties and Responsibilities to
RESPONSIBLE Client” regardless of company
representation.
LENDING 2. Lender will keep confidential any
discussions, facts or information
For the homebuyers protection the about the homebuyer that should
following restrictions are placed on loan not be revealed to others.
programs that the City will participate. 3. Lender will be accountable for
monies received from the
• Adjustable rate mortgage are not homebuyer.
allowed; 4. Lender will adhere to codes of
• No no-interest no-asset loans and ethics.
negative amortization loans are 5. Lender will refer potential
allowed; participants in the program to the
• “Interest only loans” are not City’s Homebuyer Assistance
allowed; Program.
• No balloon notes; 6. Lender will uphold the spirit of the
• Interest rate is restricted to no program, which is to help low to
more than 1.0% above “A paper” moderate income persons
market rate for the same loan purchase homes, by providing loan
programs; programs and interest rates that
• Closing cost are not to exceed 6% compliment the program and
of the sales price unless an benefit the client. Lender will
exception is approved. The 6% become familiar with the list of
includes loan fees paid at closing, unacceptable loan programs.
Page | 127. Lender will pre-approve the client provided as a direct subsidy to the
as a pre-requisite to issuance of homebuyer
funds from the Homebuyer
Assistance Program. • Resale provisions shall be required
8. Lender will charge normal and when the HOME subsidy is provided in
customary loan fees and closing the form of a direct subsidy to the
costs or less. The total settlement homebuyer and a developer, CHDO,
charges, less discount points, MIP, Community Land Trust or other similar
and items paid by seller or lender entity maintains ownership of the
should not exceed 6% of the sales HOME-assisted property to ensure its
price. The homebuyer’s ratios as continued affordability in perpetuity.
calculated by the lender shall not
exceed 31/43. • Resale provisions shall be required
9. Lender will understand that the when the HOME subsidy is provided in
City will not accept less than a 2nd the form of a direct subsidy to the
lien position. homebuyer and it is determined that
10. Lender will provide the City with a the property is located in a highly
copy of an approval letter, the appreciating market for the purpose of
Good Faith Estimate, the Mortgage maintaining the unit’s affordability
Loan Application, and the throughout the entire period of
appraisal of the property. affordability.
11. Lender understands that
participation in the program can Methods – The resale option ensures that
be disallowed if any of the above the HOME-assisted unit remains
terms or not followed or if any affordable over the entire period of
action taken by the Lender is not affordability. All HOME-assisted units
in the best interest of the “designated as affordable units” shall
homebuyer. The prior sentence meet the following criteria:
contains the sole and exclusive • The new purchaser must be low-
remedy available to the City income, meeting the HOME Program
against the Lender under this definition, and occupy the property as
Lender Agreement. the family’s principal residence.
• The sales price must be “affordable”
RESALE to the new purchaser. In this instance,
PROVISIONS affordability of the new purchaser is
defined as the income-eligible
household’s maximum mortgage
Activity Types - Resale provisions as capacity as defined by a mortgage
outlined in 24 CFR Part 92.254(a)(5)(i)(A) lender using generally-accepted
and (B) shall be required or encouraged in underwriting criteria.
the following cases:
• Under no circumstances may the
• Resale provisions shall be required “affordable” sales price exceed 95% of
when the HOME subsidy is provided in the median purchase price for the
the form of a development subsidy in area.
which HOME funds are divided among
each HOME-assisted unit and not
Page | 13• Net proceeds from the sale must mechanism filed with the Galveston
provide the original homebuyer, now County Clerk’s Office and the
the home seller, and a “fair return” on requirements within shall be triggered
their investment (including any upon sale or transfer of the HOME-
downpayment and capital assisted property.
improvement investment made by the
owner since purchase). In general, the
City of Galveston shall consider “fair RECAPTURE
return” to be the maximum sales price
as calculated using the following
PROVISIONS
formula:
Activity Types - Recapture provisions as
Maximum outlined in 24 CFR Part
Permitted Resale 92.254(a)(5)(ii)(A)(1) through (7) shall be
Price enforced in cases where HOME funds are
provided as a direct subsidy to the
= The Initial Sales Price to the Owner homebuyer as downpayment and/or
Initial Area Median Income purchase-price assistance.
Methods – The recapture option allows
X Resale Area Median Income
the City of Galveston to recapture the
entire HOME subsidy, subject to net
Initial Median Income is defined as the
proceeds, if the HOME recipient decides to
Area Median Income corresponding to a
sell the unit within the period of
household size equivalent to 1.5 times the
affordability at whatever price the market
number of bedrooms in the Home at the
will bear. All HOME-assisted unit sales
time of the Owner’s purchase of the Home
under the recapture option shall meet the
rounded to the nearest whole number.
following criteria:
• The homebuyer may sell the property
Resale Area Median Income is defined as
to any willing buyer.
the Area Median Income corresponding to
a household size equivalent to 1.5 times • The sale of the property during the
the number of bedrooms in the Home at period of affordability triggers
the time of the Owner’s Notice of Intent, repayment of the direct HOME
rounded to the nearest whole number. subsidy, subject to net proceeds, to
the City of Galveston that the buyer
Individual projects/ programs may apply received when he/she originally
for changes in the above formula for purchased the home.
application to that specific Enforcement Mechanisms - Recapture
project/program with the approval of provisions shall be enforced through a
Community Development Staff. The mortgage, note and Recapture Agreement
formula for “fair return” must be included filed with the Galveston County Clerk’s
in the contract between City of Galveston Office, and the requirements within shall
and the project/program partner. be triggered upon sale or transfer of the
HOME-assisted property.
Enforcement Mechanisms - Resale
requirements shall be enforced through Amount of Repayment – the City of
deed restriction, covenant, land use Galveston requires that when the
restriction agreement, or other similar recapture requirement is triggered by a
Page | 14sale (whether voluntary or involuntary), it
will recapture the Home investment up to X Net Proceeds = HOME Recapture
the total net proceeds remaining after the
sale as modified by program specific Owner investment returned first - the City
choices under 24 CFR Part of Galveston will not permit the
92.254(a)(5)(ii)(A)(1) through (4). Net homebuyer to recover the homebuyer’s
proceeds are the sales price minus the entire investment (downpayment and
superior loan repayment (other than capital improvements made by the owner
HOME funds) and any closing costs. The since purchase) before recapturing the
specific method of recapture as capped by HOME investment.
net proceeds may be one of the four
choices outlined in 24 CFR Part Staff shall select one of these four options
92.254(a)(5)(ii)(A)(1) through (4). These based on the specific project/program in
options include: consultation with the project/program
sponsor.
• Recapture the entire amount - the City
of Galveston may recapture the entire Mortgage Release - Upon receipt of
amount of the HOME investment from recaptured funds, the City of Galveston
the homeowner, with total collections shall file a “Release” document with the
capped by net proceeds; Galveston County Clerk’s Office to release
the original HOME-assisted homebuyer
• Reduction during the affordability
from the requirements of the mortgage or
period the City of Galveston may elect
other similar mechanism.
to reduce the HOME investment
amount to be recaptured on a pro rata
Repayments – Repayments of recaptured
basis for the time the homeowner has
funds shall be remitted directly to the City
owned and occupied the housing
of Galveston to be utilized for HOME-
measured against the required
eligible activities only.
affordability period;
• Shared Net Proceeds - When the net
proceeds (i.e., the sales price minus
loan repayment, other than HOME
funds, and closing costs) are
insufficient to repay the direct HOME
subsidy and the homebuyer’s
investment, the net proceeds shall be
shared according to the following
formula. Recapture of the HOME funds
is based on the ratio of the HOME
subsidy to the sum of the
homeowner’s investment (including
downpayment and any capital
improvement investment. made by
the owner since purchase), plus the
HOME subsidy:
HOME Subsidy
HOME Subsidy + Homeowner Investment
Page | 15LOAN quest of finding the home that
accommodates you and your family's
SUBORDINATION immediate needs. This person is one who
has a vast knowledge of the various types
and sizes of homes on the market; who is
At closing, a second lien promissory note familiar with several types of loan
and deed of trust must be signed by the programs, and who can answer questions
applicant. This lien will be subordinate to first time homebuyers often have. The
the lenders lien on the property. State of Texas requires an agent or broker
However, the City will not further to be licensed and trained in buying and
subordinate the loan unless the first selling property, and also requires
mortgage is being refinanced. The City continuous updates to their education of
will not subordinate for debt Real Estate laws and practices for the
consolidation/home equity loans, unless state of Texas.
the debts being consolidated are for
housing expenses, without taking cash A state licensed real estate agent or
out, and the total amount of the lien is less broker must represent all HAP buyers.
than the appraised value of the house.
The City will not approve refinancing for ENTERING INTO A
the purpose of the homeowner receiving
any equity (cash out) from the home such CONTRACT AND
action would constitute a payoff of the
outstanding homebuyer loan amount. CONTRACT
If the City approves a refinance option,
REQUIREMENTS
the homeowner will be responsible for
paying all the fees associated with All homebuyers will be required to enter
refinancing the loan and lien documents into a purchase agreement contract with
up to $200.00 to cover the administrative the seller of a house known as an Earnest
cost and filing fees incurred by the City. Money Contract. This contract is a
negotiable agreement between the buyer
CHOOSE A and seller, committing each party to
specific duties with regards to the
KNOWLEDGABLE purchase and sale of the property.
REAL ESTATE Once all involved parties (Buyer, Seller,
Agent/ Broker and Lender), have agreed
PROFESSIONAL upon the contract, the lender will issue a
summary of the eligible transaction for the
The purchase of a home is one of the home the buyer(s) have selected. This
largest purchases in your lifetime, it is summary, known as a Closing Disclosure,
important that you choose a Real Estate will provide the buyer with an estimated
Professional that is right for you. total amount of money that they can
borrow for the home loan; the estimated
A caring, patient person who is familiar amount of the monthly house payment,
with Homebuyer Assistance Programs is and the estimated amount of any
the key to a successful, uncomplicated additional costs involved in the purchase.
Page | 16The Closing Disclosure will also state a agent's name, address, telephone,
tentative closing date. and fax number.
CONTRACT THE APPLICATION
REQUIREMENTS PROCESS
The City of Galveston Homebuyer
Assistance Program requires that specific To determine program eligibility, the
conditions and provisions be included as buyers must submit a formal application
part of the purchase contract. packet with the items on the Pre-Approval
checklist form.
To meet program requirements, each
contract must contain the following When you have all of the required
conditions: documents then you will need to contact
1. The interest rate must be present and the Grants & Housing Department and
not exceed the prevailing market rate. schedule an appointment to turn in the
2. The contract must allow for an application packet.
independent home inspection by a
state licensed inspector. After the Grants & Housing Department
3. To protect the buyer, the contract has determined your income eligibility,
you will need to submit the items on the
must state:
Underwriting Requirements checklist
"This contract is subject to the form. Upon meeting the Underwriting
City of Galveston Homebuyer Requirements, you will need to schedule a
Assistance Program" Homebuyer Education course. This
information must be submitted before a
4. For ALL homes built prior to 1978 the closing is scheduled.
contract must include an addendum
relative to lead based paint. The application packet consists of several
5. The Contract MUST be properly documents, some provided as forms from
this booklet, some from the mortgage
endorsed by all parties to the sale with
any changes dated and initialed. lender and finally, some items that the
6. The NOTICE TO SELLER OF REAL buyer(s) must provide from their personal
PROPERTY (City of Galveston documents or records.
document) must accompany the
contract with an original signature After a complete application packet is
submitted, the Grants & Housing
from the seller(s). This document
meets Federal Uniform Relocation Act Department Staff will thoroughly review
requirements. (The document can be the documents and determine if the
obtained through the City of Galveston applicant(s) meet the eligibility criteria7.
Grants & Housing Department.) “Walk – ins” will not be permitted. During
7. The contract must also contain the the appointment, the application packet
broker's name, address, and will be briefly reviewed to ensure that the
telephone number; and the listing entire minimum required documents are
7 This review and eligibility determination is in
compliance with HUD and the HOME Investments
Partnerships Program Regulations.
Page | 17present. During the appointment and brief you are sure of your closing date.
review, if the application packet is HAP suggests that you plan for a
incomplete, the entire packet will be minimum of 8 weeks between the
returned to the buyer(s) along with time you are pre-approved for HAP
instructions on what documents are and the time that you actually close
missing and who or where the documents on the mortgage loan.
will need to be obtained. Once the
additional/missing documents are TIME ALLOTMENT FOR EXPENDITURE is 180
obtained, the buyer(s) will need to contact days, from the date the application packet
the Grants & Housing Department to is pre-approved and an allocation is set
reschedule an appointment to turn in the aside. The buyer(s) must enter into a
packet. It is imperative that the buyer(s) purchase agreement and close the loan on
submit a complete application packet to the home. In the event that the property
ensure immediate processing and is not transferred to the buyer(s) by the
allocation of the limited funds. specified date, the allocation will be lost
and the applicant’s file will be closed. The
Generally the review is completed within buyer(s) may reapply to the program,
72 hours (excluding weekends and which requires a repeat of the application
holidays) from the time the complete process and the submission of a new
packet is received. In some instances, the application and income documentation.
buyer(s) may be asked to confirm certain
APPEALS CONCERNING THE ELIGIBILITY
circumstances within the household. This
DECISION are required to be in written
confirmation may include providing the
form with a cover letter requesting
program with additional documentation
“Reconsideration of Eligibility” and contain
that in needed to confirm program
a minimum of three (3) additional items of
eligibility.
proof substantiating the reason the
application packet should be
After program eligibility has been
reconsidered. The appeal is required to
determined, the Grants & Housing
be forwarded by U.S. Mail to:
Department will issue a Preliminary Pre-
Approval or Denial Letter that will be sent City of Galveston
to: Grants & Housing Department
▪ the Buyer by U.S. Mail or HAP Appeal
2508 Ball Avenue
email* Galveston, TX 77550
At this time, the HAP allocation will be set- The Interim Director of Grants &
aside in the qualifying applicant(s) name Housing will have ten (10) business days
and the buyer(s) can proceed with the from receipt, to reply to the appeal.
purchase of an eligible housing unit. Applicants will be notified by mail of the
final decision.
*If you have not received an
Income and Eligibility Pre-Approval
letter...then you have not been
approved to receive assistance PREPARING FOR
through this program.
CLOSING
Please do not give notice of your
move to your current landlord until
Page | 18Upon review and pre-approval of all of the "package" form when submitting
necessary documents, the Grants & for HAP assistance.
Housing Department will issue a Final
Funding Approval Letter to the Lender, What to do next... Once you have
the Agent and the Buyer. received the "eligibility and
allocation" letter from HAP, you
At this time, the HAP DEED OF TRUST and are ready to continue in the
PROMISSORY NOTE will be prepared and buying process.
the assistance funds will be requested
from the City of Galveston Finance 4. Prepare to make an offer on
Department. purchasing the home you want to
buy.
The Grants & Housing Department Staff
will attend the closing. The program 5. Insure that the home is safe,
assistance funds (check) will be presented structurally sound, and a healthy
to the closing agent. The Buyer(s) will sign environment for you and your
the program Deed of Trust and family.
Promissory note and all other documents
required for the mortgage loan and for the 6. Wait…until all of the HAP
legal transfer of the property to the required repairs (if applicable)
buyer(s) name(s). have been completed. Once the
repairs are complete, call the
After all of the documents are signed they Grants & Housing Department to
will be filed with Galveston County clerk have a re-inspection performed
who will officially record and file them in confirming that all repairs have
the county records. The buyer(s) will been completed as required.
receive a copy of these documents in
about 4-8 weeks. 7. In preparation for closing, you
will need to allow for plenty of
time so that you can read through
Let's Review... ALL of the documents you will be
signing.
1. Always start with a Mortgage
Lender who will determine
how much "buying power"
you have and how much
money you can borrow to
purchase your home with.
2. Always work with a licensed
real estate agent, one who is
knowledgeable of the
requirements of the HAP
Program.
3. Schedule the appointment to turn
in your application packet, and
ensure that you have all of the
required documents ready and in
Page | 19Definition of Gross allowance for depreciation of assets used
in a business or profession may be
Annual Income and deducted, based on straight-line
depreciation, as provided in Internal
Net Family Assets Revenue Service regulations.
withdrawal of cash or assets from the
Any
as used to operation of a business or profession will
be included in income, except to the
Determine Program extent the withdrawal is reimbursement of
cash or assets invested in the operation by
Eligibility the family.
24 CFR 5.609 (3) Interest, dividends, and other net
income of any kind from real or personal
Annual Income means all amounts, property. Expenditures for amortization of
monetary or not, which: capital indebtedness shall not be used as
deductions in determining net income. An
(a)(1) Go to, or on behalf of, the family allowance for depreciation is permitted
head or spouse (even if temporarily only as authorized in paragraph (b)(2) of
absent) or to any other family member; or this section. Any withdrawal of cash or
assets from an investment will be included
(2) Are anticipated to be received from a in income, except to the extent the
source outside the family during the 12- withdrawal is reimbursement of cash or
month period following admission or assets invested by the family. Where the
annual reexamination effective date; and family has net family assets in excess of
$5,000, annual income shall include the
(3) Which are not specifically excluded in greater of the actual income derived from
paragraph (c) of this section. all net family assets or a percentage of the
value of such assets based on the current
(4) Annual income also means amounts passbook savings rate, as determined by
derived (during the 12-month period) HUD.
from assets to which any member of the
family has access. (4) The full amount of periodic amounts
received from Social Security, annuities,
(b) Annual income includes, but is not insurance policies, retirement funds,
limited to: pensions, disability or death benefits, and
other similar types of periodic receipts,
(1) The full amount, before any payroll including a lump-sum amount or
deductions, of wages and salaries, prospective monthly amounts for the
overtime pay, commissions, fees, tips and delayed start of a periodic amount (except
bonuses, and other compensation for as provided in paragraph (c)(14) of this
personal services; section);
(2) The net income from the operation of (5) Payments in lieu of earnings, such as
a business or profession. Expenditures for unemployment and disability
business expansion or amortization of compensation, worker's compensation
capital indebtedness shall not be used as and severance pay (except as provided in
deductions in determining net income. An paragraph (c)(3) of this section);
Page | 20tenant family, who are unable to live
(6) Welfare assistance. If the welfare alone);
assistance payment includes an amount
specifically designated for shelter and (3) Lump-sum additions to family assets,
utilities that is subject to adjustment by such as inheritances, insurance payments
the welfare assistance agency in (including payments under health and
accordance with the actual cost of shelter accident insurance and worker's
and utilities, the amount of welfare compensation), capital gains and
assistance income to be included as settlement for personal or property losses
income shall consist of: (except as provided in paragraph (b)(5) of
this section);
(i) The amount of the allowance or
grant exclusive of the amount (4) Amounts received by the family that
specifically designated for shelter or are specifically for, or in reimbursement
utilities; plus of, the cost of medical expenses for any
family member;
(ii) The maximum amount that the
welfare assistance agency could in fact (5) Income of a live-in aide, as defined in
allow the family for shelter and utilities. 24 CFR Sec. 5.403;
If the family's welfare assistance is
ratably reduced from the standard of (6) The full amount of student financial
need by applying a percentage, the assistance paid directly to the student or
amount calculated under this to the educational institution;
paragraph (b)(6)(ii) shall be the
amount resulting from one application (7) The special pay to a family member
of the percentage; serving in the Armed Forces who is
exposed to hostile fire;
(7) Periodic and determinable allowances,
such as alimony and child support (8)(i) Amounts received under training
payments, and regular contributions or programs funded by HUD;
gifts received from organizations or from
persons not residing in the dwelling; (ii) Amounts received by a person with
a disability that are disregarded for a
(8) All regular pay, special pay and limited time for purposes of
allowances of a member of the Armed Supplemental Security Income
Forces (except as provided in paragraph eligibility and benefits because they are
(c)(7) of this section). set aside for use under a Plan to Attain
Self-Sufficiency (PASS);
(c) Annual income does not include
the following: (iii) Amounts received by a participant
in other publicly assisted programs
(1) Income from employment of children which are specifically for or in
(including foster children) under the age reimbursement of out-of-pocket
of 18 years; expenses incurred (special equipment,
(2) Payments received for the care of clothing, transportation, child care,
foster children or foster adults (usually etc.) and which are made solely to allow
persons with disabilities, unrelated to the participation in a specific program;
Page | 21(iv) Amounts received under a resident Annual Income from Family Assets
service stipend. A resident service
stipend is a modest amount (not to Inclusions:
exceed $200 per month) received by a
resident for performing a service for the 1. Cash held in savings accounts,
PHA or owner, on a part-time basis, checking accounts, safe deposit
that enhances the quality of life in the boxes, homes, etc. For savings
development. Such services may accounts, use the current
include, but are not limited to, fire balance. For checking accounts,
patrol, hall monitoring, lawn use the average 6-month
maintenance, and resident initiatives balance.
coordination. No resident may receive
more than one such stipend during the 2. Cash value of revocable trusts
same period of time; available to the applicant(s).
(v) Incremental earnings and benefits 3. Equity in rental property or
resulting to any family member from other capital investments.
participation in qualifying State or local Equity is the estimated current
employment training programs market value of the asset less
(including training programs not the unpaid balance on all loans
affiliated with a local government) and secured by the asset and all
training of a family member as resident reasonable costs (e.g., broker
management staff. Amounts excluded fees) that would be incurred in
by this provision must be received selling the asset. Under HOME,
under employment training programs equity in the family’s primary
with clearly defined goals and residence is not considered in
objectives, and are excluded only for the calculation of assets for
the period during which the family owner-occupied rehabilitation
member participates in the projects.
employment-training program;
4. Cash value of stocks, bonds,
(9) Temporary, nonrecurring or Treasury bills, certificates of
sporadic income (including gifts); deposit and money market
accounts.
(10) Reparation payments paid by a
foreign government pursuant to claims 5. Individual retirement and Keogh
filed under the laws of that government accounts (even though
by persons who were persecuted during withdrawal would result in a
the Nazi era; penalty).
(11) Earnings in excess of $480 for each 6. Retirement and pension funds.
full-time student 18 years old or older
(excluding the head of household and 7. Cash value of life insurance
spouse); policies available to the
(12) Adoption assistance payments in individual before death (e.g.,
excess of $480 per adopted child surrender value of a whole life
or universal life policy).
Page | 22You can also read
