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HomeMy WebLinkAbout1999-346ORDINANCE NO 9CI".JO AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF DENTON, TEXAS, APPROVING GUIDELINES FOR OPERATION OF THE CITY OF DENTON HOMEBUYER ASSISTANCE PROGRAM AND ELIGIBILITY CRITERIA, AUTHORIZING EXPENDITURES IN EXCESS OF $15,000 FOR PROJECTS MEETING PROGRAM GUIDELINES AND CRITERIA, AND PROVIDING AN EFFECTIVE DATE WHEREAS, the City Council of the City of Denton recognizes the need to assist low and moderate income families in securing safe, sanitary, and decent housing, and WHEREAS, the City of Denton participates in a Homebuyer Assistance Program administered by the City of Denton Community Development Office and funded through a federal grant from the Department of Housing and Urban Development, NOW, THEREFORE, THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS SECTION 1. That the City Council approves the Homebuyer Assistance Program Guidelines and Program Eligibility Criteria which is attached hereto and made a part of this ordinance for all purposes as Exhibit "A" and authorizes the City of Denton Community Development Office to administer this program SECTION 2 That the City Council authorizes the expenditure of funds in excess of $15,000 by the Community Development Office for projects meeting program guidelines and cntena, subject to compliance with competitive bidding laws where applicable SECTION 3. That this ordinance shall become effective immediately upon its passage and approval PASSED AND APPROVED this the day of 1999 JA ILLER, MAYOR ATTEST JENNIFER WALTERIS,,CCITY SECRETARY BY W APPR ED AS TO LEGAL FORM HERBERT L PROUTY, CITY ATTORNEY BY F \SHARED\DEPTEGUOur Documents\Ordinances\99\Homebuyer Assistance Program Ordinance doc City of Denton — Community Development Division 1999/2000 Homebuyer Assistance Program Guidelines INTRODUCTION Families from all walks of life qualify for a mortgage loan to finance the purchase of existing houses However, these same families are often unable to save the money needed for the down payment, closing costs and prepaid taxes and insurance The City of Denton's Homebuyer Assistance Program (HAP) provides part of this necessary financing as a secured forgivable second mortgage loan at 0%* interest for 5, 10 or 15 years The City of Denton will forgive the note at the end of the loan term * In the case of loan default such as the sale of the property, transfer of ownership, failure on the borrower to maintain home as principal residence during the term of the loan 5, 10 or 15 years, the amount of the loan and interest of 5% from the beginning of the loan is due and payable in full The Homebuyer Assistance Program is administered by the City of Denton's Community Development Division and is funded through federal grants from the U S Department of Housing and Urban Development The program accomplishes two objectives --providing home ownership opportunities for low and moderate income families and builds stronger neighborhoods Policy clarifications or general questions should be addressed to the City's Community Development Division at the following address or telephone number City of Denton — Community Development Division 100 West Oak, Suite 208, Denton, Texas 76201 Phone Number (940) 349-7726 — Fax Number (940) 383-2445 WHO QUALIFIES FOR ASSISTANCE? Participants must meet all of the following criteria to participate in the Homebuyers Assistance Program Live in the city of Denton for one year Anticipated household income cannot exceed HAP income limit The anticipated annula income and assets are calculated using HUD's most current Section 8 Income Guidelines established in the Technical Guide for Determining Income. No of Peonle Max, Income Limit 1 $32,600 3 $41,900 5 $50,300 7 $57,750 No. of Peonle Max. Income Limit 2 $37,250 4 $46,550 6 $54,000 8 $61,450 Participants must be first-time homebuyers The following will be considered first-time homebuyers a Participants who have not owned a home in the past three years, b Participants who are displaced single parents, c Participants who own or owned a substandard mobile home CD Inspector will determine the condition of the mobile home Page 1 of 7 4 Participants must occupy the home as their primary residence during the term of program assistance The HAP second lien contains a due in full and payable/acceleration clause in the event of sale 5 Participants must meet the eligibility requirements of the mortgage program offered by a Participating Lender The interest rate on the mortgage loan cannot exceed the prevailing market rate See page 6 for a list of current Participating Lenders 6 Participants may not hold liquid assets in excess of $5,000 Liquid assets are assets that can be readily converted to cash and include such assets as cash, checking and savings accounts, certificates of deposit, money market accounts, stocks, bonds and profit sharing accounts (if funds can be withdrawn without a penalty) Note Any sum over $3,500 to the maximum of $5,000 must be pledged by the participants for closing costs, prepaids and down payment 7 Participants must attend a HUD or Fannie Mae approved homebuyer education program Consumer Credit Counseling of North Central Texas, Inc currently offers a "Successful Home Ownership" workshop The workshop is HUD -approved and meets Fannie Mae guidelines for home buyer education CCCS education workshops are offered every six to eight weeks Call the Community Development Division at (940) 349- 7726 to register for the next available workshop WHAT TYPE OF HOUSE QUALIFIES? 1 The house to be purchased must be a residential property, located within the Denton city limits Residential properties include the following existing and newly constructed single-family residence, condominium or townhouse Mobile homes and manufactured homes are not eligible properties The maximum sales price of the house to be purchased shall not exceed $80,000 2 The City of Denton will not assist in the purchase of a house that is being rented unless the buyer and renter are the same 3 In accordance with the Uniform Relocation Act, the City of Denton must mforin a seller that the City of Denton will not use it's power of eminent domain to acquire the property if negotiations fail to result in an agreement between the HAP buyer and the seller Prior to the closing of the sale, the City of Denton will provide the seller with a written estimate of the fair market value of the property that the seller signs 4 The property to be purchased must be safe, decent and sanitary Assistance will not be provided to facilitate the purchase of a substandard property An independent inspection of all major systems and items that may affect the health and safety of the occupants must be conducted on the property by a State Licensed Home Inspection Company Community Development Staff will review the inspection report and will determine if any repairs will be required HAP funds will not be released until all the items of concern have been adequately addressed It is recommended that the house contain adequate number of bedrooms Maximum No of Maximum No of Family Members Bedrooms Family Members Bedrooms 1 0/Efficiency 8 4 Bedroom 2 1 Bedrooms 10 5 Bedrooms 4 2 Bedrooms +10 6 Bedrooms 6 3 Bedrooms Page 2 of 7 Any structure built before 1978, where a child of six (6) years of age or younger will reside, must be free from lead based paint All sales contracts for property constructed prior to 1978 must be subject to Lead - Based Paint Health Hazards Addendum WHAT COSTS WILL HAP COVER? Closing Costs & Prepaids• HAP will only assist with Borrower's closing costs If the maximum allowance is not used for a particular item, funds cannot be used to finance other eligible items over the amounts specified In such cases where certain items cannot be covered through HAP, the buyer will be responsible for those closing costs All of the following closing costs are eligible for financing, to some degree, through HAP application fee credit report fee lender's inspection fee loan origination fee settlement or closing fee document preparation fee title insurance courier fees recording fees title search appraisal fee survey fee attorney's fees other similar items Limitations on Closing Costs & Prenaids 30 Days Interest A full 30 days interest is provided 14 Months Hazard Insurance Three (3) Months Property Taxes - a full three (3) months taxes are provided If the actual taxes for a three (3) month period are less than the amount provided, the excess funds may not be escrowed for additional taxes It is the responsibility of the purchaser to pay for any taxes above the three (3) months provided under the program Inspection fees $100 for an Independent Home Inspections, $50 for lenders remspection after repairs have been completed, $75 for a Pest Inspection, $350 for a lead -based paint assessment and inspection Down Payment* Up to 50% of the MINIMUM down payment required by the Participating Lender based on the sales price In some instance, a mortgage loan does not require a down payment, however, under the Homebuyers Assistance Program a minimum of $250 is required as down payment from the homebuyer Gap Financing Additional funds may be available to help homebuyers whose income does not exceed 65% of the area median income and meet gap criteria These funds are distributed and approved by the City GAP Financing is not meant to be used as a cushion factor to make the loan more appealing to the purchaser or mortgage company It is only available when the action is necessary for the participant to qualify for a mortgage loan or the price range for the house is available in the market Gap financing can be used for the following situations A Assist in the difference between the sales price of the house and the maximum loan the buyer can afford - B Assist participants to buy down the interest rate in order to make the mortgage payment affordable C Assist home buyer with mortgage principal buydown in order to make the mortgage payments affordable Page 3 of 7 LEVELS OF ASSISTANCE The following are the three levels of assistance through the Homebuyer Assistance Program and additional requirements for each level of assistance Family Size MODERATE INCOME 80% - 66% AMI LOW INCOME 65% - 51% AMI VERY LOW INCOME 50% & Below AMI 1 $32,600 - $26,456 $26,455-$20,351 $20,350 or Below 2 $37,250 - $30,291 $30,290 - $23,301 $23,300 or Below 3 $41,900 - $34,061 $34,060 - $26,201 $26,200 or Below 4 $46,550 - $37,831 $37,830 - $29,101 $29,100 or Below 5 $50,300 - $40,886 $40,885 - $31,451 $31,450 or Below 6 $54,000 - $43,876 $43,875 - $33,751 $33,750 or Below 7 $57,750 - $46,931 $46,930 - $36,101 $36,100 or Below 8 $61,450 - $49,921 $49,920 - $38,401 $38,400 or Below Amount of HAP Assistance for Yz down payment & eligible closing costs Up to $5,000 Up to $5,000 Up to $5,000 Gap Funds (See page 3 for an explanation on the purpose for gap funds) Not Eligible for Gap Funds An additional $5,000 may be available for gap funds An additional $14,900* may be available for gap funds *Up to $14,900 may be available if funds from the Federal Home Loan Bank are available The FHLB of Dallas provides an additional $5,000 for households that are at or below 50% of the AMI The $5,000 grant is provided over a five-year period OCCUPANCY REQUIREMENTS/TERM OF LOANS The occupancy requirements and the term of the HAP loan is based on the amount of assistance that is provided for down payment, closing costs and gap funds The following table indicates the term of the note and the number of years the household is required to maintain their home as their principal place of residence in order to full comply with the Homebuyer Assistance Program Amount of Assistance Up to $5,000 Up to $10,000 Up to $19,900 Occupancy Requirements & Term of Loans 5 years 10 years 15 years Page 4 of 7 EARNEST MONEY CONTRACT 1 The contract must show an interest rate not to exceed the prevailing rate 2 All contracts must be subject to a Property Condition Addendum (PCA) The Earnest Money Contract must call for an independent inspection of all major systems and items that may affect the health and safety of the occupants The independent inspection must be completed by a State Licensed Home Inspection Company Community Development Staff will review the inspection report and will determine if any repairs will be required HAP funds will not be released until all the items of concern have been adequately addressed 3 Under Special Provisions it must be annotated that the contract is subject to the Buyer qualifying for HAP assistance 4 Addendum to Sales Contract / Lead -Based Paint Hazards Notification is required for property constructed prior to 1978 According to the addendum, a buyer has the option to conduct a risk assessment or inspection for the presence of lead -based paint hazards If the buyer is to pay for the assessment, this fee can be reimbursed under HAP should the loan be approved by the lending agency 5 Contracts must be properly endorsed by Seller(s) and Purchaser(s) Any changes to the contract must be dated and mitialed by both parties 6 Broker's name and address are required along with selling agent's name and telephone number 7 In some instances, the appraised value of the home will not support the loan A change in contract price may affect the HAP benefit level The mortgage company must submit a letter indicating the new sales price along with an adjusted Good Faith Estimate (GFE) PROCESS TO RECEIVE ASSISTANCE If you meet all of the eligibility criteria, the process for homeownership then includes the following steps 1 Attej1d MM ArM ovea n er euuc vu m .. �• ��- Counseling of North Central Texas is currently offering "Successful Homeownership" workshop The workshop includes four components Pre -Homeownership, Homebuying process, Maintaining Home as a Homeowner and Budgeting Skills Please call the City's Community Development Division to register for the next available workshop The workshops are offered every six to eight weeks and are free of charge 1 Select and contact a HAP Participating Lender from the approved list of your choice That Lender will establish the actual size of the mortgage you can afford and determine your preliminary eligibility for the program Feel free to contact the City's Community Development Division if you have any questions on the program 2 Find yolir "dream home" and enter into a purchase agreement A local realtor can assist you in finding your home, based on the lender's loan pre -qualification Once you have selected your "dream home", the realtor can also assist you in entering into a purchase agreement Please note that it is not necessary to utilize the services of a realtor to receive assistance 4 HAP lellder will submit your HAP application Once you have obtained preliminary loan approval and entered into a purchase agreement, your lender will submit your application to the City's Community Development Division for down payment and closing costs assistance You will NOT have to submit an application directly to the City The HAP lender will process all the paperwork necessary for you to apply for the HAP program Page 5 of 7 When the buyer's application is received the Community Development Office will begin processing the request for assistance An outline of our functions follows A Information is reviewed to ensure completeness and accuracy and an eligibility check is performed B Review independent home inspection and request any needed repairs C Conduct an environmental review on property to determine if near an airport or in a Special Flood Hazard Area D Determine the amount of assistance from the Settlement Statement and request funds from our Accounting Department Assistance is subject to completion of all repairs as required by Community Development E Notify lender and title company of assistance They will receive a Schedule of Assistance outlining the actual amount of assistance that will be provided to the buyer F Prepare Homebuyers Assistance Program Deed of Trust and Promissory Note for loan closing G Submit legal contracts for HAP assistance to title company for closing Funds for closing will be wired to the title company the day of closing WHAT WILL YOU BE 'REQUIRED TO SIGN AT CLOSING? On the day of closing the buyer(s) will be required to sign two legal documents for the Homebuyers Assistance Program — A Deed of Trust and Promissory Note The following is an explanation of the legal documents Promissory Note, The promissory note states that the buyer promises to pay the amount of HAP assistance based on the payment schedule stated on the note The note is forgiven at the end of the loan term 5, 10 or 15 years depending on the amount of assistance See Page 4 for the number of years Deed of Trust The deed of trust is a security instrument that allows the City of Denton to place a lien on the property for the term of the forgivable loan and only for the amount of HAP assistance At the end of the term of the loan the entire grant will be forgiven At that time, the City of Denton will file a Release the Lien with the Denton County Clerk's Office The contracts indicate that the buyer(s) must comply with the following conditions 1 Buyer(s) agrees to reside in the house for the term of the forgivable loan 5, 10 or 15 years from the date of execution of the promissory note 2 Buyer(s) agrees to maintain the property in safe and sanitary condition 3 Buyer (s) agrees to pay all mortgage payments, taxes and other assessment on the property in a timely manner PLEASE NOTE The amount of the loan and interest of 5% from the beginning of the loan is due and payable in full upon the sale of the property, transfer of ownership. failure failure on the borrower to maintain home as pnnci awl principal residence during the term of the loan 5 10 or 15 years Page 6 of 7 HOMEBUYER ASSISTANCE PROGRAM PARTICIPATING LENDERS * Active Participating Lenders Participating Lenders/Address Contact Person Mortgage Loans Translators Telephone Number See Below Allied Mortgage Capital Corp. Helen W Ikerd 1, 2, 5 N/A 1722 W Oak, Denton TX 75201 (940) 898-1694 American Investment Mortgage* Manny Uceda 1 2 4 Spanish/ 2216 Loon Lake Rd, TX 76205 (940) 380-0002 Italian/French American National Bank Spencer Murphy 1, 2, 5 N/A 1565 W Main St, Suite 468, Lewisville TX 75067 (972) 221-7966 Countrywide Home Loans Hugh Kelly 112,315 Spanish 724 West Main St #250, Lewsiville TX 75067 (888) 610-7989 First State Bank of Texas* Judy Atkins 11213 N/A 100 S Locust, Denton TX 76201 (940) 381-7286 Jefferson Heritage Bank Tom Phillips (940) 382-9676 1, 2, 3, 5 Spanish 321 W Oak Street, Denton TX 76201 The Funding Source Brad Deighton 115 N/A 5068 W Plano Hwy #300, Plano TX 75093 (972) 991-4100 Merit Mortgage Inc.* Dana Reynolds 1, 2, 5 N/A 325 S Stemmons, Lewisville TX 75067 (972) 539-6733 Norwest Mortgage, Inc Donna Kelley 1, 2, 3, 4, 5 Various 2430 I-35 E, Suite 150, Denton TX 76205 (940) 381-0044 W/appt Precise Mortgage Services, Inc * Wendy Broyles 19 2, 5 N/A 1173 Bent Oak Dr Ste 100, Denton TX 76205 (940) 898-8066 Provident Bank Grant Jacobson 1, 2, 5 N/A 2220 San Jacinto Blvd, Denton TX 76205 (940) 387-5820 Reliance Mortgage Co Richard LaBarbara 2,5 N/A 120 E McKinney, Denton TX 76201 (940) 381-1987 BOMAC Home Mortgage, Inc Company* Vicki Cummings 1, 2, 5 Spanish 2430 S I35E Ste 238, Denton TX 76205 (940)4 84-1110 Summit Mortgage* Renee Fairchild 2 N/A 519 S Carroll Blvd, #A, Denton TX 76201 (940) 381-2523 Texas Bank* Jessie Rennaker 729 Fort Worth Drive, Denton TX 76201 (940) 383-4600 Types of Mortgage Loans O FHA (203b) ® Conventional O FHA (203k) ® VA PLEASE NOTE THIS LIST WILL BE UPDATED AS NEEDED — JUNE 1999 ® Denton County Bond Program Page 7 of 7