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HomeMy WebLinkAbout1997-337ORDINANCE NO 9q-337 AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF DENTON, TEXAS, AP- PROVING GUIDELINES FOR OPERATION OF THE CITY OF DENTON HOMEBUYER ASSISTANCE PROGRAM AND ELIGIBILITY CRITERIA, AUTHORIZING EXPENDI- TURES 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 admin- istered 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 I. That the City Council approves the Homebuyer Assistance Program Guidelines and Program Eligibility Criteria which is attached hereto and made a part of this or- dinance for all purposes as Exhibit "A" and authorizes the City of Denton Community Develop- ment Office to administer this program SECTION II. 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 criteria, subject to compliance with competitive bidding laws where applicable SECTION III. That this ordinance shall become effective immediately upon its passage and approval PASSED AND APPROVED this the A� day of Aaam be r, 1997 JACLeXILLER, MAYOR ATTEST JENNIFER WALTERS, CITY SECRETARY BY APPR ED A TO LEGAL FORM HERBER_T�LQP�RJO�UTY, CITY ATTORNEY ( BY COMMUNITY DEVELOPMENT OFFICE CITY OF DENTON 100 WEST OAK, SUITE 208 DENTON, TX 76201 (940)349-7726 1997-98 HOMEBUYERS ASSISTANCE PROGRAM GUIDELINES (HAP) Guidelines Page 1 of 12 PROGRAM GUIDELINES TABLE OF CONTENTS Page Number I PURPOSE 3 II WHO QUALIFIES FOR ASSISTANCE? 3 III WHAT TYPE OF HOUSE QUALIFIES? 4 IV WHAT COSTS WILL HAP COVER? 4 V LEVEL OF ASSISTANCE 5 VI THE EARNEST MONEY CONTRACT 6 VII GOOD FAITH ESTIMATE 6 VIII HAP PACKET AND APPROVAL 7 IX HAP COMMITMENT 8 IX APPENDICES • QUALIFYING INCOME LIMITS AND RANGES 9 • SECTION 8 INCOME GUIDELINES 10 • CURRENT LIST OF PARTICIPATING LENDERS 12 Guidelines Page 2 of 12 I. PURPOSE 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 Homebuyers Assistance Program (HAP) provides part of this necessary financing as a secured forgivable second mortgage loan at 0% interest for 5, 10 or 20 years The City of Denton will forgive the note on a monthly basis HAP, funded by federal grants from the Department of Housing and Urban Development, 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 Community Development Office at 100 West Oak, Suite 208, Denton, Texas 76201 or by calling (940) 349-7726 II. WHO QUALIFIES FOR ASSISTANCE'► To be eligible for participation in the Homebuyers Assistance Program (HAP), buyers must meet all of the following criteria 1 Participants must either live or work in the city of Denton 2 Participants' gross annual anticipated household income cannot exceed 80% of the area median income (See page 9 for Qualifying Income Limits) Household income is decided by current HUD Section 8 program standards and includes the income of all persons in the home who are over the age of 17 (See page 10 for Section 8 Income Guidelines) 3 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 Community Development Inspector will determine the condition of the mobile home 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 12 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 the homebuyer education program "Successful Home Ownership" provided by Consumer Credit Counseling of North Central Texas, Inc The workshop is HUD -approved and meets Fannie Mae guidelines for home buyer education Guidelines Page 3 of 12 III. WHAT TYPE OF HOUSE QUALIFIES? 1 The house to be purchased must be an existing residential property, located within the Denton city limits The maximum sales price of the house to be purchased shall not exceed $75,000 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 3 It is recommended that the house contain adequate number of bedrooms Maximum # of Family Members 1 N Suggested # of 0/Efficiency 1 Bedrooms 2 Bedrooms 3 Bedrooms Maximum # of Family Members 8 10 +10 Suggested # of Bedrooms 4 Bedroom 5 Bedrooms 6 Bedrooms 4 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 5 NOTE: The City of Denton will not assist in the purchase of a house that is being rented unless either of the following conditions exists a The buyer and renter are the same b Prior to leasing and occupying the property, the renter received written notification of the possibility of the property being sold and that relocation assistance would not be provided IV. WHAT COSTS WILL HAP COVERS Closing Costs &c Preoaids. HAP will only assist will 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 i.imitations on Closing oats & Pregaids• • 30 Days Interest- A full 30 days interest is provided • 14 Months Hazard Insurance Guidelines Page 4 of 12 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 reinspection after repairs have been completed, $75 for a Pest Inspection, $350 for a lead -based paint assessment and inspection 2 Duo= 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 3 Sap Financing: Additional funds maybe available to help homebuyers whose income does not exceed 65% of the area median income (See page 9 for Qualifying Income Limits) 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 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 Ho3yto Apply for GAP Funds. The mortgage company's cover letter transmitting the application package must indicate the following information A The amount and purpose of gap funds needed by the buyer B Explanation on how the additional gap funds will assist the buyer C A detailed explanation from buyers justifying the need for gap financing V. LEVELS OF ASSISTANCE & OCCUPANCY REQUIREMENTS 1 Moderate Income Households - Maximum $5,000 - 5 years Homebuyers whose anticipated gross annual household income falls between 80% and 65% of the area median family income limits can qualify for a maximum of $5,000 for half of the minimum down payment and eligible closing costs (See page 9 for Qualifying Income Limits) Participants must occupy the home as their primary residence for five (5) years 2 Low Income Households -Maximum $10,000 - 10 years Homebuyers whose anticipated gross annual household income falls between 65% and 50% of the area median family income limits can qualify for a maximum of $10,000 for half of the minimum down payment, gap financing and eligible closing costs (See page 9 for Qualifying Income Limits) Participants must occupy the home as their primary residence for ten (10) years Guidelines Page 5 of 12 3 Very Low Income Households - Maximum $19,900 - 20 years Homebuyers whose anticipated gross annual household income falls at 50% or below of the area median family income limits can qualify for a maximum of $19,900 for half of the minimum down payment, gap financing and eligible closing costs (See page 9 for Qualifying Income Limits) Maximum HAP assistance includes $5,000 in Federal Home Loan Bank Funds Participants must occupy the home as their primary residence for twenty (20) years VI. THE EARNEST MONEY CONTRACT 1 The contract must show an interest rate not to exceed the prevailing rate 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 initialed 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) VII. GOOD FAITH ESTIMATE I If, after issuing a commitment, the purchaser changes mortgage companies, we require a letter of transfer and a revised GFE from the new participating lender 2 Discount points should be paid by Seller when at all possible Discounts points are an eligible costs under gap financing Most lending agencies require a non-refundable fee of $300 to $400 to cover an appraisal and a credit report Should your loan be approved by the lending agency, this fee will be reimbursed under HAP Guidelines Page 6 of 12 VIII. HAP PACKET AND APPROVAL 1 PEAJ.IMINARY APPROVAL STATUS. After the Participating Lender qualifies the applicant for a mortgage loan, the following information is the minimum that must be submitted to the Community Development Office (See address listed below) for Preliminary Approval Note Items requested in #2 of this Section (Final Approval) can also be submitted at this time if they are available A Cover letter, indicating the Buyer's name, property address, amount of HAP funds requested, anticipated closing date and considerations for gap financing B Mortgage Analysis Sheet/Qualifying Sheet, copy C Loan Application, copy D Verification of Employment, copy E Most Recent Pay stubs, 2 months, copy F Verification of Deposits, copy G Most Recent Bank statements for each account - two months, copy H Filed Income Tax Returns - three years, copy If an income tax return was not filed, a notarized letter is needed certifying that a return was not filed I Additional Verification of Income, if needed, copy (Note All sources of income included in the Section 8 Income Guidelines (See page 10) must be verified in writing by the income source if possible J Signed HAP Acknowledgment Form 2 FINAI. APPROVAL STATUS. The mortgage company and buyer will receive final approval status when the following data has been received and approved by the Community Development Office A Approval Letter for mortgage loan, B Home buyer certification of completion of "Successful Home Ownership Workshop" provided by Consumer Credit Counseling B Earnest Money Contract with appropriate addendums C Good Faith Estimate, D Final Settlement Statement, E Title Policy, ( after closing) A Commitment for Title Policy is also acceptable F Wiring instructions Guidelines Page 7 of 12 F Independent Home Inspection Report, copy, G Property Survey, H Complete Appraisal Report, Copies of prepaid receipts for expenses paid outside of closing for reimbursement (e g , appraisal, credit report, independent home inspection and pest inspection fees) 3 The Community Development Office is under no obligation to call the participating lender or realtor to request information needed to complete a HAP packet 4 If, after issuing a commitment, the purchaser changes mortgage companies, we require a letter of transfer and a revised Good Faith Estimate from the new mortgage company 5 Should the purchaser change properties, the information required for final approval needs to be submitted again along with the new earnest money contract and a revised Good Faith Estimate IX. HAP COMMITMENT 1 Upon receipt of all Preliminary Approval Status information, the Community Development Office begins 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 (income, area, affordability, availability of funds, etc ) B Participating Lender will receive a Notification of Preliminary Approval for approved applicants within 48 hours The preliminary approval will include the maximum amount of assistance, final approval conditions and a commitment period of 90 days The commitment may be extended for additional time provided the buyer has an acceptable Earnest Money Contract 2 Upon receipt of Final Approval Status information, the Community Development Office Staff will prepare for closing An outline of our functions follows A Review independent home inspection to ensure that all major systems were inspected and determine if any repairs will are required The seller and realtors must be informed of the program regulations regarding an independent home inspection and possible repairs B An environmental survey is conducted to determine if the structure is located within a clear zone of a civil airport or military airfield or is in a Special Flood Hazard Area, etc C Determine if the house has sufficient living/sleeping space to accommodate family D Compute the amount of assistance from a final Settlement Statement and request that funds for down payment, eligible closing costs and gap financing be wire to the title company in behalf of home buyer Assistance is subject to completion of all required repairs Please note. A final Settlement Statement is due not later than three business days before closing. This is necessary to provide sufficient time for the City to process a wire request Guidelines Page 8 of 12 E Notify participating lender and title company of the commitment The Participating Lender and the Title Company 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 and checks for HAP assistance to title company for closing QUALIFYING INCOME LIMITS FOR THE CITY OF DENTON'S FEDERALLY ASSISTED PROGRAMS Income eligibility for HAP is determined in accordance with income figures from the I4UD list of income figures from the Dallas SMSA, which includes the City of Denton Participant income is calculated using Section 8 income definition Family Size Moderate Income 80% - 66% AMI Low Income 65% - 51% AMI Very Low Income 50% & Below AMI 1 $29,300 - $23,791 $23,790 - $18,301 $18,300 - OR BELOW 2 $33,450 - $27,171 $27,170 - $20,901 $20,900 - OR BELOW 3 $37,650 - $30,616 $30,615 - $23,551 $23,550 - OR BELOW 4 $41,850 - $33,996 $33,995 - $26,151 $26,150 - OR BELOW 5 $45,200 - $36,726 $36,725 - $28,251 $28,250 - OR BELOW 6 $48,550 - $39,456 $39,455 - $30,351 $30,350 - OR BELOW 7 $51,900 - $42,186 $42,185 - $32,451 $32,450 - OR BELOW 8 $55,250 - $44,851 $44,850 - $34,501 $34,500 - OR BELOW NOTE 1 All income received on a regular basis must be divulged and verified whether or not it is to be considered as a bapis for prepayment of the primary loan. 2 Any property owned by participant will be included in income calculations based on its income potential 3 Co-borroweWco-mortgagors must meet all HAP eligibility criteria (must not own residential property, gross income when combined with principal borrower's must be within limits, must occupy the home, etc ) 4 Do not count the following households members in determining family size for HAP Income Limits purposes foster children, live -in aides and children of live-in aids, unborn children, and children being pursued for legal custody or adoption, who are not currently living with the households A child who is subject to a shared - custody agreement in which the child resides with households at lease 50 percent of the time can be counted Guidelines Page 9 of 12 HOUSING AND URBAN DEVELOPMENT SECTION 8 INCOME REQUIREMENTS A. Income Inclusions 1 All wages and salaries, overtime pay, commissions, fees, tips and bonuses, and other compensation for personal services (before any payroll deductions), 2 Net income from the operation of a business or profession Expenditures for business expansion or amortization of capital indebtedness cannot be used as deductions in determining net income, however, an allowance for depreciation of assets used in a business or profession may be deducted, based on straight line depreciations, as provided in Internal Revenue Service regulations Any withdrawals of cash or assets from the operation of a business or profession is included in income, except to the extent the withdrawal is reimbursement of cash or assets invested in the operation by the Family, Interest, dividends, and other net income of any kind from real or personal property Expenditures for amortization of capital indebtedness cannot be used as a deduction in determining net income An allowance for depreciation is permitted only as authorized in paragraph (2) of this section Any withdrawals of cash or assets from an investment will be included in income, except to the extent the withdrawal is reimbursement of cash or assets invested by the Family Where the Family has Net Family Assets in excess of $5,000, Annual Income includes the greater of the actual income derived from Net Family Assets or a percentage of the value of such Assets based on the current passbook savings rate, as determined by HUD, CURRENT PASSBOOK RATE IS 3 3% All gross periodic payments received from social security, annuities, insurance policies, retirement funds, pensions, disability or death benefits, and other similar types of periodic receipts, including lump -sum payment for the delayed start of a periodic payment (except Social Security), Payments in lieu of earnings, such as unemployment, worker's compensation and severance pay (but see paragraph(3) under Income Exclusions), 6 Welfare Assistance If the Welfare Assistance payment includes an amount specially designed for shelter and utilities that is subject to adjustment by the Welfare Assistance agency in accordance with the actual costs of shelter and utilities, the amount of Welfare Assistance income to be includes as income consists of The amount of the allowance or grant exclusive of the amount specially designed for shelter or utilities, plus The maximum amount that the Welfare Assistance agency could in fact allow the Family for shelter and utilities If the Family's Welfare Assistance is ratably reduced from the standard of need by applying a percentage, the amount calculated under this paragraph is the amount resulting from one application of the percentage Periodic and determinable allowances, such as alimony and child support payments, and regular contributions or gifts received from persons not residing in the dwelling Alimony and child support amounts awarded as part of a divorce or separation agreement are included as income unless the applicant (1) certifies that the income is not being provided, and (2) takes all reasonable legal action s to collect amounts due, and Guidelines Page 10 of 12 8 All regular pay, special pay, and allowances of a member of the Armed Forces (whether or not living in the swelling) who is head of the Family, spouse, or other person whose dependents are residing in the unit (but see paragraph 7 under Income Exclusions) B Income Exclusions 1 Income from employment of children (including foster children) under the age of 18 years, 2 Payments received for the care of foster children, 3 Lump -sum additions to Family assets, such as inheritance, insurance payments (including payments under health and accident insurance and worker's compensation), capital gams and settlement for personal or property losses (but see paragraph 5 of Income Inclusion), 4 Amounts received by the Family that are specially for, or in reimbursement of, the cost of Medical Expenses for any Family member, 5 Income of a live-in aide, 6 Amounts of educational scholarships paid directly to the student or to the educational institution, and amounts paid by the Government to a veteran, or used in meeting the costs of tuition fees, books, equipment, materials, supplies, transportation, and miscellaneous personal expenses of the student Any amount of such scholarships or payments to a veteran not used for the above purposes that is available for subsistence are to be included in income, 7 The special pay to a Family member serving in the Armed Forces who is exposed to hostile fire, 8 a Amounts received under training programs funded by HUD, b Amounts received b Disabled person that are disregarded for a limited time for purposes of Supplemental Security Income eligibility and benefits because they are set side for use under a Plan to Attain Self -Sufficiency (PASS), or c Amounts received by a participant in other publicly assisted programs that are specially for, or in reimbursement of, out-of-pocket expenses incurred (special equipment, clothing, transportation, child care, etc ) and that are made solely to allow participation in a specific program, 9 Temporary, nonrecurring, or sporadic income (including gifts), 10 Reparation payments from foreign governments in connection with the Holocaust, 1 I Lump sum payments of SSI and Social Security benefits, or 12 Amounts specially excluded by any other Federal statue from consideration as income for purposes of determining eligibility or benefits under a category of assistance programs that includes assistance under the 1937 Act Guidelines Page 11 of 12 HAP PARTICIPATING LENDERS Pa cipating Lenders/Address Contact Person/ Mortgage Translators/ Telephone Number Loans Language American National Bank Spencer Murphy FHANA/ N/A 1565 W Main St, Suite 468, Lewisville TX 75067 (972) 221-7966 Conventional American Reliance Mortgage Mike Perkins FHANA/ N/A 1173 Bent Oaks, Suite 101A, Denton TX 76205 (940) 320-1363 Conventional Countrywide Home Loans Hugh Kelly FHA/VA/ Various 2662 N Josey Lane #208, Carrollton TX 75007 (972) 245-2544 FNMA/FHLMC Cram & Co Mortgage Plus Donna Helms Conventional/ Spanish 614 Edmonds, Suite 105, Lewisville TX 75067-3555 (800) 221-2509 VA First State Bank of Texas Pat Courtney Conventional/ N/A 100 S Locust, Denton TX 76201 (940) 381-7250 FHA/203K First Federal Savings Bank of North Texas Danny Mitchell FHANA/ Spanish 321 W Oak Street, Denton TX 76201 (940) 382-9676 Conventional First Bankers Mortgage Corp Kenneth Powell FHA/ No 303 N Carroll Blvd , Ste 110 Denton TX 76201 (940) 387-5660 Conventional Guaranty Federal Bank Lisa Mesa Fannie Mae 3/2 Yes 8333 Douglas Ave, Dallas TX 75225 (214) 360-1969 Spanish Madison Commerce Mortgage Brett Howard FHANA/ Spanish 2430 South I-35E, Suite 218 Denton TX 76205 (940) 891-1100 Conventional Merit Mortgage Inc Dana Reynolds FHANA/ N/A 325 S Stemmons, Lewisville TX 75067 (972) 539-6733 Conventional Precise Mortgage Services, Inc. Carol E Hinton FHANA/ N/A 1173 Bent Oak Dr Ste 100, Denton TX 76205 (940) 898-8066 Conventional Reliance Mortgage Co. Richard LaBabera Conventional/ N/A 120 E McKinney, Denton TX 76201 (940) 381-1987 VA Stanford Mortgage Company Brian Wilson FHANA/ Spanish 2430 S I35E Ste 238, Denton TX 76205 (940) 484-1110 Conventional Summit Mortgage Rene6 Fairchild Conventional N/A 519 S Carroll Blvd, #A, Denton TX 76201 (940) 381-2523 Sun West Mortgage Co Jeff Bendig FHANA/ N/A 2828 Forest Lane #1125 Dallas TX 75234 (972) 241-7477 Conventional Texas Bank Jessie Rennaker FHANA/203K/ N/A 729 Fort Worth Drive, Denton TX 76201 (940) 383-4600 Conventional World Savings & Loan Association Richard Hall Conventional Spanish 18333 Preston Rd , Ste 188, Dallas TX 75252 (972) 380-1577 PLEASE NOTE: THIS LIST WILL BE UPDATED AS NEEDED - November 1,1997 Guidelines Page 12 of 12