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HomeMy WebLinkAbout26-1181Community Services Homebuyer Assistance Program Guidelines 2026-30 Program Years INTRODUCTION The Community Services department has administered the Homebuyer Assistance Program (HAP) since 1992 to help low and moderate-income families purchase their first home. Funds are provided as a secured forgivable loan at 0% interest for five (5) to ten (10) years, and the note is forgiven monthly. The loan balance is payable upon the sale, home equity loan, lease, some refinance loans or transfer of title. The program is funded through federal grants from the U.S. Department of Housing and Urban Development and is available on a first-come-first-serve basis if funding is available. Guidelines are subject to change based on changes to the federal regulations. Any questions should be addressed to Community Services. Community Services 601 E. Hickory Street, Denton, Texas 76205 Phone Number: (940) 349-7726 ADA/EOE/ADEA ~ TDD (800) 735-2989 WHO IS ELIGIBLE? Participants must meet the requirements listed below to qualify for the program. PROGRAM ELIGIBILITY The household must: 1.Be first-time homebuyer: a)Have not owned a home in the past three years; b)Displaced single parents; and/or c)Own a substandard mobile home. 2.Be a U.S. citizen or a legal resident. 3.Qualify for a mortgage loan from a Participating Loan Officer. The program has restrictions on interest rate, debt-to-income ratio, and type of loans. Non-occupant co-borrowers or co-signers are not eligible. 4.Contribute a minimum of 1.75% of the sales price toward the purchase of a home. 5.Have cash reserves of one month of mortgage payments in their checking, savings account, or any other assets after buyer contribution. 6.Agree to live in the home as their primary residence during the term of the forgivable loan. 7.Attend a Homebuyer Education Class provided by a HUD-approved housing counseling organization. See page 4 for a list of agencies that offer homebuyer education classes. EFFECTIVE 10/01/26 Community Services Homebuyer Assistance Program Guidelines 2026-30 Program Years INCOME ELIGIBILITY 1. Household income cannot exceed 80 percent of the Area Median Income Limits, adjusted for family size. The current eligible income limits are provided in Attachment 1. 2. Liquid assets must be less than $20,000 (not including retirement accounts, i.e., IRA’s, 401K plan, etc.). HOME/PROPERTY ELIGIBILITY 1. Residential property must be located inside the city limits of Denton and includes existing or newly constructed single-family residence, condominium or townhouse. Mobile homes and manufactured homes are not eligible properties. 2. Property must be occupied by the owner, buyer, or vacant at contract signing. Rental property is eligible when the tenant has been notified in writing prior to contract signing that the home might be sold, or the tenant is in the process of vacating, provided the buyer will occupy the home as their principal residence immediately after closing. 3. Age of home: a) Homes built prior to 1970 may be eligible for homebuyer assistance if the major systems of the house have been upgraded. The major systems include: electrical systems, plumbing systems, including water and/or sewer lines, roof replacement, heating, ventilation, and air conditioning (HVAC) and if needed pier and beam foundation stabilization. If a pre-1970 home has not received these upgrades, the Minor Home Repair Program may be available. b) Any structure built before 1978 must be free of any deteriorated paint. The City of Denton will conduct a visual assessment of pre-1978 houses to determine the condition of the paint. If the visual assessment shows deteriorated paint, the paint will need to be stabilized and a clearance test conducted by trained workers in accordance with Federal lead-based paint requirements for safe treatment. 4. The property must be safe, decent, and sanitary. An independent home inspection must be completed by a State Licensed Home Inspection Company. In addition to the Home Inspection, Staff will also perform an inspection of the house to ensure that the house meet the program’s property standards. A list of required repairs will be provided. Funds will not be released until all the items of concern have been addressed. Staff will complete a final inspection on the property prior to closing. 5. Funds up to $10,000 are available to assist homebuyer with program required repairs. These funds are separate from the down payment and closing costs assistance. The following are specifics on the repair funds: a) This assistance for repairs is available in a grant. b) Properties in the 100-year floodplain or floodway are not eligible for this assistance. c)Repair funds are not available for lender-required repairs since these repairs are required to be completed prior to closing or required to be in an escrow account at closing. d) Staff will complete the work specifications, and cost estimate of the required program repairs before bids are requested. e) Contractors with minimum liability insurance may perform the work. f) Staff will seek a minimum of three bids from interested companies. Community Services Homebuyer Assistance Program Guidelines 2026-30 Program Years g) The work specification, cost estimates, and bids will be completed prior to closing. h) Repairs will be completed after closing and before the buyer(s) move into their home. 6. The Seller must agree to the terms and conditions in the “Notice to Real Property Owner” in accordance with the Uniform Relocation Assistance and Real Property Acquisition Policies Act, as amended. 7. The buyer and seller must have independent real estate representation prior to negotiating terms. The buyer’s real estate representation is required to be on the list of Participating Realtors, as provided below. 8. It is required that the house contain an adequate number of bedrooms for the number of household members in accordance with the following table: Number of Bedrooms Maximum Household Members 1 2 2 4 3 6 4 8 5 10 9. HOME Homeownership Value Limits Sale price and value are subject to HOME Homeownership Value Limits. The current effective date and limits can be found in Attachment 1 and remain in effect until HUD issues new limits. WHAT TYPE OFASSISTANCE IS AVAILABLE This is a first-come, first-served program. Funds are not reserved until the applicant has been certified eligible AND an executed purchase contract is received by the City of Denton Community Services Department. The program is contingent on the availability of funds. Eligible homebuyer may select one of the two down payment options below: Option 1. Funding up to the amount of $25,000, 0% interest (0% APR), forgivable loan, second lien position with a 5-year affordability period. Option 2. Funding up to the amount of $50,000, 0% interest (0% APR), forgivable loan, with a 10-year affordability period. The amount of assistance is based on need. Assistance is available to assist first-time homebuyers with the following: 1. Closing Costs: HAP will only assist with normal and customary buyer’s closing costs and prepaids. Check with your mortgage company for specific eligible and non-eligible closing costs. 2. Down Payment: HAP will assist with the minimum down payment required by the Participating Lender such as three and one half percent (3.5%) down payment for FHA loans and five percent (5%) for most conventional loans. 3. Principal Reduction Funds: Principal reduction funds can only be used to assist in the Community Services Homebuyer Assistance Program Guidelines 2026-30 Program Years difference between the sales price of the house and the maximum loan the buyer can afford above the minimum down payment. An affordable payment is considered 30% of household income based on program calculation. The household is ineligible if their payment would cause the household’s total debt burden to exceed 43% of their monthly household income. Interested buyers will work with their mortgage company to apply for these funds. The mortgage company will need to submit the program application to the City of Denton for approval of all funds, including principal reduction. The City of Denton recommends that buyers and the mortgage company receive a preliminary program approval before making an offer on a home. TERM OF LOAN/REPAYMENT OF FUNDS 1. Term of Loan: The term of the loan is five (5) to ten (10) years. The buyer(s) are required to live in the home as a principal residence for the term of the loan to comply with the program and contract requirements. 2. Repayment of HAP funds: The assistance is forgiven monthly. For example: If the assistance is $10,000 for a 5-year term, every month the homebuyer lives in the home the loan balance will be reduced by $166.67 per month or 1/60 of the loan amount. The HAP lien is released at the expiration of the term of the loan, once all the funds have been forgiven. However, in the following circumstances, the City of Denton will require that the HAP assistance be repaid: Situation of Repayment Terms of Repayment Transfer or sale of the property Repayment of loan balance from net proceeds1. If net proceeds are not sufficient to repay balance, it can be reduced to available net proceeds at sale. Foreclosure Transfer in lieu of foreclosure Home equity or Cash-Out refinance Repayment of full amount of assistance Property ceases to be owner-occupied Repayment of full amount of assistance. Lease of property Repayment of full amount of assistance. Discovery of misrepresentation or fraud Repayment of full amount of assistance. 1 Net proceeds are defined by HUD as the sale price less closing costs and mortgage payoff. 3. Refinance Loans: The Homebuyer Assistance Program will approve a refinance loan for a HAP buyer if the refinance payment remains affordable and it will either 1) lower the interest rate at a minimum 1.5% or 2) reduce the loan term. 4. Non-Assumable: The loan from the City of Denton is not assumable. The loan must be paid in full upon the sale or transfer of the property. PROCESS TO RECEIVE ASSISTANCE The following is the process to receive assistance if you meet all the eligibility criteria: 1. Contact a HAP Participating Lender from the approved list provided by Community Services or available online at https://www.cityofdenton.com/en- us/residents/services/housing-assistance/home-buyer-assistance. The lender will determine if you qualify for a mortgage loan and determine your preliminary eligibility for the program. Your mortgage company will submit the necessary paperwork to the Community Services Homebuyer Assistance Program Guidelines 2026-30 Program Years program for consideration under the HAP program. A preliminary approval is good for three months and can be extended for an additional two months with a signed earnest money contract. 2. Contact a Participating Realtor from the approved list provided by Community Services or available online at https://www.cityofdenton.com/en-us/residents/services/housing- assistance/home-buyer-assistance. The realtor can assist you in finding your home, based on the lender's loan qualification. Once you have selected your home, the realtor can also assist you in entering into a purchase agreement. 3. HAP lender 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 program for down payment and closing costs assistance. You will NOT have to apply directly to the City. 4. Complete a Homebuyer Education course from a HUD-Certified Housing Counseling Agency, Fannie Mae, or Freddie Mac. Options available are listed in Attachment 2. 5. When the buyer's application is received, the Community Services Department will begin processing the request for assistance. An outline of our functions follows: A. Information is reviewed for completeness and accuracy, and an eligibility check is performed. B. Review independent home inspection and request any needed repairs. Conduct a visual assessment of pre-1978 houses to determine presence of deteriorated paint. Conduct an environmental review on the property. C. Determine the amount of HAP assistance from Settlement Statement and wire funds to the title company. Assistance is subject to completion of repairs. Notify Lender, Title Company, and buyer of assistance. D. Conduct a final inspection of the property. E. Prepare and submit HAP Deed of Trust and Promissory Note to the title company for closing. CLOSING REQUIREMENTS On the day of closing, the buyer(s) will be required to sign the following legal documents for the HAP program. 1. Promissory Note: The promissory note states that the buyer(s) must comply with the following conditions: a. Buyer(s) agrees to reside in the house for the term of the forgivable loan of five (5) to ten (10) years from the date of the promissory note. b. Buyer(s) agrees to maintain the property in safe and sanitary condition. c. Buyer (s) agrees to pay all mortgage payments, taxes, and other assessments on the property in a timely manner. 2. Deed of Trust: A security instrument that allows the City of Denton to place a lien on the property for the term of the loan. At the end of the loan term, the entire grant will be forgiven. At that time, the City of Denton will file a Release of Lien with the Denton County Clerk's Office. Community Services Homebuyer Assistance Program Guidelines 2026-30 Program Years x Applicants are subject to all program requirements and guideline changes. Guidelines are subject to change without notice. x Programs are subject to availability of funds. If there are no funds available, potential applicants will be placed on a waiting list. x This information is intended to give applicants a quick overview of the program requirements. Not all program and eligibility requirements are included. The program will be implemented in ways consistent with the Title VIII of the 1968 Civil Rights Action as known as the Federal Fair Housing Law. The law makes illegal any discrimination in the sale, lease or rental of real property based on race, color, religion, handicap, national origin, familial status or gender. Any applicant denied assistance from the program has the right to appeal the denial. Complaints concerning the program should be made in writing to the City of Denton Department of Community Services. If unresolved in this manner, a formal appeal must be made in writing on a form provided by the Division and filed with the Community Services Manager. If needed, a meeting will be scheduled between the applicant, the Housing Programs Manager, and the Community Services Manager. A written response to the applicant will be made within thirty (30) working days. In accordance with 24 CFR 92.356 and 24 CFR 570-611, applicants can be denied participation in the City’s Homebuyer Assistance Program if a conflict of interest exists. A conflict of interest exists if an applicant is an employee, agent, consultant, officer, elected official or appointed official of the City of Denton and if, within the past 12 months, any of the applicants: 1. Exercises or has exercised any function or responsibilities with respect to funds for this program, 2. Participates or has participated in the decision-making process related to funds for this program, or 3. Is or was in a position to gain inside information with regards to program activities. PROGRAMMATIC WAIVERS The City of Denton repair programs must follow specific guidelines required by the funding source to assure proper administration and management. If an applicant feels that their circumstances require special consideration, a request may be made in writing, waiving from the usual requirements. All waiver requests must be requested in writing and should specify the program requirement(s) to be considered for waiver and state the applicant’s reason(s) or special circumstances why they believe a waiver should be approved. The Housing Programs Manager will review requests on a case-by-case basis. OTHER DISCLAIMERS NON-DISCRIMINATION REQUIREMENTS DISPUTE CONFLICT OF INTEREST REQUIREMENTS Community Services Homebuyer Assistance Program Guidelines 2026-30 Program Years The City Manager or their designee, upon determination of a good cause, may waive any guidelines not otherwise required by the funding source, City ordinance, or policy. Applicant will be notified in writing of the final decision. APPEALS PROCESS An appeal of a program decision may be in made in writing to Community Services using the contact information below. A written response to any appeal will be completed and mailed within 15 days from the receipt of the written appeal. Documentation of the appeals will be placed in the appropriate project files. Community Services Department Email Community.DevelopmentMail@cityofdenton.com Community Services Department Address 601 E Hickory St., Denton, Texas 76205 Community Services Homebuyer Assistance Program Guidelines 2026-30 Program Years ATTACHMENT 1 The effective dates and limits in Attachment 1 remain in effect until HUD issues new limits. Effective Date: 10/1/2026 Maximum Income Limit – 80%: Family Size 1-person 2-person 3-person 4-person Income Limits $67,850 $77,550 $87,250 $96,900 Family Size 5-person 6-person 7-person 8-person Income Limits $104,700 $112,450 $120,200 $127,950 HOME HOMEOWNERSHIP VALUE LIMITS Effective: 10/1/2023 Existing Homes New Homes $370,000 $370,000 Community Services Homebuyer Assistance Program Guidelines 2026-30 Program Years ATTACHMENT 2 List of Homebuyer Education Classes available in the Area: Name of Agency Available Registration Fannie Mae: HomeView Free online course https://www.fanniemae.com/education Freddie Mac: CreditSmart Free online course https://creditsmart.freddiemac.com/paths/h omebuyer-u Finally Home! Online course (maximum fee of $50) https://www.finallyhome.org/en/partners/td hca/ BCL of Texas Saturday class in Dallas https://bcloftexas.org/homeownership/ classes or 214-688-7456 Housing Channel.org Classes Available in English and Spanish in Arlington and Fort Worth https://www.housingchannel.org/classes or Phone: 817-924-5091 Toll-Free: 1-877-924-5095 EFFECTIVE 10/01/26