1999-346 ORDINANCE NO q6j) -~Z/-3~
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 m secunng safe, sanitary, and decent housing, and
WHEREAS, the C~ty of Denton participates in a Homebuyer Assistance Program
admimstered 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 ExhIbxt "A" and authorizes the City of Denton Community
Development Office to administer tins program
E T/5._~C,~T~. That the City Council authorizes the expenditure of funds ~n excess of
$15,000 by the Commumty Development Office for projects meeting program guidelines and
criteria, subject to compliance with competitive bidding laws where applicable
SECTION 3. That this orchnance shall become effective immediately upon its passage
and approval
PASSED AND APPROVED this the r~/D'~t day of ~ 1999
ATTEST
HERBERT L PROUTY, CITY ATTORNEY
F \SHARED\DEPTXLOL\Our Documents\Ordmanees\99\Homebuyer Assistance Program Ordinance doc
City of Denton - Community Development Division
1999/2000 Homebuyer Assistance Program Guidelines
INTRODUCTION
Families from all walks of hfe 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 I-Iomebuyer 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 pnnclpal residence dunng the term of the loan 5, l0 or 15 years, the amount of the loan and
~nterest of 5% from the beglnnmg 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 oppormnmes for low and moderate income
families and builds stronger neighborhoods
Policy clanficatluns or general questions should be addressed to the City's Community Development Division at
the follovong 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
1 Live m the city of Denton for one year
2 Anticipated household income cannot exceed HAP mcome limit The anticipated annula income and assets
are calculated using HUD's most current SecUon 8 Income Guidelines established in the Technical Guide for
Det In
No 0fPeonle Max. Income Limit No, of Peonle M~x, Income Limit
l $32,600 2 $37,250
3 $41,900 4 $46,550
5 $50,300 6 $54,000
7 $57,750 8 $61,450
3 Participants must be first-time homebuyers The followmg will be considered first-time
homebuyers
a Participants who have not owned a home m the past three years,
b Partlmpants who are displaced smgle parents,
c Pamelpants 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 ehglbthty reqmrements of the mortgage program offered by a Pa~clpatmg
Lender The mterest rate on the mortgage loan cannot exceed the prevailing market rate See page 6 for a
list of current Partmlpatmg Lenders
6 Participants may not hold hqmd assets m excess of $5,000 Llqmd assets are assets that can be readily
converted to cash and ~n¢lude such assets as cash, checking and savings accounts, certfficates of deposit,
money market accounts, stocks, bonds and profit sharing accounts 0f funds can be w~thdrawn w~thout a
penalty) Note Any sum over $3,500 to the maximum of $5,000 must be pledged by the partmlpants for
closing costs, prepalds and down payment
7 Partxclpants must attend a HUD or Fanme Mae approved homebuyer education program Consumer Credit
Counsehng of North Central Texas, Inc currently offers a "Successful Home Ownershtp" workshop The
workshop is HUD-approved and meets Fannie Mae gmdehnes for home buyer education CCCS educatmn
workshops are offered every s~x 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 w~thln thc Denton city limits Residential
properties include the following existing and newly constructed single-family residence, condonnmum or
townhouse Mobde homes and manufactured homes are not ehglble properties The maximum sales prme of
the house to be purchased shall not exceed $80,000
2 The C~ty of Denton will not assmt in the purchase of a house that is being rented unless the buyer and renter
are the same
3 In accordance with the Uniform Relocataon Act, the City of Denton must inform a seller that the Clty Of
Denton will not use ~t's power of eminent dommn to acqmre the property ~f negotiations fail to result an an
agreement between the HAP buyer and the seller Prior to the clostng of the sale, the City of Denton will
prowde the seller w~th 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 samtary Assistance will not be provided to facilitate
the purchase of a substandard property An mdepandent inspection of all major systems and ttems 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 wall review the inspection report and will detennme ~f
any repmrs roll be reqmred HAP funds will not be released until all the ttems of concern have been
adequately addressed
5 It ~s recommended that the house contmn adequate number of bedrooms
Maximum No of Maximum No of
Fannlv Members Be~ooms Family Members Bedrooms
1 0/Effimency 8 4 Bedroom
2 1 Bedrooms 10 5 Bedrooms
4 2 Bedrooms +10 6 Bedrooms
6 3 Bedrooms
Page 2 of 7
6 Any structure built before 1978, where a cluld of SlX (6) years of age or younger wall reside, must be free
from lead based paint All sales contracts for property constructed prior to 1978 must be sub.leer to Lead-
Based Paint Health Hazards Addendum
WHAT COSTS WILL HAP COVER?
1 Closino Costs & Prenaids. HAP will only assist with Borrower's closing costs If the maximum allowance
is not used for a pa~cular item, funds cannot be used to finance other ehgiblc items over the amounts
specified In such cases where certam 1terns 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 ered~t report fee lender's inspection fec
loan ortgination fee settlement or closing fee document preparation fee
title insurance courter fees recording fees
title search appraisal fee survey fee
attorney's fees other s~mllar 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 ~s 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 relnspeetIon after repairs
have been completed, $75 for a Pest Inspection, $350 for a lead-based paint assessment and inspection
2 Down Payment' Up to 50% of the M1NIMLrM 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 mmtmum of $250 ts required as down payment from the homebuyer
3 ~ Addtuonal 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 Fmancmg ts not meant to be used as a cushion factor to make the loan more appeahng to the purchaser
or mortgage company It is only available when the action is necessary for the participant to quahfy for a
mortgage loan or the price range for the house is available in the market Gap financing can be used for the
followang situations
A Assist in the difference between the sales price of the house and the maximum loan the
buyer can afford - I
B Assist participants to buy down the mterest rate m order to make the mortgage payment affordable
C Assist home buyer wath mortgage pnnctpal 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 MODERATE INCOME LOW INCOME VERY LOW INCOME
Size 80% - 66% AMI 65% - $1% AMI $0% & 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 Asmstance
for '/2 down payment & Up to $5,000 Up to $5,000 Up to $5,000
ehg~ble closing costs
Gap Funds (See page 3 for an Not Ehg~ble for An additional $5,000 An additional $14,900'
explanation on the purpose Gap Funds may be available for mag be available for
for gap funds) gap funds gap funds
*Up to $14,900 may be available ff 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 ~s prowded
over a five-year period
OCCUPANCY REQUIREMENTS/TERM OF LOANS
The occupancy reqmrements and the term of the HAP loan is based on the amount of assistance that ~s prowded
for down payment, closing costs and gap funds The following table md~cates the term of the note and the number
of years the household ~s mqun:ed to maintain their home as their pnnmpal place of residence ~n order to full
comply w~th the Homebuyer Assistance Program
Amount of Assistance Up to $5,000 Up to $10,000 Up to $19,900
Occupancy Reqmremants 5 years 10 years 15 years
& Term of Loans
Page 4 of 7
EARNEST MONEY CONTRACT
1 The contract must show an interest rate not to exceed the prevmhng rate
2 All contracts must be subject to a Property Condtuon Addendum (PCA) The Earnest Money Contract must
call for anlmdependent 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
Commumty Development Staff will rewew the inspection report and will detenmne if any repairs will be
reqmred HAP funds will not be released until all the ~tems of concern have been adequately addressed
3 Under Special Prows~ons it must be annotated that the contract ~s subject to the Buyer quabfymg for HAP
assistance
4 Addendum to Sales Contract / Lead-Based Pmnt Hazards Notification is reqmred for property constructed
pnorto 1978 Accordmgtotheaddandum, a buyer has the optlon to conduct a rlsk assessment or mspectlon
for the presence of lead-based paint hazards If the buyer ~s to pay for the assessment, tMs 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 mmaled by both pames
6 Broker's name and address are reqmred along w~th selhng agent's name and telephone number
7 In some instances, the appraised value of the home wall not support the loan A change in contract puce may
affect the HAP benefit level The mortgage company must submit a letter mdrCatlng the new sales puce
along with an adjusted Good Froth Estamate (GFE)
PROCESS TO RECEIVE ASSISTANCE
If you meet all of the chglbthty criteria, the process for homeownershlp then includes the following steps
1 Attend 8. I-IUI) or l¢~nnle l~se annroved homebnver education workshon Consumer Credit
Con~sell!.o Of North Central Texas is currently offerin~ "Successful Itomeownershin' workshon The
workshop mcludes four components Pre-HomeownersMp, Homebuying process, Mamta~mng Home as a
Homeowner and Budgeting Skills Please call the City's Commumty Development Dlws~on to register for
the next available workshop The workshops are offered every slx to mght weeks and are free of charge
1 Select and contact a }tAP Partlelnafln~ Lender from the annroved list of your ehmee
That Lender wall establish the actual s~ze of the mortgage you can afford and determine your prehm~nary
ehglbthty for the program Feel free to contact the City's Commumty Development D~vis~on if you have
any quesBons on the program
2 Bad Your "dream home" and enter into a nnrchase a~reement A local realtor can assist you in finding
your home, based on the lender's loan pre-quahficat~on Once you have selected your "dream home", the
realtor can also assist you m entering rotc a purchase agreement Please note that it ~s not necessary to Utdlze
the serrates of a realtor to recmve assistance
4 }lAP lender will submit your I-IAP annlleaflon Once you have obtained prehm~nary loan approval and
entered into a purchase agreement, your lender will submit your application to the C~ty's Community
Development Dlms~on for down payment and closing costs assistance You will NOT have to submit an
appheat~on 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 annlication is received, the Community Develonment Office will benin
nrocessinu the reauest for assistance An outline of our functmns follows
A Informatmn ~s rewewed to ensure completeness and accuracy and an ehgtbthty check ~s performed
B Revtew ~ndependent home mspectmn and request any needed repmrs
C Conduct an envtronmental remew on property to determme x£ near an mrport or m a Spemal Flood
Hazard Area
D Determine the amount of assistance from thc ScCflcmcnt Statement and request funds from our
Accounting Department Assistance zs subject to completion of all repmrs as required by Commumty
Development
E Not~fy lender and t~tle company of asmstance They will recmve a Schedule of Assistance outhning the
actual amount of assistance that will be prowded 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 t~tle company for closing Funds for closing will be w~red
to the t~tle company the day of closing
WHAT WILL YOU BE REQUIRED TO SIGN AT CLOSING?
On the day of closmg the buyer(s) will be reqmred 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 prounses to pay the amount of HAP assistance based
on the payment schedule stated on the note The note ~s forgiven at the end of the loan term 5, 10 or 15 years
depending on the amount ofassastance See Page 4 for the number of years
Deed of Trust The deed of trust ~s a security ~nstmment that allows the Ctty of Denton to place a hen 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 ttme, the C~ty of Denton will file a Release the Lten w~th the
Denton County Clerk's Office
The contracts indicate that the buyer(s) must comply with the following cond~ttons
1 Buyer(s) agrees to remde ~n 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 mamtmn the property m safe and samtary condttton
3 Buyer (s) agrees to pay all mortgage payments, taxes and other assessment on the property m a timely
manner
PLEASE NQTE The amount of the loan and interest of 5% from the beginning of the loan is
due and p~ygble m full uoon the sale of the oropertv, transfer of ownership, fmlure failure on the
borrower to Camtaln home as ~nnmpal ~nnclpal residence dunng 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 Spamsh/
2216 Loon Lake Rd, TX 76205 (940) 380-0002 Itahan/Franch
American National Bank Spencer Murphy 1, 2, 5 N/A
1565 W Ma~n St, State 468, Lew~swlle TX 75067 (972) 221-7966
Countrywide Home Loans Hugh Kelly 1, 2, 3, 5 Spamsh
724 West Mare St #250, Lews~vflle TX 75067 (888) 610-7989
First State Bank of Texas* Judy Atk~ns
1, 2, 3 N/A
100 S Locust, Denton TX 76201 (940) 381-7286
Tom Phflhps
Jefferson Heritage Bank (940) 382-9676 1, 2, 3, 5 Spamsh
321 W Oak Street, Denton TX 76201 ~,~. '>aa
The Funding Source Brad De~ghtnn 1, 5 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, Lew~swlle TX 75067 (972) 539-6733
Norwest Mortgage, Inc Donna Kelley 1, 2, 3, 4, 5 Various
2430 1-35 E, Suite 150, Denton TX 76205 (940) 381-0044 W/appt
Precise Mortgage Services, Inc * Wendy Broyles 1, 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 Jacmto Blvd, Denton TX 76205 (940) 387-5820
Reliance Mortgage Co R~chard LaBarbara 2, 5 N/A
120 E McKmney, Denton TX 76201 (940) 381-1987
BOMAC Home Mortgage, Inc Company* V~ck~ Cummings 1, 2, 5 Spamsh
2430 S I35E Ste 238, Denton TX 76205 (940) 484-11 l0
Summit Mortgage* Rene6 Fairchild 2 N/A
519 S Carroll Blvd, gA, Denton TX 76201 (940) 381-2523
Texas Bank* Jessie Rennaker
1, 2, 3, 5 N/A
729 Fort Worth Drive, Denton TX 76201 (940) 383-4600
Types of Mortgage Loans O FHA (203b) ~ Conventional ~ Denton County Bond Program
O FHA (203k) ~ VA
PLEASE NOTE THIS LIST WILL BE UPDATED AS NEEDED - JUNE 1999
Page 7 of 7