Homeownership Guide

At PHA we want more of our tenants to become homeowners. We see that transition as a crucial step in our plan to revitalize Philadelphia’s neighborhoods. We proudly support residents’ transition to independence with the Housing Choice (Section 8) homeownership program. PROGRAM SUMMARY: On Tuesday, September 12, 2000 the U.S. Department of Housing and Urban Development released the final rule, allowing individuals and families to use vouchers toward mortgage payments. The use of vouchers for homeownership will give many low-income individuals and families the opportunity to purchase their own homes. Participants in the Housing Choice Homeownership program may have their mortgage payments subsidized for a maximum term of 15 years on a mortgage loan of 20 years or more. Mortgage loans less than 20 years may be subsidized for a maximum term of 10 years. The maximum term limits for minimum income and employment do not apply for elderly or disabled families. PROGRAM RULES: Can use current vouchers designated for elderly and disabled families Participant may purchase current home or other available home Membership in cooperative can be obtained with the voucher subsidy Not to purchase a unit under construction Project-based units non-eligible FAMILY QUALIFICATIONS: Assistance may be provided for: First-time homebuyer Family that owns or is acquiring shares in a cooperative Family that is entering into a lease-to-purchase option will remain under the rental subsidy program until ready to purchase ELIGIBLE FAMILIES: Current Housing Choice families who are participating in the Family Self-Sufficiency Program Families that meet the minimum income requirements of $10,300 a year Families that meet the minimum employment requirement of one year at a full time job. Elderly and disabled families are exempt from employment requirement Families must qualify for mortgage based on current income and credit. FIRST-TIME HOMEBUYER: Family must demonstrate sufficient monthly gross income to meet PHA’s minimum income standard: Enough income to meet homeownership and other family expenses Minimum income requirement set at $10,300 Income counted for minimum requirement must come from sources other than public assistance Other verifiable income will be considered Public assistance must be counted for elderly or disabled families. FULL-TIME EMPLOYMENT REQUIREMENT: Family must: Demonstrate that applicant or co-applicant(s) is currently employed full time and has continuously been employed for one year prior to homeownership assistance Seasonal employment may be prorated and considered as continued income PORTABILITY: Family may exercise the homeownership option outside PHA’s jurisdiction if the intended housing authority is administering a Section 8 homeownership program and is accepting new families into its homeownership program. MORTGAGE DEFAULT: Any applicant family member that has previously defaulted on a mortgage obtained through this homeownership option may be barred from receiving future homeownership assistance. HOW THE PROGRAM WORKS: Participant indicates interest by completing the pre-qualification questionnaire Homeownership division reviews personal information and financial information PHA determines mortgage eligibility of families PHA refers families to housing counseling agencies and/or financial institutions for pre-approval purposes Once qualified by financial institution, voucher conversion process is completed STATEMENT OF HOMEOWNER OBLIGATIONS: Family and PHA execute statement of homeowner obligations PHA is allowed to make Housing Assistance Payments directly to family PHA requires the participant to set up a bank account with three months of tenant portion All subsidy payments will be directly deposited into that account SUBSIDY CALCULATION: PHA shall pay a monthly homeownership assistance payment on behalf of the family that is equal to the lower of: the payment standard minus the total tenant payment; or the family’s monthly homeownership expenses minus the total tenant payment TERM LIMIT: Maximum term of homeownership assistance 15 years based on mortgage term of 20 or more years 10 years based on a mortgage term of less that 20 years COUNSELING AND TRAINING: When family has been determined eligible, they must attend and complete homeownership counseling and training sessions PHA staff and or other entity may conduct Pre-homeownership counseling Post-homeownership counseling Approved homeownership training course REQUIRED HOMEOWNERSHIP TRAINING: Introduction to homeownership Budgeting and home maintenance Equity and other financial considerations Credit counseling (as needed) The closing process Home maintenance Other classes, as required by counselor REQUIRED HOMEOWNERSHIP COUNSELING: Homeownership Financing Description of types of financing Pros and cons of different types of financing Mortgage term considerations Shopping for the best lenders Closing costs Other considerations STEPS LEADING TO FINALIZING PURCHASE: Advantages of purchasing outside low-income areas How to locate a home for purchase Understanding the contract of sale How to negotiate purchase price Understanding the inspection process What it meanS to be a homeowner Counseling after closing FINDING & FINANCING A HOME: Homeownership voucher families shall: Identify the house they wish to purchase within 60 days of acceptance into the program Execute a contract of sale contingent upon inspections Arrange for down payment and closing costs Complete closing process Note: Extensions may be requested FINANCING: Family is ultimately responsible for securing own financing May use local or state Community Development Block Grant (CDBG) financing or other subsidized financing All regular lender underwriting and property inspection requirements apply Families will be evaluated using current income and credit PHA prohibits the following forms of financing Balloon payment mortgages Variable interest rate loans Seller financing (land contract) may be used if previously approved by PHA The Housing Choice homeownership assistance is provided to the family each month after closing. The assistance is intended to help the family meet mortgage payments and homeownership expenses each month. HOMEOWNERSHIP EXPENSES: Principal and interest Mortgage insurance premium Taxes and insurance Routine maintenance cost reserve Major repairs and replacement reserve Utility allowance PHA ALLOWANCES FOR MAINTENANCE AND MAJOR REPAIRS: Maintenance and major repair allowances will not be based on condition of home Families are not required to escrow or put money in bank as replacement reserve Family will be responsible for the required maintenance and replacement of major systems IF YOU ARE ELIGIBLE AND WANT THE PRIDE THAT OWNING YOUR OWN HOME CAN BRING, CALL NOW FOR MORE INFORMATION: (215) 684-8015