Housing Trust Fund
of Santa Barbara County
2013
Housing Trust Fund of Santa Barbara County
P. O. Box 60909
Santa Barbara, CA 93160-0909
(805) 685-1949
www.sbhousingtrust.org
Workforce Homebuyer
Down Payment Loan Program
Workforce Homebuyer Down Payment Loan Program
Loan Funding Process with Application Steps
*The Housing Trust Fund has a list of approved Community Partners where you can take a
Homebuyer Education Training course, have your income certified, obtain pre-approval for
your First Mortgage Loan and receive assistance in applying for a First-time Homebuyer
Down Payment loan (see Appendix D). You may use any realtor or broker you choose to
locate your home, and it is helpful if they have attended an HTF informational workshop.
STEP 1
• Complete a Homebuyer Education Training Course
• Take a course offered by a HTF-approved Community Partner* and receive your certificate of completion.
STEP 2
• Obtain Pre-Approval for a First Mortgage Loan
• Apply for a First Mortgage loan from a HTF-approved lender to obtain your pre-approval letter. The Lender will give you a HTF down payment loan application.
STEP 3
• Complete Your Income Certification
• You must have your income certified by a HTF-approved Community Partner to verify that you are an eligible low-to-moderate income household. This is separate from qualifying for the First Mortgage loan.
STEP 4
• Locate Your Home
• Work with your Realtor or Broker to find the home you would like to purchase. • Execute a sales contract to buy the home, contingent on the down payment loan.
STEP 5
• Submit Your Down Payment Loan Application
• Submit your down payment loan application and supporting documetation to your First Mortgage lender. The lender will forward your application to HTF.
STEP 6
• Down Payment Loan Commitment
• HTF will review your complete loan application and make a decision within 10-12 working days. If you qualify, you will be issued a loan commitment.
STEP 7
• Escrow and Loan Closing
• Loan documents will be prepared for your signature.
Housing Trust Fund of Santa Barbara County
Workforce Homebuyer Down Payment Loan Program
I. PROGRAM OVERVIEW
The Workforce Homebuyer Down Payment Loan Program is a program of the Housing Trust
Fund of Santa Barbara County (HTF) to expand homeownership opportunities for local working
families. The program helps bridge the homeownership affordability gap for Workforce
homebuyers by providing 30-year deferred payment loans up to $42,000 per household to assist
low-to-moderate income households in purchasing a home in the community. Funds can be
used for down payment and closing costs for households who earn a maximum of 80% of the
Area Median Income (AMI), adjusted for household size. Funding for the program has been
provided through a grant to HTF from the State Department of Housing and Community
Development Local Housing Trust Fund Program.
The loans offered under this program are subordinate financing and have no current interest or
principle payments. Instead, the interest rate is contingent upon on a share of the property’s
potential appreciation. The loan is due when the borrower sells or transfers the property, ceases
to maintain the residence as his/her primary residence, converts the home to a rental property, or
refinances the first mortgage (unless the refinance meets program exceptions, as defined in the
homebuyer loan documents). Loans do not generally become due in the case of death or
divorce when the beneficiary or remaining spouse uses the home for his/her primary residence.
The program targets eligible cities in North County, including Buellton, Guadalupe, Lompoc,
Santa Maria and Solvang, with special focus on the City of Santa Maria. The program removes
a financial barrier to the dream of homeownership, enabling qualified working families to buy a
home that provides a stable residence that strengthens the family and the neighborhood.
II. HOMEBUYER ELIGIBILITY REQUIREMENTS
Homebuyers seeking a down payment loan must meet the following minimum criteria:
§ Applicants must be residents of or work within Santa Barbara County.
§ Applicants must be a First-Time Homebuyer and not have owned a principal residence
within three (3) years from the date of program application.
§ Applicants must be a low-income household and have the household income certified by an
HTF-approved Community Partner.
§ The homebuyer must occupy the home as the primary residence for the duration of the loan.
§ The home size must be sufficient for the household so that there is no overcrowding.
§ Applicants must attend and complete a HTF-approved Homebuyer Education Training class.
§ Applicants must secure pre-approval of a 30-year fixed rate First Mortgage loan from a
participating lender and have satisfactory credit and job/income stability.
Workforce Homebuyer Down Payment Program
Loan Underwriting Standards Summary
PLEASE REVIEW THE WORKFORCE HOMEBUYER DOWN PAYMENT PROGRAM
GUIDELINES AND DISCLOSURE FOR INFORMATION ON LOAN REQUIREMENTS.
I. HOMEBUYER QUALIFYING STANDARDS:
First-Time Homebuyer: The borrower may not have owned a principal place of residence in Santa
Barbara County within the last three (3) years prior to application for the loan (with certain exceptions), nor have ownership in other residential properties. Please see Appendix A of the Program Guidelines.
Homebuyer Education Training: The borrower must have successfully completed Homebuyer
Education Training by an HTF-approved Community Partner prior to applying for a down payment loan.
Low-Income Household: The combined income of all household members cannot exceed 80% of Area
Median Income, adjusted for household size. See the attached income limits in Appendix B of the Program Guidelines.
Income Certification: The borrower(s) must have their income certified as an eligible low-income
household by an HTF-approved Community Partner prior to applying for a down payment loan.
Residency Requirements: Borrower(s) must live or work in Santa Barbara County, be U.S. citizens or
permanent alien residents and occupy the home as their primary residence for the duration of the loan.
Employment/Income/Credit: Applicants must secure pre-approval of a fully amortized 30-year fixed
rate First Mortgage loan from a participating lender and have satisfactory credit and income stability. Generally applicants must demonstrate 12 months continuous employment.
II. PROPERTY ELIGIBILITY:
Location: Eligible North County Cities: City of Santa Maria, City of Lompoc, City of Buellton, City of
Guadalupe, City of Solvang. Priority Area: City of Santa Maria. Unincorporated County areas are not eligible.
Eligible Housing Types: Detached or attached single-family homes; units in Planned Developments;
duplexes; townhomes; condominiums; and, mobile homes that are on a permanent foundation and have an individual deed to the property.
Physical Condition: The home must be ready for occupancy and have no building, health and safety
code violations or deficiencies or lead paint. HTF requires a home inspection report.
Occupancy Requirements: The borrower and co-borrower must establish residency within 60 days of
loan closing and occupy the home as a primary place of residence for a minimum of 10 months each year for the duration of the loan.
Rental and Boarders: Homeowner may not lease or rent the home to another party during the term of the
HTF loan, except for approved good cause (see Appendix E in Guidelines). Homeowners may rent out a room provided all borrowers continue to reside in the home (unless prohibited by First Mortgage lender).
III. FINANCIAL:
Down Payment Loan: Maximum 16.5% of the home purchase price, up to $42,000, and based on
homebuyer need. Structured as 30-year deferred payment secondary loans with Shared Appreciation.
Homebuyer Financing Requirements: Borrowers must contribute at least 3.5% of the home purchase
price and closing costs and invest other liquid assets in excess of $15,000 for the purchase of the home1.
First Mortgage Loan Requirements: 30-year fixed rate, fully amortized; no balloon payments; no
negative amortization; establishment of an impound account for property taxes and insurance; no prepayment penalty. The First Mortgage lenders must be approved HTF Community Partners (see list).
Debt Ratios: Determined by the First Mortgage lender but generally with front-end housing costs no less
than 25%2 and no more than 38% and back-end housing and all other long-term debt no greater than 45%.
Loan-to-Value: The down payment loan plus the First Mortgage may not exceed 100% of the value of
the home. In certain cases (e.g. other deferred subordinate debt), the combined loan-to-value ratio may exceed 100%, provided the down payment loan and senior debt does not exceed the value of the home.
Appraisal: HTF will rely on a full appraisal commissioned by the First Mortgage Lender.
Loan Repayment: Due at the end of the 30-year term or upon sale, transfer, rental, refinance of the home
(certain exceptions apply), failure to occupy as a primary residence or upon default.
Closing Cost Grants: Homebuyers who purchase a home within the City of Santa Maria may be eligible
for a closing cost grant of up to $3,000 to help pay for nonrecurring closing costs (15 loans are available).
IV. USE OF DOWN PAYMENT LOAN:
Nonrecurring Closing Costs:
§ Credit Report § Home appraisal § Loan origination fee § Title and Escrow fees § Recording and Notary Fees
§ Loan Interest Rate Buy-down up to a maximum of one-half point (.5%) § Upfront Mortgage Insurance Premium
§ Home Inspection Report and Home Warranty
Recurring Costs and Impounds:
§ Property Tax Impound – maximum 6 months § Prepaid Homeowner’s Association fee § Prepaid home insurance
Loan Qualification Costs:
§ Homebuyer Education Course reimbursement – maximum of $200 § Homebuyer Income Certification reimbursement – maximum of $400
V. USES OF CLOSING COST GRANTS: All of the same above uses of the down payment loan,
except that grant proceeds from the City of Santa Maria may not be used for Recurring Costs and Impounds.
1 Homebuyers may use gifts from relatives and employers as a portion their own cash if satisfactory documentation is provided
and the homebuyer has held these funds for at least 45 days in their own account. HTF may grant exceptions to the 45-day requirement on a case-by-case basis if gift funds are from immediate relatives. However, in all cases the homebuyer must contribute a minimum of 1% of the cash investment from their own resources rather than gifts.
2
Workforce Homebuyer Down Payment Loan Program
Maximum Household Income Limits
To be eligible for a Workforce Homebuyer Down Payment Loan, the applicant’s total household
income cannot be more than 80% of the Area Median Income (AMI) for Santa Barbara County
for low-income households, adjusted for household size, or 120% of AMI for moderate-income
households, adjusted for household size. The Area Median Income is published annually by the
U.S. Department of Housing and Urban Development and adopted by the California Department
of Housing and Community Development. All loans made in North County will be for
low-income households with low-incomes that do not exceed 80% of AMI.
Applicants must have their household income certified by a HTF-approved Community Partner
to verify that they are an eligible low-to-moderate income household. This is separate from
qualifying for the First Mortgage loan.
The combined income of all household members 18 years old or older who will be living in the
home must be included in calculating the applicant’s total household income. To be considered a
member of the household, individuals must be either:
§ On the title and loan of the home
§ Claimed as a dependent on the tax returns of the household member who will appear on the
title and Housing Trust Fund loan (a spouse is not a dependent; he or she must be on the title
and loan of the property); or,
§ Any other household member 18 years of age or older earning an income.
In February 2013, the Area Median Income was $73,300 for a family of four. Maximum
household incomes for the Workforce Homebuyer Down Payment Program are shown below and
are calculated based on the State HCD Hold Harmless Policy.
32013 Maximum Income Limits
Santa Barbara County
FY 2013 Income Limit Category 1 Person 2 Person 3 Person 4 Person 5 Person 6 Person 7 Person 8 Person Low (80%) Income Limits $44,600 $51,000 $57,350 $63,700 $68,800 $73,900 $79,000 $84,100 Moderate (120%) Income Limits $61,550 $70,350 $79,159 $87,950 $95,000 $102,000 $109,050 $116,1003Published by the State Department of Housing & Community Development on February 25, 2013. These income levels reflect
Financial Worksheet Example
Housing Trust Fund of Santa Barbara County Borrower Name:
Workforce Homebuyer Down Payment Loan Program Co-Borrower Name:
ACQUISITION COSTS: AFFORDABILITY TEST - Monthly Home Purchase Price: $250,000.00 Mortgage Payment $983.88 Alternations, Repairs, Improvements Property Taxes $260.42 Estimated Prepaid Items: Insurance $40.00 Property Tax impound $1,500.00 HOA (if any) $-0- Insurance $400.00 Monthly PMI $-0- Prepaid HOA Total Housing Costs $1,284.30 Other (explain):
Total Recurring Costs $1,900.00
Household Mo.
Income $4,000.00 Estimated Closing Costs: Annual Income $48,000.00 Credit Report $60.00 % for housing costs 32% Appraisal $450.00 % housing & all debt
Loan Origination/Processing Fee $1,250.00 Title/Escrow $700.00
Recording and Notary $100.00 LOAN INFORMATION:
Home Warranty Mortgage Amount $200,000 Loan Interest Rate Buy-down Interest Rate 4.25% Other (explain): Term 30 years Total Non-recurring costs $2,560.00 Loan-to-Value Ratio 96% Mortgage Insurance Premium $-0- (1st & Second loans)
Other: $-0-
Other: $-0-
Total Acquisition Costs $254,460.00
SECONDARY LOAN CAP TEST EQUITY/DOWNPAYMENT Assistance Ratio* Max. Ratio Borrower cash $12,000.00 21.8% 30% Borrower's closing costs paid by seller $54,460.00 $75,000.00 Other Financial Assistance/Credits:
WISH grant $-0-
City of Santa Maria closing grant $3,000.00 (*Total HTF loan,
Other (explain): $-0-
homebuyer equity and all other) HTF Secondary Loan (Max. 16.5%
home price up to $42,000 $39,460.00
Total Equity/Downpayment $54,460.00 Notes:
* If homebuyer equity, secondary loan
FIRST MORTGAGE LOAN
and grant assistance exceeds 30% of the home purchase price, the HTF loan Loan amount (exclude PMI, MIP, $200,000.00 loan will be reduced until total equity funding fee financed) and assistance is 30% or lower. PMI, MIP, Funding Fee financed $-0-
Total Loan Amount $200,000.00
Sales Example with Shared Appreciation
Example #1:
The homebuyer purchases a home for $245,000, using a $40,425 down payment loan from the Housing Trust Fund, plus 3.5% or $8,575 of his/her own cash. The homeowner installs $5,000 in eligible home improvements and resells the home after five years for $275,000. The owner will repay the Housing Trust Fund the principal loan amount of $40,425 plus the lesser of a share in the appreciation of the home or 8.5% annual interest on the loan. The owner is responsible for paying for the transaction costs of the resale of the home (realtor fees, etc.) The owner’s equity in the home has also increased by making payments of principle on the first mortgage loan.Share of Appreciation Percentage (Contingent Interest):
Original purchase price of the home………..$245,000 Total Housing Trust Fund Shared Appreciation Loan………...$ 40,425 Share of Appreciation (Contingent Interest) Percentage = $40,425/$245,000 = 16.5%
Calculation of Share of Appreciation (Contingent) Interest:
Share of Appreciation Interest Percentage x (Resale Value – Value of Improvements – Purchase Price) = Share of Appreciation (Contingent Interest)
Share of Appreciation Interest Example:
*One possible gross Resale Value, 20184…………..………$275,000
Original Purchase Price………...$245,000 Accrued Appreciation (Purchase Price minus Resale Value)……...…………..$30,000 Less Value of Home Improvements (as determined by appraisal)………...$5,000 Amount subject to Share of Appreciation (Contingent Interest)……….$25,000 Housing Trust Fund Share of Appreciation Percentage ………...16.5% Owner share subject to Share of Appreciation……….……….83.5% Housing Trust Fund Share of Appreciation (16.5% x $25,000)………$4,125 Owner Share of Appreciation (83.5% x $25,000)………..…..$20,875
Alternative Option: 8.5% Simple Annual Interest
Original Shared Appreciation Loan Amount 2012………...$40,425 Multiply by .085 (8.5% simple interest)………...$ 3,436 Multiply by 5 (home sold after five years)………$17,180
Given the above assumptions as an example, the Owner would repay the Housing Trust Fund principal loan amount of $40,425 plus the lesser of the Share of Appreciation or 8.5% interest. In this example, the lesser amount is the $4,125 Share of Appreciation.
4 *HTF offers no assurance or guarantee whatsoever that the Home will increase in value to any extent, or that it will
Refinance Example with Shared Appreciation
Example #2:
The homebuyer purchases a home for $200,000, using a $30,000 down payment loan from the Housing Trust Fund, plus 5% of the home price or $10,000 of his/her own cash. The homeowner lives in the home for 15 years, during which the owner installs $20,000 in eligible home improvements. The owner decides to refinance and repay the Housing Trust Fund based on the Fair Market Value of the home at that time, which is established by appraisal of the home. The owner will repay the Housing Trust Fund the principal loan amount of $30,000 plus the lesser of either a share in the appreciation of the home or 8.5% annual interest on the loan. The owner is responsible for paying for the refinance costs of the home. The owner’s equity in the home has also increased during the 15 years by making payments of principle on the first mortgage loan.Share of Appreciation Percentage (Contingent Interest):
Original purchase price of the home………..$200,000 Total Housing Trust Fund Shared Appreciation Loan………...$ 30,000 Share of Appreciation (Contingent Interest) Percentage = $30,000/$200,000 = 15%
Calculation of Share of Appreciation (Contingent) Interest:
Share of Appreciation Interest Percentage x (Resale Value – Value of Improvements – Purchase Price) = Share of Appreciation
Share of Appreciation Interest Example:
One possible gross Resale Value, 20285…………..……….$300,000
Original Purchase Price………...…..$200,000 Accrued Appreciation (Purchase Price minus Resale Value)……...……...$ 100,000 Less Value of Home Improvements (as determined by appraisal)………...$ 20,000 Amount subject to Share of Appreciation (Contingent Interest)………..….$ 80,000 Housing Trust Fund Share of Appreciation Percentage.……….…..15% Owner share subject to Share of Appreciation……….…….85% Housing Trust Fund Share of Appreciation (15% x $80,000)……….$12,000 Owner Share of Appreciation (85% x $80,000)………..$68,000
Alternative Option: 8.5% Simple Annual Interest
Original Shared Appreciation Loan Amount 2012………...$30,000 Multiply by .085 (8.5% simple interest)………...$ 2,550 Multiply by 15 (home refinanced after 15 years)……….……$38,250
Given the above assumptions as an example, the Owner would repay the Housing Trust Fund principal loan amount of $30,000 plus the lesser of the Share of Appreciation or 8.5% interest. In this example, the lesser amount is the $12,000 in Shared Appreciation.
5 HTF offers no assurance or guarantee whatsoever that the Home will increase in value to any extent, or that it will
