HIDALGO COUNTY
URBAN COUNTY PROGRAM

HOMEBUYER ASSISTANCE PROGRAM

The purpose of the Hidalgo County Urban County Program – Homebuyer Assistance Program is to provide homeownership opportunities to eligible low and moderate -income residents residing within the eighteen (18) member cities, rural and/or countywide area, which are within the jurisdiction of the Hidalgo County Urban County Program (UCP).  Residents that live within the city limits of Edinburg, Pharr, McAllen and Mission may also be eligible for assistance provided that the home purchased is located outside of those city limits.

The UCP has also adopted and included provisions in accordance with the Consolidated and Further Continuing Appropriations Act, 2012, and Notice CPD 12-007 (Operating Guidance for Implementing FY 2012 HOME Appropriation Requirements) within its Homebuyer Assistance Program.

The Program’s objective is to:

1)	Provide a means of stabilizing property values and enhancing the overall quality of life within eligible communities.
2)	Increase the number of affordable, single-family housing units within the jurisdiction.
3)	Address the issue of housing overcrowding by providing an avenue for eligible families to obtain a home commensurate with family size.

A.	Form of Financial Assistance (92.205 (b))

The Urban County Program will provide up to $10,000.00 (maximum subsidy amount), as determined by a subsidy analysis calculation completed by UCP staff.  This assistance shall be in the form of a deferred loan at a 0% interest rate.  In consideration for such assistance, the Urban County Program shall assume a second lien position subordinate to the primary mortgage lender.

This deferred loan shall be due in full upon the sale, lease, title change, and death of principals or refinancing of the subject property within the affordability timeframe.

B.	Eligible Costs (92.206)

Funding provided under the Homebuyer Assistance Program will be used to pay for the following:

(1)	Down Payment Assistance
(2)	Closing Costs
(3)	Gap Financing; and
(4)	Any other applicable Hard Costs and Soft Costs

C.	Eligible Property Types (92.254)

(1)	Single family dwelling units
(2)	Property may be privately or publicly owned prior to sale to the homebuyer.
(3)	Property may be existing or new construction. However, to avoid the displacement of persons already occupying the unit, the property must be vacant at least 60 days prior to sales contract execution or must already be occupied by the seller or buyer.

D.	Property Location (92.202)

All properties must be located within the boundaries of Hidalgo County to the exclusion of those areas within the city limits of Edinburg, McAllen, Mission and Pharr, TX.

E.	Maximum Property Value (92.254 (a))

The maximum value of the property to be purchased may not exceed 95% of the median purchase price for our area as set forth in 92.254(a)(2)(iii).  These values may change yearly, as median prices are determined annually.

F. 	Property Standards (92.251)

The property purchased by the Homebuyer must be in compliance with all applicable, local housing codes, ordinances and statutory requirements at the time of purchase or initial occupancy.   If there are no such standards or code requirements, then the house must meet Housing Quality Standards (HQS - 24 CFR 982.401) at the time of purchase.  

G.	Income Determinations (92.203)

Client income determinations shall be made through the use of 24 CFR Part 5, also referred to as the Section 8-Income Limits Definition.   This definition of annual income takes into account the full amount, before any payroll deductions, of wages and salaries, overtime pay, commissions, fees, tips and bonuses, and other compensation for personal services of all adult household members. In addition, the following sources of income shall also be included:

The net income from the operation of a business or profession.  Expenditures for business expansion or amortization of capital indebtedness shall not be used as deductions in determining net income.  An allowance for depreciation of assets used in a business or profession may be deducted, based on straight line depreciation, as provided in Internal Revenue Service regulations.  Any withdrawal of cash or assets from the operation of a business or profession will be 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 shall not be used as deduction in determining net income.  An allowance for depreciation is permitted only as authorized in the paragraph above.  Any withdrawal 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 shall include the greater of the actual income derived from all net family assets or a percentage of the value of such assets based on the current passbook savings rate, as determined by HUD;

•	The full amount of periodic amounts received from Social Security, annuities, insurance policies, retirement funds, pensions, disability or death benefits, and other similar types of periodic receipts, including a lump-sum amount or prospective monthly amounts for the delayed start of a periodic amount 

•	Payments in lieu of earnings, such as unemployment and disability compensation, worker’s compensation and severance pay

•	Welfare assistance, if the payment includes an amount specifically designated for shelter and utilities, the amount of welfare assistance income to be included as income shall consist of:  the amount of the allowance or grant exclusive of the amount specifically designated 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 shall be 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 organizations or from persons not residing in the dwelling;

•	All regular pay, special pay and allowances of a member of the Armed Forces (except for special pay to a family member serving in the Armed Forces who is exposed to hostile fire)

UCP staff will determine the annual income of the applicant(s) as defined in 24 CFR 92.203 by examining the source documents evidencing annual income.  The annual income of the family will be calculated by projecting the yearly income which is based on the income at the time of application.

UCP staff will review the last three months of consecutive check stubs for the current year showing year to date earnings in addition to the previous years income tax return.  If the year to date earnings is not listed, then the applicant must submit all check stubs for the current year.  Applicants on commission-based pay, self-employed, or migrant farm workers must bring the previous three years income tax returns.  An average of the three will be calculated to determine the income for the year.

UCP staff will also use unemployment benefits letters, worker’s compensation benefits letters, child support benefits letters, social security benefits letters and bank statements, when applicable to project the income annually.

Applicants who have made applications for assistance that were found ineligible according to eligibility guidelines may not re-submit another application for assistance for a period of ninety (90) days from the date of initial application.

H.	Eligible Income Limits (92.217)

The applicant’s annual income must not exceed 80% of the HUD determined area median income, adjusted by family size at the time of application. UCP staff will obtain the most recent HUD income limits that are currently at http://www.hud.gov/offices/cpd/affordablehousing/programs/home/limits/income/ to determine eligibility.

A re-certification of income is only required if more than six months pass between the time the family is determined to be income eligible and HOME assistance is provided.

I.	Applicant Qualification (92.254 (a)(3))

1)	Must be a resident of Hidalgo County; and
2)	Must occupy the property as their principal residence; and
3)	Must meet HUD income guidelines at time of application and at time of purchase, contract signing or lease-purchase agreement signing as outlined in Section H above; and
4)	All household members must be U.S. citizens or be legal resident aliens; and
5)	Attend a “Homebuyer Counseling Course” that is sponsored by a HUD Certified Counseling Agency; and
6)	Qualify for a residential loan from a financial lending institution prior to applying for homebuyer assistance from the UCP

J.	Underwriting Requirements

1)	Housing debt will be evaluated through a review of the household’s front end and back end ratios.  The front end cannot exceed 35%; the back end cannot exceed 45%. This calculation will be completed in order to determine the homebuyers long term affordability through the review of estimated housing costs, revolving debt, including personal loans, credit/charge cards and any secured/unsecured loans, as well as other monthly obligations.  Applicants are required to submit to a credit history review.
2)	Mortgage rates shall not be 4 points over the conforming Fannie Mae par rate.
3)	No more than one (1) point on origination fees will be allowed.
4)	Loans must be a fixed rate.
5)	No balloon payments will be allowed.
6)	Total loan to value ratio, including the homebuyer assistance lien, shall not exceed 100% without UCP approval.
7)	No interest buy-downs will be allowed.
8)	An appropriate amount of assistance will be measured depending upon the amount of down payment and/or closing costs needed as well as any additional amount that may be required to assist in the affordability of the unit.  This amount however, shall not exceed $10,000.

K.	Principal Residence (92.254 (a)(3))

Upon qualification and disbursement of funds, the applicant must occupy the home as their principal residence for a period of five (5) consecutive years.

L.	Long-Term Affordability (92.254 (a)(4)) 

As a requirement from HUD, the Urban County Program must document affordability and will assume a second-lien position on the applicant’s property for a period of five (5) years.  A release of lien will be issued and filed after the affordability time period has been met.  
M.	Recapture Policy (92.254 (a) (5) (ii))

The Urban County Program has adopted Recapture requirements for the Homebuyer Assistance Program.  Under recapture requirements, the loan will be forgiven pro rata over the period of affordability, which is five (5) years from the loan closing date used in the loan documents. However, if the Homebuyer does not complete a year of living in the house, the UCP will recapture the entire HOME assistance amount.  During the period of affordability, the owner is required to occupy the property as their principal residence.  A lien will be recorded in the amount of the direct HOME subsidy to the buyer for the duration of this period to ensure full compliance with all HOME requirements.  The terms of the pro rata forgiveness are as follows, as long as the home remains the principal residence of the homebuyer:

(i)	During the first year, UCP will recapture the full amount of HOME assistance;
(ii)	Upon satisfactory completion of the 1st year of the Loan Documents -20% of the original principal amount will be forgiven;
(iii)	Upon satisfactory completion of the 2nd year of the Loan Documents -40% of  the original principal amount will be forgiven;
(iv)	Upon satisfactory completion of the 3rd year of the Loan Documents - 60% of the original principal amount will be forgiven;
(v)	Upon satisfactory completion of the 4th year of the Loan Documents - 80% of the original principal amount will be forgiven; and
(vi)	Upon satisfactory completion of the 5th  year of the Loan Documents -100% of the original principal amount will be forgiven

In addition, the homebuyer understands and agrees that if a voluntary or involuntary transfer of title occurs, within this period of affordability, the County will attempt to recapture all or a portion of the direct HOME subsidy provided to the homebuyer.

Furthermore, if the net proceeds from a voluntary or involuntary sale are insufficient to repay the prorated amount of the HOME subsidy, the County shall recapture the entire amount of net proceeds from the sale. If there are no net proceeds from the sale, no repayment is required. Net proceeds are defined as the sales price minus superior loan repayment and any closing costs incurred by the homebuyer.

Compliance will be enforced by conducting principal residency verifications on HOME assisted units throughout the duration of the affordability period

N.	Conversion to Rental Units

The UCP will not approve or perform a project set-up unless an eligible applicant has been provided and appropriate income eligibility and underwriting has been completed for every homebuyer program project.       

O.	Fair Housing & Marketing (92.251)

As a matter of policy, the Urban County Program endeavors to comply with and affirmatively further Fair Housing in all marketing media dealing with the HOME Program.  Marketing brochures explaining the Program and program requirements are offered in both English and Spanish.  

P.	Environmental Review  (92.352)

UCP staff conducts environmental reviews of each subject property as required by HOME regulations and 24 CFR Part 58.  Property sites are reviewed with respect to the 100-year Flood Plain and other required environmental assessments.

Q. 	Homebuyer Responsibilities

•	Maintain the home as their principal residence for a period of at least five (5) years
•	Provide and submit evidence of valid home insurance coverage, inclusive of flood insurance when necessitated by the location of the home, to the UCP
•	Provide and submit yearly proof of residency to the UCP (ex. utility bill in the homebuyers name).

R.	Homebuyer Documentation Checklist

•	Copy of property deed or earnest money contract
•	Copy of Builders Contract for new construction
•	Current check stubs for the last 3 months for all adults in the household
•	W-2’s and a copy of the latest income tax return
•	Last three (3) years income tax return if self-employed, a commissioned 	based worker or migrant worker.
•	Unemployment Benefits letter (if applicable)
•	Worker’s Compensation Benefits letter (if applicable)
•	Divorce Decree (if applicable)
•	Copy of Bank Statements (Checking last 6 months and Savings most current statement)
•	Social Security Cards on all household members
•	Birth certificates or INS documentation reflecting citizenship status for all 	household members
•	Driver’s Licenses or Identification Cards for Homebuyers
•	Call for appointment scheduling

Lender Information

The Homebuyer must also request from the Lender the following documentation and submit the same to UCP staff:

•	Copy of Commitment letter 
•	Copy of loan application
•	Copy of good faith estimate or Eligibility Summary or other comparable 	document
•	Copy of underwriting worksheet
•	Copy of Truth in Lending Disclosure Statement 
•	Copy of final appraisal report
•	Copy of merged credit report generated by lender