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Home maintenance. Budgeting. Credit counseling. Negotiating the purchase ... may establish a maximum time for a family to locate a home and purchase a home ...

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section 8 homeownership

Section 8 Homeownership

Kathy Winter

Iowa State Office

U.S. Dept. of HUD

515-284-4315

[email protected]

section 8 homeownership2
Section 8 Homeownership
  • Section 8 HO is an option to the PHA
    • Implements through PHA Annual and administrative plans.
  • Use Voucher subsidy for monthly homeownership expenses
  • First-time Homebuyer Program
  • Resident pays 30% of AMI for housing costs
  • Open Market Purchase
legislative history
Legislative History
  • Sec. 555 of QHWRA of 1998
    • Congress amends Sec. 8(y)
  • Proposed Rule April 1999
  • Final Rule Published Sept. 12, 2000
    • Effective October 12, 2000
  • Special Housing Type under Subpart M of 24 CFR 982
requirements
Requirements
  • FINAL RULE - SEPTEMBER 12, 2000
  • PHA choice
  • Amendment to annual and administrative plan
  • Final Rules
    • October 18, 2002: Downpayment Assistance & Streamlining
    • October 28, 2002: Eligibilty Units Owned or Controlled by a PHA
requirements5
Requirements
  • Eligibility of Units Owned or Controlled by a PHA; Final Rule – October 28, 2002
  • Downpayment Assistance Grants and Streamlining Amendments; Final Rule – October 18, 2002
pha capacity one of three options
PHA CapacityOne of Three Options
  • ONE: Establish Min. Down-payment
    • Three (3) percent of sale price
    • At least one percent of sale price comes from family’s personal resources.
pha capacity
PHA Capacity
  • Two: PHA requires financing for purchase meets one of following:
    • Provided, insured or guaranteed by State or Federal Gov.
    • Complies with secondary market underwriting requirements.
    • Complies with generally accepted private sector underwriting standards
pha capacity8
PHA Capacity
  • Three: PHA demonstrates in Annual Plan it has capacity or will acquire capacity to successfully operate Homeownership Program.
family eligibility
Family Eligibility
  • Section 8 Eligible Family
    • Current program participant
    • Eligible for admission to Sec 8 HCV program
family eligibility10
Family Eligibility
  • First time Homebuyer
    • Single Parent or displace homemakers
    • No HO interest in 3 years
    • Exception for Family that includes member with disability and homeownership is needed as a reasonable accommodation.
family eligibility11
Family Eligibility
  • Minimum Income 982.627(c)
    • Disabled Family: Monthly SSI for individual living alone x 12.
    • Other Families 2000 X National Minimum wage/hr ($10,300/yr)
      • Welfare assistance may not be included.
    • Disabled and Elderly Families – Welfare assistance may be included
pha higher minimum income
PHA – Higher Minimum Income
  • A PHA may set a higher minimum income for all family types.
  • However Family may still qualify with HUD Min. income.
    • Family that meets HUD minimum income and not PHA Minimum shall meet the requirement if:
      • Pre-qualified or pre-approved for financing;
      • Financing meets PHA established requirements; and
      • Financing sufficient to purchase unit that meets HQS.
family eligibility13
Family Eligibility
  • Employment 982.627(d)

Disabled and elderly exempt

  • One adult member employed continually fulltime for year prior to HO assistance.
  • One adult currently employed fulltime – not less than 30 hours
  • PHA may not create more restrictive employment criteria
family eligibility14
Family Eligibility
  • Mortgage Defaults
    • Not eligible if any family member has previously received Sec 8 HO assistance and defaulted on mortgage
  • PHA may establish additional requirements for family eligibility
    • FSS participants
homeownership voucher option
Homeownership Voucher Option
  • Family finds eligible property
  • Subsidy to assist with monthly homeownership expenses
  • PHA may make monthly payment to family or lender
pre homeownership counseling 982 630
Pre-Homeownership Counseling982.630
  • Family must attend and satisfactorily complete program required by PHA
  • Family does not pay for counseling
  • PHA staff and/or other entity may conduct
    • Consider HUD approved counseling agencies
pre homeownership counseling 982 63017
Pre Homeownership Counseling982.630
  • PHA may adapt suggestions to meet local circumstances and needs of family.
  • PHA may offer additional counseling after assistance begins.
  • If not HUD approved counselor the PHA should ensure the program is consistent with HUD’s Housing Counseling program.
pre homeownership counseling
Pre-Homeownership Counseling
  • Suggested Topics:
    • Home maintenance
    • Budgeting
    • Credit counseling
    • Negotiating the purchase price of a home
pre homeownership counseling 982 63019
Pre Homeownership Counseling 982.630
  • Topics, cont.
    • Financing: Obtaining and pros and cons of different approaches
    • Finding a home
    • Locating a home in a area without a high concentration of low-income families
    • Fair housing and state & Federal truth in lending laws
finding a home
Finding a Home
  • PHA may establish time limits
    • Locating a unit and purchasing
  • PHA may not steer family
eligible unit 982 628
Eligible Unit 982.628
  • One unit property or single unit in coop or condominium
  • New Construction
  • Seller cannot be debarred, suspended or subject to a limited denial of participation by HUD
eligible unit
Eligible Unit
  • Unit in PHA Jurisdiction
  • Must pass HQS
  • Inspected by 3rd party Independent inspector
home inspections 982 631
Home Inspections 982.631
  • PHA conducts HQS inspection used for Voucher program
    • Determines condition is decent, safe and sanitary.
    • No annual HQS inspection required
home inspections
Home Inspections
  • Independent Professional (3rd Party)
    • Selected and hired by family
    • Assess adequacy and life span of major systems, appliances and other structural components
    • Satisfaction of inspection by buyer typical contingency clause in contracts of sale.
    • PHA may disapprove unit on basis of report
home inspections25
Home Inspections
  • PHA may require additional inspections after purchase of unit.
voucher subsidy available
Voucher Subsidy Available
  • Payment standard in Sec. 8 program determines maximum subsidy
    • No separate HO payment standard schedule
    • Same subsidy standards
payment standard
Payment Standard
  • Payment Standard greater of:
    • Payment standard at commencement of HO assistance.
    • Payment standard at most recent reexamination since commencement of HO assistance

Never goes below initial calculation

homeownership assistance payment
Homeownership Assistance Payment
  • Family pays at least total tenant payment (TTP), may pay more
  • Monthly HAP is calculated as the lesser of
    • Payment standard minus family TTP
    • Families monthly homeownership expenses minus family TTP
contract of sale
Contract of Sale
  • Family must provide copy of contract of sale to PHA
  • Contract of Sale must include:
    • Prepurchase inspection (buyer satisfaction, buyer not obligated to pay repairs)
    • Seller certification – seller not debarred, suspended or subject to limited denial of participation.
    • Terms and Conditions of sale
financing 982 632
Financing 982.632
  • PHA may establish their own financing requirements, including:
    • Lender qualifications and terms of financing
    • PHAs encouraged to review financing prior to approval of assistance to avoid Predatory Lending type situations
pha financing requirements
PHA Financing Requirements
  • May prohibit certain forms of financing
  • Restrictions on other debt secured by home
  • Terms of financing
    • Minimum downpayment
pha financing requirements32
PHA Financing Requirements
  • Affordability of Purchase
    • PHA may disapprove financing or refinancing if it determines debt is unaffordable or terms don’t meet PHA req.
  • HUD is working on a Guide Book

All PHA financing or affordability requirements must be described in PHA administrative plan.

financing a purchase 982 632
Financing a Purchase 982.632
  • Financing a Unit
    • PHA may establish their own financing requirements, including: lender qualifications and terms of financing.
    • PHAs are encouraged to review financing to avoid Predatory Lending before assistance is approved.
pha requirements for admission 982 626 b
PHA Requirements for Admission 982.626(b)
  • PHA may limit HO Assistance to families or purposes defined by PHA
  • Examples
    • FSS participants
    • Families in XYZ Non-profit Homeownership program

(Must include these requirements with the PHA Administrative Plan.)

pha requirements 982 629
PHA Requirements 982.629
  • PHA may establish a maximum time for a family to locate a home and purchase a home
  • PHA may require periodic reports on family’s progress in finding a home
  • PHA decides if the family gets a rental voucher if a home is not found or put on the waiting list.
    • Must include these requirements with the PHA Administrative Plan
pha requirements
PHA Requirements
  • PHA determines if the HAP will go to the lender or the family. 982.635(d)
  • PHA determines the number of Section 8 Vouchers it will commit to the program.
homeownership expenses 982 635 c
Homeownership Expenses 982.635(c)
  • The PHA determines amount to be included in the HO expenses/costs
    • Principal and Interest on mortgage
    • Mortgage Insurance Premium (MIP)
    • Property Taxes
    • Homeowner’s insurance
    • PHA allowance for maintenance expenses
    • PHA allowance for major repair and replacement
    • PHA utility allowance
pha allowances
PHA Allowances
  • Allowances set for program as a whole, not based on actual cost or condition of homes
  • PHA may contact counseling agencies and realtors for advice
homeownership assistance payment 982 635
Homeownership Assistance Payment 982.635
  • PHA will make a payment equal to the lower of:
    • The payment standard (regular Sec. 8 program) minus the total tenant payment; or
    • The family’s monthly homeownership expenses minus total tenant payment.
family share
Family Share
  • Family Responsible for all HO expenses not covered by HAP
  • If homeownership expenses exceed the payment standard, family pays the difference in addition to TTP.
  • 40% rule does not apply to HO families
    • Law only limits amount paid by family for rent.
continued assistance
Continued Assistance
  • Family Obligations
    • Comply with terms of mortgage.
    • Use and occupancy
      • Family’s only residence
      • Report changes in composition
      • No subletting or leasing
continued assistance42
Continued Assistance
  • Comply with other family obligations under the voucher program
  • Notice of move-out
  • Notice of default
  • Supply information concerning:
    • Refinancing
    • Sale or transfer of any interest in home
    • Homeownership expenses
continued assistance43
Continued Assistance
  • Prohibition on ownership interest on second residence
  • Comply with additional PHA requirements
    • Eg. Postpurchase counseling
termination of assistance 982 638
Termination of Assistance 982.638
  • Termination of Assistance
    • PHA may terminate assistance in the case of mortgage default (foreclosure)
      • PHA’s decision on whether family may receive rental assistance.
    • PHA may terminate if family does not comply with family obligations
family at zero hap 982 635 e
Family at Zero HAP 982.635(e)
  • Homeownership assistance terminates after 180 days with zero assistance.
  • HOWEVER, PHA has discretion to grant relief where termination would result in extreme hardship.
time limitations 982 634
Time limitations 982.634
  • Time limits do not apply to elderly or disabled families
  • Maximum term:
    • 10yrs of HAP for a mortgage less than 20 yr
    • 15yrs of HAP for mortgage 20 yr and more
    • Applies from initial purchase
portable 982 636
Portable 982.636
  • Portable
    • Receiving PHA must have HO program
    • Family and Unit must meet eligibility requirements
move to new unit
Move to New Unit
  • Continuation of HO Assistance
    • Initial Eligibility requirements apply, except:
      • First time homeowner
      • Pre-assistance counseling
example sec 8 purchase
Example – Sec. 8 Purchase
  • Family of four purchasing a 3 bedroom home.
  • Payment Standard for a 3 BR is $800/month
  • Housing expenses include:
    • Principal, Interest, Taxes, Insurance (PITI)
    • Mortgage Insurance Payment (MIP)
    • Allowances Total $185
      • $35 for maintenance allowance 3/BR
      • $50 replacement allowance 3/BR
      • $100 utility allowance 3/BR
example sec 8 purchase50
Example Sec. 8 Purchase
  • Family Adjusted Annual Income is $20,000
  • 30% of Adjusted Monthly Income $500
  • Monthly Total Tenant Payment $500
  • TTP = Total Family Share
example sec 8 purchase51
Example – Sec. 8 Purchase

Purchase Price $70,000

FSS Escrow (DP) $5,000

First Mortgage – FHA (30yrs @7%) $65,000 _________________________________________

First Mortgage Payment PITI & MIP on $65k $615

Utility, maintenance and replacement allowances $185

Monthly Homeownership Expenses $800

example sec 8 purchase52
Example – Sec. 8 Purchase
  • Gross Homeownership Costs $800
    • PITI & MIP $615
    • Allowances $185

Total Family Share

($185 allowances+ $315 lender) $500

Homeownership Assistance Payment $300

example sec 8 purchase53
Example –Sec. 8 Purchase

Purchase Price - $90,000

FSS Escrow (DP) $ 5,000

First Mortgage – FHA (30yrs @7%) $85,000

___________________________________________

First Mortgage Payment PITI & MIP on $85k $815

Utility, Maintenance & Replacement Allowance $185

Monthly Homeownership Expenses $1,000

example sec 8 purchase54
Example Sec. 8 Purchase

Gross Homeownership Costs $1,000

  • PITI & MIP 815
  • Allowances 185

Total Family Share $700

($185 allowances +$515 lender)

Housing Assistance Payment $300

example sec 8 purchase55
Example Sec. 8 Purchase
  • Is $700 per month Family Share too high for family with $20,000 adjusted annual income?
web site
Web Site
  • HUD Section 8 Homeownership: http://www.hud.gov/offices/pih/programs/hcv/homeownership/
community program
Community Program….
  • Lenders and Insured Loans
    • Conventional
    • Subsidized Loans
    • State Housing Finance Authority
    • USDA
    • Fannie Mae
    • FHA
community program58
Community Program…..
  • Funding for additional subsidy
    • Federal Home Loan Bank
    • HOME – local government or State of Iowa
    • CDBG – local government or State of Iowa
    • 5(h) proceeds (sale of Public Housing)
    • Local Housing Trust Funds
your community s market
Your Community’s Market
  • What is available in your community for sale?
    • Are they in good condition?
    • What price are they selling for?
    • Are the affordable houses concentrated in low-income areas?
    • Considering your payment standard - will it work without additional subsidy?
    • Would you increase your payment standard?
your community s market60
Your Community’s Market
  • Rental Housing Market
    • What is utilization rate of Section 8 Vouchers?
    • What is the need in your community for affordable housing?
    • How long is the waiting list?
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