City of Folsom First Time Home Buyer, Down Payment Assistance Program

The City of Folsom offers affordable or deferred payment loans for the purpose of assisting low income, first time homebuyers with funds for down payment and closing costs, to enable them to qualify for the purchase of an owner occupied home within the City. The property may be single-family detached 1-2 unit dwelling, condominium or townhouse, or manufactured home on a permanent foundation.

OCCUPANCY

The subject property must be intended to be the primary and sole residence of the
borrower(s).

MAXIMUM LOAN AMOUNT

The maximum amount of the loan will be $20,000. The maximum loan amount may be increased, as determined by the City, separately for each housing subdivision or condominium conversion project and will be set by the City of Folsom prior to approving that housing project as eligible under the mixed income ordinance and this program.

INTEREST RATE

The interest rate on the Note will be three percent (3%), simple interest.

PAYMENTS

The loan is a deferred payment loan, secured by a recorded Deed of Trust. Loans shall be repayable upon sale or transfer of the property, when the property ceases to be owner-occupied, or upon maturity.

TERM

The loan has a 30 year term.

MAXIMUM COMBINED LOAN TO VALUE

The total of all loans secured by the property shall not exceed 105% of value.

USE OF FUNDS

The funds from this loan must be used to pay the homebuyer’s down payment and non-recurring closing costs.

BORROWER CONTRIBUTION

The borrower must contribute a minimum of one-percent (1%) of their own funds to the home purchase transaction.

FIRST MORTGAGE LOAN

The City of Folsom requires that the buyer(s) obtain the maximum amount of first mortgage loan for which they are qualified and their total housing costs do not exceed 35% of their gross income. The City of Folsom intends to assist as many families as possible and therefore will provide the minimum assistance required to each qualified homebuyer. The term of the first mortgage loan will be no less than 30 years and shall not include provisions for negative amortization, principal increases, balloon payments, or carry excessive fees and charges to the homebuyers. The first mortgage lender is required to collect and manage an impound account for payment of taxes, assessments and hazard insurance.

ADDITIONAL FINANCING

The City of Folsom down payment assistance loan shall be recorded and may be in a junior lien position, behind the first mortgage loan and, if necessary to further assist affordability, behind additional financing assistance. Acceptable financing for additional down payment and closing cost assistance may be provided by the NeighborWorks HomeOwnership Center, and/or additional assistance from the Sacramento Housing and Redevelopment Agency.

ELIGIBLE PROPERTIES

The subject property must be located within the City of Folsom.

HOMEBUYER EDUCATION

All homebuyers under the City of Folsom FTHB Down Payment Assistance program will be required to complete homebuyer education classes offered by the NeighborWorks HomeOwnership Center. Specifically, the homebuyers must complete “Preparing for HomeOwnership” and “My Home” workshops offered by NeighborWorks HomeOwnership Center, a HUD certified local housing counseling agency.

HOUSEHOLD INCOME

The borrower household must have a gross annual income at or below 80% of median income, as published by the U.S. Department of HUD at the time of the loan application, according to the size of the household. A household is defined as one or more persons who live together in a single housing structure. The 2008 Annual Income Limits are listed in the table below:

CERTIFICATION

The potential homebuyer(s) will be “certified” as program eligible prior to entering into a Purchase Contract. This certification will remain valid for a period of 6 full months from the date of the certification and may be extended if the homebuyer is in escrow at the time of expiration. Please contact NeighborWorks HomeOwnership Center at (916) 452-5356 to schedule an appointment to receive certification.

FIRST TIME HOMEBUYER

The borrower(s) must be a first-time homebuyer, further described as an individual and his/her spouse who has not owned a home during the 3-year period before the purchase of a home with this down payment assistance, except for the following:

a) A displaced homemaker who, while a homemaker, owned a home with his/her spouse or resided in a home owned by the spouse. A displaced homemaker is an adult who has not, within the preceding 2 years, worked on a full-time basis as a member of the labor force for a consecutive 12-month period and who has been unemployed or underemployed, experienced difficulty in obtaining or upgrading employment and worked primarily without remuneration to care for his/her home and family;

b) A single parent who, while married, owned a home with his/her spouse or resided in a home owned by the spouse. A single parent is an individual who is unmarried or legally separated from a spouse and has one or more minor children for whom the individual has custody or joint custody or is pregnant; and

c) An individual who owns or owned, as a principle residence during the 3-year period before the purchase of a home with assistance from the City of Folsom, a dwelling unit whose structure is:

1. Not permanently affixed to a permanent foundation, or

2. Not in compliance with state, local, or model building codes and cannot be brought into compliance with such codes for less than the cost of constructing a permanent structure.

DEBT RATIOS

Monthly housing expense should not exceed 35% of the borrower’s gross monthly income. The total debt expense, for debts with more than 10 remaining months, should not exceed 41%. Compensating factors may be considered.

CREDIT

The borrower should have established credit history, with a FICO score of no less than 620. Any open collection accounts must be fully paid.

For more information, please contact Michelle Parks, Administrative Assistant, at (916) 355-7262 or mparks@folsom.ca.us.