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With America’s homeownership rate at an all time high of more than 67%, the savvy real estate professional is always going to be looking for ways to find new markets. Now the department of Housing and Urban Development has created a program that puts homeownership within the reach of the segment of the population who couldn’t afford to participate in the American Dream. In September 2000, the final version of the Section 8 homeownership program was approved. This regulation allows thousands of low-to-moderate income families to use Section 8 vouchers (previously limited only to rental assistance) to purchase homes, and provides for 10-15 years of federally subsidized mortgage payments to eligible families. The goal of the Homeownership Voucher program is to move families into economic self-sufficiency. This article will give you an overview of the way the program works and how families are selected, but there are many exceptions. If you would like more information on the program, check out the regulations online at the HUD web site. Who is eligible to receive these
vouchers? Any family who receives Section 8 tenant based assistance may be considered for homeownership vouchers. The family must be classified as a “first time homebuyer”, or must not have owned a home for the past three years. If a single parent or displaced homemaker previously owned a home with a spouse, but does not currently own, they are classified as “first time homebuyers” The vouchers may also be used by families who are acquiring shares in a cooperative, or who have been renting under a lease purchase agreement. The family must meet several requirements, which are listed below. These requirements are waived (as are many of the other regulations such as the length of assistance payments) for senior citizens and disabled families receiving Section 8 assistance. The issuing housing authority may add some additional requirements as long as they follow HUD Guidelines. 1. Employment Criteria – One year of continuous full-time (more than 30 hours per week) employment for one or more adults in the family. 2. Income requirements – The family earned income (from sources other than welfare assistance) must be equal to or greater than an amount equal to 2000 hours of employment at the Federal Minimum Wage. 3. Housing Counseling – Family must attend housing counseling sessions in order to understand the responsibilities and obligations of homeownership. 4. The family must execute a “Statement of Homeownership Obligations” an agreement outlining the family’s responsibilities with the Public Housing Authority, before assistance begins. How
may the homes be financed? The Section 8 Homeownership rule allows for some latitude in financing. However, the Public Housing Authority (PHA) issuing the voucher may establish guidelines prohibiting certain types of financing (such as balloon mortgages). The regulations state that financing
must “ be provided, insured or guaranteed by the state or Federal
government, comply with secondary mortgage market underwriting
standards, or comply with generally accepted private sector underwriting
standards” These requirements are designed to prevent predatory
lending schemes that would possibly cause the family to lose their home
after the assistance term is over. The family must provide a 3% down payment, 1% of which must come from the family’s own funds. It is permissible to combine the Section 8 homeownership voucher assistance with other government programs, so a family may seek down payment assistance from other programs. Families that participated in a FSS (Family Self Sufficiency Program) through their housing authority or IDA (Individual Development Accounts) may use their escrow accounts towards their 1% contribution. What Homes are eligible? The program is designed (just like the Section 8 tenant rental assistance program) to assist families in having “freedom of choice” as to where they live. Therefore, the program cannot be limited to certain neighborhoods, addresses, lenders or real estate agents. However, a PHA may choose not to issue any homeownership vouchers in its area. To be eligible a home must:
How do the vouchers work? Homeownership vouchers are administered at a rate called the payment standard. The payment rate is quite comparable to a mortgage payment on an affordable, first time buyer home, particularly given today’s low interest rates. The payment standard is also scaled based on the family’s required number of bedrooms, so a larger family would be eligible for a greater payment standard. The family is required to pay a portion of the homeownership expenses and the government subsidizes the rest. If the family member loses their job, the government increases the subsidy to cover the period while the family member is looking for work. The vouchers also include an amount designated to assist with utility payments and provide an amount to cover extraordinary maintenance and repair expenses. Payments are made directly to the family or to the lender on behalf of the family. How long does assistance
continue? The maximum term for homeownership assistance is 15 years for all mortgage notes with a term greater than 20 years. All other notes (i.e. a 15 year note) have a maximum term of 10 years. Families are evaluated each year to determine what portion of the payment they must pay, and if the family becomes economically sufficient during the time of the assistance, the family will become fully responsible before the maximum eligibility period is up. Maximum terms (as with many of the other requirements) do not apply to senior citizens or disabled families. If the homeowner sells the home during the assistance period, the Housing Authority is eligible to recapture some of the assistance funding. How can I work with Section 8
homeownership families? As you can see, Section 8 homeownership assistance creates a substantial new population of homebuyers. Many Section 8 families would prefer to purchase a home, and are eager to take advantage of the program. In addition, many public housing authorities issue Section 8 vouchers when they are redeveloping old public housing communities. The displaced residents who are eligible can opt to use that voucher for homeownership. To get started, you may want to
contact the Section 8 administrator of the Housing Authorities in the
communities you serve. Keep
in mind that many cities and counties have their own housing authority.
Find out what staff will be working with the families who are
going to utilize homeownership vouchers and introduce yourself and your
services to them. Many of
the housing authorities will be providing the required counseling
component themselves, and would welcome some volunteer help at classes.
If the housing authority is not providing the counseling, you may
want to find out what agencies are doing the counseling for them.
Contact the agency and let them know you are interested in
working with these families. Lenders and realtors have an excellent opportunity to partner in this niche. While the housing authority may not insist on clients using any particular professional or service, families will be eager to use someone they have met before and feel they can trust. You can also look for expanded opportunities to reach families through your social and volunteer activities. The homeownership voucher program is especially useful to disabled and elderly families, and provides an opportunity that was previously unavailable to most. You may be aware of families in these situations who are currently receiving Section 8 rental assistance and may be eligible for this program. Finally, keep in mind that for many of these families, just as with other first-time homebuyers, the language and terms of the home buying process may be very unfamiliar. Taking the time to work with each family, and guide them through the process will pay off in satisfied clients who will refer you to their network of friends and co-workers. And you will have successfully tapped a new market! |
