CITY OF FOSTER CITY
LOW INCOME HOMEOWNER REHABILIATION LOAN PROGRAM
LOAN UNDERWRITING GUIDELINES
LOAN UNDERWRITING GUIDELINES
Part I:
Applicant Thresholds
Borrower
Qualification/Disqualification
• Owner of property
• Property is the primary residence at the time of application • Borrower qualifies as low or very low income per at 60% of AMI or 30% of AMI using HERA Special income limits
• Only one loan per borrower per property through the Loan Program
Part II:
Eligibility
Eligible Properties • Single dwelling unit, attached or detached or duplex property located in Foster City
• Only one loan per property through the Loan Program
• Have commitments for the remainder of the funds needed for construction but not more than two other loans on the property (including a mortgage) and a loan-to-value that is no higher than 90% for all loans (including Loan Program loan)
Project Requirements • Be working with an experienced general contractor or sub- contractors, if applicable. All contractors must be licensed in California.
• Meet accessibility requirements, if applicable
• Comply with local and state building codes and permit requirements
Eligible Uses of Funds Eligible costs include:
• Construction materials and labor for rehabilitation of existing unit. Typical items include but are not limited to:
windows, roof, kitchen, bathrooms, solar photovoltaic
• General contractor fees and overhead, not to exceed 10% of the total project cost.
• Demolition necessary for the rehabilitation
• Site work, such as water/sewer/septic repair or replacement or utility improvements
• Permit costs beyond those that are waived through
participation in this Program
• Other hard or soft costs approved at the discretion of the City
Ineligible Projects/Uses of
Funds
• Building additions resulting in additional square footage to the building
CITY OF FOSTER CITY
LOW INCOME HOMEOWNER REHABILIATION LOAN PROGRAM
LOAN UNDERWRITING GUIDELINES
• The City will determine, in its sole discretion, costs deemed excessive or unreasonable, or uses deemed ineligible.
Ineligible uses of funding include, but are not limited to, costs associated with construction items or materials of a luxury nature or furnishings.
Part III:
Income Eligibility Requirements
Homeowner Income
Restrictions
• Household income at time of application does not exceed the MTSP HERA Special Income limits for the household size at 60% AMI for low income households or30% AMI for
extremely low income households.
• Income shall be certified by a qualified professional or the City using the City’s BMR Administrative Procedures and Guidelines.
Part IV:
Key Loan Terms
Loan Amount • $100,000 or the total cost of construction, whichever is less.
Loan Term • 10 to 30 years with option to extend in 5-year increments after the initial term up to a maximum 30 years total,
including all extensions.
Interest Rate • 0% simple interest, deferred for homeowners with incomes less than <30% of AMI (MTSP HERA Special); 3% simple
interest, deferred for homeowners with incomes less than <60% AMI (MTSP HERA Special).
Payments • No monthly payments.
• Lump sum due at qualifying repayment event, including accrued interest.
• No prepayment penalty
Repayment events • Change in ownership.
• If the property is no longer owner-occupied.
• At the end of the loan term, unless a new 5-year extension of affordability covenant is executed up to a maximum term of 30 years including all extensions.
• The lot is split.
• Borrower’s breach of any other provisions of the Loan Documents that remains uncured.
CITY OF FOSTER CITY
LOW INCOME HOMEOWNER REHABILIATION LOAN PROGRAM
LOAN UNDERWRITING GUIDELINES
Subordination • Yes, to primary mortgage and home equity loan/line of credit (other situations subject to written approval by the City).
Sale of Loan • The City retains the right to sell the loan.
Loan signatories • Spouses and registered domestic partners shall sign the Loan Documents unless title is clearly held as the owner’s sole and separate property
• Non-occupant parents, ex-spouses, siblings, and/or children who are listed on title to the real property or as registered owners of the unit will be required to co-sign the Loan Documents and shall be equally liable to repay the
Rehabilitation Loan
Completion of Rehabilitation
Construction
• Project is required to be completed within 24 months of loan approval. Owner shall submit a completion of project affidavit upon completion.
Part V:
Selection/Execution Process
Interest List, Waitlist, and
Preferences
Any Foster City homeowner can sign up for the interest list. Interest list applicants will be invited to apply for the loan program every March 1, June 1, September 1, and December 1. Applications will sorted by preference as follows:
1. First Priority: The applicant’s home is located in census tract with geographic targeting for disabilities (6080.25 or 6083) or renter cost burden (6080.13 or 6080.23).
2. Second Priority: the applicant is in one or more of the following preference categories:
o A veteran of the US Armed Forces;
o Someone with a disability;
o A senior, aged 62 or over;
o A teacher or employee of a public elementary, high
school, junior college, or university;
o A city of Foster City employee
o Applicant is a homeowner participant in HIP
Housing’s Home Sharing Program or will participate
upon completion of the rehabilitation project.
3. Third Priority: Project Readiness: preference will be given to those projects that have already been submitted to the City of Foster City’s permit process.
CITY OF FOSTER CITY
LOW INCOME HOMEOWNER REHABILIATION LOAN PROGRAM
LOAN UNDERWRITING GUIDELINES
4. Fourth Priority: All other income-qualified applicants.
Verification of preference shall be completed by the City or qualified third-party loan program manager. Verification shall require appropriate documentation.
Review of Applications Applications will be randomized within preference categories to create a waitlist. The City will process up to five (5) loans per quarter. Applicants that are not selected will remain on the waitlist.
Applicants are responsible for providing current contact information.
Application Steps Application Steps:
1. Homeowner will apply and submit request for funding, upload a project summary, budget, and contractor contact and license information.
2. City staff will review and provide pre-approval authorization, reserving available Loan funds for the individual project for a period of 90 days.
3. During the 90-day Pre-Approval period, homeowner shall secure any additional project financing, if applicable.
4. Homeowners will also have access to no-cost “office hours” with a Technical Assistance advisor to answer any questions about their project.
5. Homeowner will submit documents and forms to the
qualified income certification agency as required.
Approval Steps Approval Steps:
1. Once project financing is complete, City staff will review all documents and provide final approval on the Low Income
Homeowner Rehabilitation Loan.
2. Homeowner will execute all loan documents.
3. Homeowners will also have access to no-cost “office hours” with a Technical Assistance advisor to answer any questions about their project.
4. City will release funds to Homeowner.
5. Homeowner will have two years from release of funds to complete construction.
Part VII:
Ongoing Homeowner Obligations
Ongoing Homeowner
Obligations
In order to ensure adherence to the intent of the program to serve homeowners who plan to continue to own and utilize their home as their primary residence, the Rehabilitation Loan will be due and payable in full if any of the following occur:
CITY OF FOSTER CITY
LOW INCOME HOMEOWNER REHABILIATION LOAN PROGRAM
LOAN UNDERWRITING GUIDELINES
• The borrower dies, unless the Rehabilitation Loan is
assumed by another eligible borrower;
• The unit or any interest therein is sold, conveyed, or transferred;
• Property taxes or mortgage becomes delinquent;
• The borrower no longer occupies the unit as their principal residence for reasons with limited exceptions;
• The borrower is in default on any other Rehabilitation Loan requirement;
• Fire and other insurance is not maintained; or
• Borrower fails to keep all fees, levies and/or taxes current
The homeowner must agree to notify the City of any of the above events and must provide an annual affidavit that no loan repayment events have occurred in the last year and are not anticipated in the next year.
Part VII:
Other Provisions
Rehabilitation Definition Rehabilitation includes the following:
• Any construction work or replacement requiring a city- issued permit that does not add square footage to the
property.
• Work that does not require a city permit that results in an upgrade to the home such as painting, replacing appliances, installation of new hardware, new flooring, or safety-related equipment in bathrooms, etc. Please note that installation must be performed per manufacturer’s instructions.
• Other hard or soft costs approved at the discretion of the City.