COMMUNITY DEVELOPMENT DEPARTMENT
HOUSING DIVISION
FIRST TIME HOME BUYER
MORTGAGE DOWN PAYMENT ASSISTANCE PROGRAM (MDPAP) GUIDELINES AS FUNDED BY: PERMANENT LOCAL HOUSING ALLOCATION (PLHA)
Table of Contents
Program Overview ................................................................................................. 1 Application Process .............................................................................................. 1 Borrower Eligibility ................................................................................................. 2-7 Income
Household Size
First-Time Homebuyer
Co-Borrowers
Home Purchase Loan
Buyer’s Contribution
Home Buyer’s Education Class
Property Eligibility ............................................................................................... 7 Eligible Costs ....................................................................................................... 7 Underwriting Requirements ................................................................................ 8-9 Maximum Loan amount
Debt-to-Income ratios
Credit requirement
Required Downpayment
Property Insurance requirement
First Mortgage requirements ............................................................................ 9 Loan-To-Value Limits ........................................................................................ 10 Loan Terms ......................................................................................................... 10-11 Loan Security and Position
Loan Structure and Forgiveness
Repayment Terms
Refinance and Subordinations
Sale or Transfer Ownership
Monitoring ......................................................................................................... 11 Appeals .............................................................................................................. 12 Amendments to Program Rules ...................................................................... 12 Lender Participation and Loan Processing guidelines ................................... 12-13 Attachments:
FAQ
Loan application
Owner Participation Agreement
Eligibility Worksheet
Certification of Zero Income
Self-Certifying Letter for household member 18+ years
Tax Return Affidavit
Sample Promissory Note
Sample Deed of Trust and Deed Restriction
Sample Truth in Lending Disclosure Statement
FIRST TIME HOME BUYER
MORTGAGE DOWN PAYMENT ASSISTANCE PROGRAM (MDPAP) GUIDELINES AS FUNDED BY: PERMANENT LOCAL HOUSING ALLOCATION (PLHA)
PROGRAM OVERVIEW
The City of Salinas First Time Home Buyer Mortgage Down Payment Assistance Program (MDPAP) provides mortgage assistance in the form of a down payment loan for the purchase of a home and associated non-recurring loan closing costs to qualified moderate-income families purchasing their first home within the City of Salinas limits.
The household must have sufficient income, assets and credit worthiness to obtain mortgage financing to make a minimum down payment of 3% of the purchase price .
MDPAP bridges the gap between the total purchase price, inclusive of eligible closing costs, and the amount of the buyer’s first mortgage loan (the maximum loan for which the buyer qualifies). The City offers a silent second mortgage loan (second lien position) in the form of a 30- year Deferred Payment Loan (DPL) of up to $125,000 or 17% of the purchase price, whichever is less , with a three percent (3%) interest rate. Accrued interest is forgivable after 30- year period, if the property remains occupied by the borrower for the duration of the loan term. This DPL does not require monthly payments; however, the full loan amount becomes due at the end of the 30-year loan term . Principal loan amount plus any accrued interest becomes due upon; sale, transfer of title, or if the property ceases to be owner -occupied during the period of affordability, as defined in the MPAP guidelines, whichever comes first. The continuation of the program is subject to availability of funding. The City retains the discretion to update the MPAP guidelines.
APPLICATION PROCESS
1. Applicant(s) complete a required 8- hour homebuyer education class and provide a certificate of completion. The certificate must be dated within six months of closing, but no more than a year old at the time of submission.
2. Mortgage Down Payment Assistance Program (MDPAP) applicant(s) select one of the City’s participating lenders or mortgage brokers and receive pre-approval for a First Mortgage prior to applying.
3. The lender or mortgage broker assists the applicant/buyer in determining the amount of City funds they are eligible for and the price range of homes they may purchase.
4. Applicant(s) sign a Purchase Contract and open escrow.
5. A completed application packet (Document Checklist in the Eligibility Worksheet for required documents) is submitted to the City by the lender or mortgage broker. MDPAP applications are processed on a first-come, first-served basis. An Incomplete application packet is returned to the submitting lender or mortgage broker . The City will time-stamp the received MDPAP application, once deemed complete by city staff.
6. The purchased property must pass a property inspection by City staff. The inspection will observe for lead-based paint hazards, building, health, and safety code deficiencies.
7. Approval of the first mortgage lender does not guarantee eligibility for the City’s MDPAP loan. The City will conduct an extensive review of all necessary documentation to determine eligibility. Both the applicant and the lender or mortgage broker must verify that the minimum eligibility requirements are met. Failure to meet these requirements can result in the loan application being declined.
The City’s loan approval process may take up to 30 days.
BORROWER ELIGIBILITY
1. Income
Income eligibility is based on the gross projected income of all household members, over the age of 18, who will live in the home. For households with multiple family members on title, income from all sources for each family member must be verified. This gross projected income may not exceed 150% of the Area Median Income (AMI), adjusted for household size, for Salinas as published by the US Department of Housing and Urban Development (HUD) for the Section 8 program. A prior year’s tax return does not establish projected income; current pay stubs must be submitted. Income verification documents must be no older than six months at the time of loan funding. It will be assumed that the applicants current income circumstances will continue for the next 12 months unless there is verifiable evidence to the contrary. When collecting income verification documentation any known or upcoming changes in income must be considered. Gross income from ALL sources must be included, even if the primary lender excluded an income source. This includes but is not limited to:
A. Overtime pay, commissions, fees, tips, bonuses, and other compensation for personal services (before any payroll deductions).
B. If an upcoming raise is noted on the Verification of Employment, income must be calculated based on the raise.
C. Wages from a second job, even if the borrower has not been employed long enough for FHA underwriting guidelines to consider it.
D. The regular periodic payments such as Social Security, Supplemental Security Income (SSI), annuities, insurance policies, retirement funds, pensions, disability or death benefits, and other similar sources , including lump-sum payment for the delayed start of a periodic payment. These amounts should not be grossed up.
E. Payments in lieu of earnings, including unemployment, disability compensation, worker’s compensation, and severance pay.
F. Periodic and determinable allowances such as alimony, child support, and regular contributions or gifts from persons not residing in the household to the extent that such payments are reasonably expected to continue.
G. For purposes of this Program, the following types of assets shall be considered in determining eligibility:
a) Cash savings;
b) Marketable securities, stocks, bonds, and other forms of capital investment, including tax exempt securities other than Individual Retirement or KEOGH plans;
c) Inheritance and lump-sum insurance payments received within the last three years;
d) Settlements for personal or property damage received within the last three years;
e) Equity in real estate, except as stated below;
f) Accounts receivable of a business utilizing a cash bookkeeping system; and, g) Other personal property which is readily convertible into cash.
The following are not considered assets:
(i) Ordinary household effects, including furniture, fixtures, and personal property;
(ii) Automobiles used for personal use; and
(iii) Depreciable property used in a business that generates a significant proportion of household income.
H. Interest, dividends, retirement accounts available to applicant, and other net income from personal property. If the household net assets exceed $5,000, gross income includes the greater of:
a) The actual income derived from all assets; or
b) 2.5% of the total value of all assets.
Self-Employed person : Income qualification is based on prior year income tax returns. Net income plus depreciation from business or professional operations will be used.
Seasonal Employees with fluctuating incomes: Income averaging is allowed.
Income limits issued by HCD can be found at the following link:
https://www.hcd.ca.gov/grants-and-funding/income-limits/state-and-federal-income-rent- and-loan-value-limits
2. Household Size
For qualification purposes, “household size” is determined as follows:
A. Immediate household members and dependents must be verified using the prior year Federal Income Tax Return and the Household Composition Form. Any change in household members must be supported with verifiable documentation demonstrating that the new household member will live with the applicant.
B. If the borrower’s spouse is not shown on the tax return (e. g., the borrower filed Head of Household), the spouse’s tax return or a signed affidavit must be provided, even if the borrower is taking title as a sole and separate borrower. Any income from the spouse must be included, and the spouse will be counted as part of the household.
C. Families who do not file Federal Income Tax Returns must verify dependents through acceptable documentation such as:
a) Child support orders or payment records
b) Temporary Aid for Needy Families (TANF) eligibility documents c) Social Security eligibility letters
d) Birth certificates
e) Other verifiable records
To add a member, documentation must prove that the individual is a supportive, needy family member who will live in the home.
D. W hen determining family size the following individuals should not be counted:
a) Foster children
b) Unborn children
c) Children for whom legal custody is being pursued but who are not currently living in the home.
3. First-Time Homebuyer
To be eligible, the borrower must be a first -time homebuyer, defined as someone who has not owned a home in the during the three-year period immediately prior to purchase under the Program . Four other types of households qualify even though they may have owned a home within the three-year period. They are: displaced homemaker; single parent who owned a home when married; an owner of a home that is not permanently affixed to a permanent foundation in accordance with local code; or, an owner of a home that is not in compliance with applicable codes, and cannot be brought into compliance with such codes for less than the cost of constructing a permanent structure. However,
previous participation in any City of Salinas homebuyer assistance program renders the borrower ineligible for MDPAP, even if they no longer have ownership interest in the property. For example, if the borrower previously received a Down Payment Assistance Program (DAP) loan or a Lower Income Homebuyer Program (LIHP) loan, whether as a primary borrower or a co-borrower, they are not eligible for MDPAP.
Note: Homebuyer assistance programs offered by the City of Salinas are considered a one-time opportunity, regardless of the borrower’s role in the transaction.
4. Non- Occupying Co-Borrowers
Non-occupying co-borrowers or co -owners are not permitted under the First Time Home- Buyer Program ( MDPAP). All borrowers listed on the loan and title must intend to occupy the property as their primary residence.
5. Home Purchase Loan
The borrower must be prequalified for a home purchase mortgage loan through a participating lender. The base loan amount must reflect the maximum loan for which the borrower qualifies, based on the lender’s underwriting criteria.
6. Buyer’s Contribution
Household shall have sufficient assets to provide a minimum down payment equal to 3% of the purchase price.
7. Home Buyer’s Education Class
Taking an 8-hour Homebuyer Education class early in the homebuying process is required.
All borrower(s) are required to complete a HUD-approved homebuyer education course and submit a certificate of completion with their application package. The certificate must be dated within six months of closing, but no more than a year old at the time of submission.
The homebuyer education curriculum must cover the following topics:
Preparing for homeownership
Available financing and credit analysis
Loan closing and homebuyer responsibilities
Home maintenance and loan servicing
Note: The City does not offer these courses directly. However, they are available through various local organizations. A recommended provider is the Eden Council for Hope & Opportunity (ECHO) . For class schedules and registration information contact (510) 628-6124, [email protected], or visit Home Buyer Education - Eden Council for Hope and Opportunity.
8. Other Requirements
Household shall reside in Salinas or at least one member of the household shall be employed in Salinas for a period of not less than two years prior to application submittal. Migrant workers shall be deemed to meet this requirement if they reside or are employed in Salinas for a minimum of eight (8) months out of the year for a period of not less than three years prior to acquisition of property.
PROPERTY ELIGIBILITY
To qualify for the Mortgage Down Payment Assistance Program ( MDPAP), the property must meet the following criteria:
1. Owner-Occupancy: The home must be the applicant’s principal place of residence
2. Property Type: The Property must be a single- family residence, condominium, or manufactured housing within an owner-occupied park. Properties with mother-in-law units, guest quarters, or any structures intended for rental use are not eligible. a. Any attached room that cannot be accessed from inside the home is considered a separate unit and disqualifies the property. b. Homebuyers may purchase homes within newly constructed subdivisions; however, down payment assistance funding may not be authorized for any residence that has not received "Final Inspection and Certificate of Occupancy ".
c. All properties acquired under this Program must be owner -occupied, vacant, or occupied by the program participant prior to making an initial purchase offer. Properties that are currently being rented to a private household may not be purchased as it will cause renters to be displaced. d. Additionally, all properties acquired under this Program must be appropriate in size for the number of household members planning to occupy the property as established by the 2021 International Property Maintenance Code.
3. Location: The property must be located within the City of Salinas limits
4. Inspection Requirements : The property to be acquired must meet the Section 8 Housing Quality Standards (HQS) at time of initial occupancy by the First Time Homebuyer. The property must be inspected by a licensed and certificated inspector. This requirement can be satisfied by:
a. An FHA appraisal/inspection
b. A Fannie Mae appraisal/inspection
c. Another City-approved certification
For homes built before 1978, the appraiser report must include a statement regarding “chipping or peeling paint” The appraiser must clearly state on an addendum whether there “is” or “is not” chipping or peeling paint on the interior or exterior. • If “chipping or peeling paint” is noted, the issue must be corrected before loan approval
5. Lead-Based Paint Disclosure: Buyers of homes built before to 1978 must receive a copy of the EPA’s Protect Your Family From Lead in Your Home guide, available at:
https://www.epa.gov/node/5197
On September 15, 2000, the United States Department of Housing and Urban Development Lead-Base Regulations took effect. The new lead-based paint regulations require any deteriorated paint that is found during a property visual assessment to be treated using “standard treatments” (repair, safe paint removal, and or repainting) before federal funds are dispersed. EPA certified workers/supervisors must complete this treatment. Additionally, after the paint treatment, the property must pass a clearance test by a certified clearance technician to ensure that the unit is safe for occupancy.
Participants in the City’s FTHB program who submit a purchase contract to the City for the purchase of a house built prior to 1978 must complete a visual assessment for deteriorated paint on the subject property. Although the City will perform a Housing Quality Standard Inspection which includes a visual assessment of the paint, the City recommends that prospective homebuyers acquire the services of a professional home inspector for a thorough home inspection including a visual assessment of the paint.
Prior to entering into the purchase agreement, the buyer or buyer’s agent shall include contingencies in the contract for lead-based paint. This will give the buyer the option to void the contract based on the results to the lead-based paint assessment/evaluation.
ELIGIBLE COSTS
MDPAP funding may be used for mortgage assistance, including non-recurring closing cost, up to $125,000 or 17% whichever is less. Dependent upon the borrower’s need and availability of funding. Ineligible costs include the borrower’s outstanding debts, liens or judgements.
UNDERWRITING REQUIREMENTS
1. Loan Amounts and Use of Funds
• Up to $1 25,000 or 17% whichever is less is available for mortgage assistance and non-recurring loan closing costs.
• Assistance is calculated as the difference between the purchase price (plus eligible closing cost) and the sum of the maximum first mortgage loan and buyer’s contribution, if any.
• MDPAP funds cannot be used to pay off any portion of a borrower’s consumer debt, liens or judgements.
2. Debt-to-Income (D/I) Ratios
• The standard maximum front-end (housing) ratio is 35% • The standard maximum back-end (total debt) ratio is 43% • Two exceptions allow the front -end ratio to exceed 35%, but not more than 38%, if either of the following conditions is met:
The borrower has demonstrated, for at least 12 consecutive months, the ability to pay housing costs equal to or greater than the anticipated new housing cost. The borrower’s new monthly housing expense will not
increase more than 5% over their current housing expense.
3. Primary Loan Requirements
• The borrower must qualify for and obtain a first mortgage loan for the maximum amount they are eligible for
• MDPAP ratios are based on the primary lender’s standards, with the following guidelines:
a. The top ratio may not exceed 35% unless an exception applies; the total ratio may not exceed 43%
The amount of the City’s MDPAP assistance may not exceed the amount of the primary mortgage.
4. Creditworthiness Requirements
Borrowers must demonstrate the ability to responsibly manage debt. At the time the MDPAP package is submitted:
a. No past due or collection accounts may be present
b. No unpaid liens or judgments may exist
c. Any bankruptcy must have been discharged at least three years prior to application.
5. Loan Type Restrictions
• Only fixed-rate mortgages with equal monthly payments over the full term allowed
• The following loan types are not permitted:
o Adjustable-rate mortgages (ARMs)
o Graduated payment mortgages (GPMs)
o Negative amortization loans
o Ballon payments
o Deferred interest loans
6. Loan Documentation and Terms
• Only full documentation loans are eligible; must be FHA or Fannie Mae approved
• Sub-prime loans are not allowed
• Temporary buy-downs are not permitted
• A permanent buy-down is allowed only if the cost does not exceed 1% of the loan amount excluding third party fees.
7. Cash Out of Escrow
• Borrowers may only receive cash back from escrow equal to any funds they personally deposited and that are not needed for any lender -required minimum down payment.
8. Title Insurance Requirement
• An ALTA Lender’s Policy must be obtained for the full amount of the MDPAP loan at close of escrow.
9. Insurance Requirements
• Borrowers must maintain hazard insurance (and flood insurance, if applicable) for at least the replacement value of the home’s improvements. The City of Salinas must be named as additional loss payee on the hazard insurance policy.
Loss Payee Clause:
City of Salinas
Community Development Department Housing
Division
200 Lincoln Ave
Salinas, California 93901
Loan #: PLHA-MDPAP-XXXX
PRIMARY MORTGAGE (FIRST LOAN) REQUIREMENTS
1. Loan Term:
The primary mortgage must have a minimum term of 30 years.
2. Interest Rate:
The loan must carry a market-rate or below-market interest rate.
3. Loan Type:
Only fixed-rate mortgages with consistent monthly payments over the life of the loan are permitted. Adjustable-rate mortgages (ARM’s) and graduated payment mortgages (GPM’s) are not allowed.
4. Loan Structure:
Loans must be fully documented and conform to FHA or Fannie Mae standards.
Sub-prime loans are not permitted. The following features are also prohibited:
o Temporary buy-downs
o Negative amortization
o Principal increases
o Balloon payments
o Deferred interest provisions
A permanent interest rate buy-down is permitted, provided the cost does not exceed 1% of the loan amount excluding third party fees.
5. Impound Account:
Primary lender must establish and maintain an impound account for property taxes, assessments, and insurance payments for the life of the mortgage.
LOAN-TO-VALUE LIMITS
The combined loan-to-value ratio for a MDPAP loan, including all other secured debt on the property, must not exceed 100% of the sales price.
MDPAP LOAN TERMS
1. Loan Security and Position
The MDPAP loan will be secured by a Promissory Note and Deed of Trust for up to $125,000 and will be subordinate only to the primary mortgage lender (i.e., second lien position).
2. Loan Structure and Forgiveness
The MDPAP loan is a 30-Year Deferred Payment Loan (DPL). In the event the purchaser remains in the property for the 30-year loan term, any and all accrued interest will be forgiven, and the loan repayment will be based on the principal amount of the loan only. The principal balance plus accrued interest becomes due in full upon:
• Sale, transfer, or conveyance of the property or title • Default of the loan
• Ceases to be owner occupied prior to the expiration of the 30-year loan term • Cash-Out refinancing
Transfers to a join tenant may be allowed without repayments, subject to restrictions.
If the primary mortgage is refinanced and includes “cash out”, the MDPAP loan must be repaid in full.
3. Repayment Terms
• No monthly payments required
• Three percent (3%) simple interest. Interest forgivable after 30-year period • No prepayment penalties
• No loan fees
• MDPAP loans are not assumable.
4. Refinance and Subordinations
Refinancing shall be allowed where the borrower will repay, in full, the principal and interest on the down payment assistance loan; or the amount to be refinanced is limited to the principal amount of the first mortgage and reasonable closing costs i.e. escrow costs, points, and other direct loan costs resulting in a reduced house payment (Rate and Term). Refinancing to provide "cash out" or remove or encumber equity from the property shall not be authorized. • The new primary loan must:
o Be fully amortized
o Have no balloon payments or call dates
5. Sale or Transfer During Affordability Period
The property may be sold during the 30-year loan term, however, if the owner sells, transfers title or stops using the property as their principal residency for any reason during this time, the City of Salinas will recapture the full amount of the PLHA assistance subsidy provided to the owner plus any accrued interest, in accordance with the terms of the PLHA Promissory Note. This recapture must occur before the owner receives any return from the sale.
The recapture amount is limited to the net proceeds available from the sale or foreclosure.
a. If the property has appreciated in value, the borrower may retain any net proceeds exceeding the PLHA assistance amount.
b. Amounts repaid to the City shall be deposited into the City’s PLHA account and reused for additional down payment assistance consistent with PLHA Regulations and HCD Guidelines. If, at any point prior to full repayment of the PLHA deed, the property is no longer the homeowner’s primary residence due
to sale, transfer, lease, or any other reason, repayment will be subject to Section 302(c)(6) of the PLHA Guidelines. In such cases, the City of Salinas shall ensure compliance through a recorded deed restriction requiring one of the following actions, unless doing so conflicts with another public funding source or law:
i. Repayment of the PLHA loan and any accrued interest to the City’s PLHA account, with all repayments reused in accordance with PLHA Eligible Activities;
ii. Sale of the home at an affordable housing cost to a qualified Lower- Income or Moderate-Income household;
iii. Execution of an equity-sharing agreement between the homeowner and the City, with proceeds reused consistent with PLHA requirements.
c. If the property had depreciated or is sold under foreclosure, and the net proceeds are insufficient to cover the full PLHA assistance amount, recapture limits to the amount of net proceeds remaining after all senior debts have been paid.
6. Ownership Transfer: If ownership of the property changes during the 15-year affordability period, the entire PLHA grant becomes immediately due and payable to the City of Salinas.
A transfer of ownership includes, but not limited to:
• The sale of the property
• The conveyance of any legal, beneficial or equitable, interest in the property, whether voluntary or involuntary, or by any method
• The death of the borrower during the 30-year affordability period, even if the property passes to a successor or beneficiary in accordance with state law.
MONITORING
The City of Salinas will conduct annual monitoring on all MDPAP loans for a period of thirty (30) years from the date of escrow closing, or until the home is no longer the borrower’s principal residence, whichever comes first. Monitoring may include an annual verification letter requiring the borrower to confirm the property remains their primary residence, or other verification methods as determined by the City. As part of the monitoring process, The City of Salinas shall be named as a beneficiary on hazard and flood insurance policies and shall be notified of modifications or cancellations of insurance coverage. Evidence of property tax payments will be required. Lender shall provide City with a recorded Request for Notice of Default on mortgages or taxes. Homeowners are required to cooperate fully with the City’s monitoring procedures. Failure or refusal to comply will be considered a material breach of the loan agreement between the homeowner and the City.
APPEALS
Any applicant or other person whose interests are adversely affected by any determination or requirement of City staff in regard to the requirements of this Program may appeal to the City Manager of the City of Salinas. The appeal shall set forth specifically wherein the action fails to conform to the provisions of this Program. Such appeal shall be filed in the office of the City Clerk. The City Manager may reverse or modify any determination if he/she makes the finding that the action under appeal does not conform to the provisions of the Program.
AMENDMENTS TO PROGRAM RULES
The Salinas City Manager, or designated representative(s), may amend program requirements as needed to meet program goals and objectives. All amendments must remain consistent with the overarching Program guidelines.
LENDER OR MORTGAGE BROKER PARTICIPATION AND LOAN PROCESSING
GUIDELINES
1. Letter of Participation
The lender or mortgage broker must submit an original signed Letter of Participation to the City of Salinas, confirming their willingness to comply with all program rules as outlined in the letter.
2. Prequalification
The lender or mortgage broker is responsible for prequalifying the borrower for a mortgage loan to purchase an eligible home.
3. Cash Requirements Determination
The lender or mortgage broker must determine the borrower’s required cash contribution, beyond the lender's loan amount, needed to complete the home purchase.
4. Eligibility Worksheet Completion
Using the City -provided Home Buyer Assistance Program Eligibility Worksheet , the lender or mortgage broker must verity:
The borrower’s income eligibility the MDPAP loan;
The eligibility of the property and sales price; and
The estimated amount of the MDPAP loan.
5. Certification of Eligibility
An authorized representative of the lender or mortgage broker must sign the Certification of Eligibility, confirming both the borrower's and the property’s eligibility.
6. Submission of Application Documents
The lender or mortgage broker must submit the following documents to the City of Salinas:
Original signed Eligibility Worksheet
Required income and property verifications
Any additional documents listed on the worksheet
Escrow instructions, including the escrow account number and escrow company details
Submit by Mail:
City of Salinas
Housing Division, Community Development Department
Attention:
65 W Alisal Street, 2nd Floor
Salinas, California 93901
City Review and Funding Process
The City will review all submitted documents for accuracy and completeness, including the lender's certification of borrower eligibility. Upon approval, the City will be issued payment (check or wire) to the escrow company and account designated by the lender. Disbursement occurs upon closing of escrow. The City's loan documents, including the Promissory Note, Deed of Trust with Deed Restriction, and Truth- in-Lending Disclosure Statement) will be sent to escrow along with instructions for execution.
Closing and Post-Closing Requirements
The City will review the estimated settlement statement before loan disbursement to confirm compliance with MDPAP guidelines. After closing:
• All original City loan documents and final settlement statement must be returned directly to the City.
• The City will perform a review of the final settlement statement • If discrepancies are found, the City will issue a request for return of funds to the escrow company, with copies to the borrower and lender or mortgage broker. • Upon return of funds, the borrower’s MDPAP loan amount will be adjusted accordingly.
CITY OF SALINAS
COMMUNITY DEVELOPMENT DEPARTMENT
PLHA Mortgage Down Payment Assistance Program
OWNER PARTICIPATION AGREEMENT
This Agreement is entered into on by and between the City of Salinas, hereinafter referred to as "City" and
hereinafter referred to as "Buyer" for the purchase of the residence located at , Salinas, California,
hereinafter referred to as "Residence".
This Agreement is entered pursuant to a Local Program operated by the City of Salinas under the California Department of Housing and Community Development (HCD) PLHA Mortgage Down Payment Assistance Program including related Program Guidelines, requirements and Loan Documents, all incorporated herein (PLHA Mortgage Down Payment Assistance Program or Program) providing financial assistance (PLHA MDPAP Loan or Loan) to eligible home buyers utilizing a purchase mortgage which is eligible under the Mortgage Down Payment Assistance Program .1 The City has received funds from the state HCD Permanent Local Housing Allocation to assist moderate-income households in the purchase of their first home.
The purpose of this Agreement is to provide financial assistance for moderate income first-time home buyers to purchase a home to be used as Buyer's principal residence. Moderate-income is defined by the HCD as less than or equal to 150% of median income for the Salinas Metropolitan Statistical Area. The City will provide a Loan up to $125,000 or 17% of purchase price, whichever is less to Buyer for mortgage assistance and/or non- recurring closing costs. This deferred Loan shall be in the form of a Promissory Note secured by a second Deed of Trust benefiting the City of Salinas, bear a three percent (3 %) interest rate, have no monthly payments, and interest will be forgiven in 30 years or repayable upon sale, transfer of title or when the home is no longer the Buyer's principal residence, whichever occurs first.
THEREFORE THE DEPARTMENT AND THE BUYER AGREE AS FOLLOWS
1. Buyer must (1) be a first-time home buyer, defined as not having owned a home for the past three calendar years; (2) not have received any previous type of homebuyer assistance from the City (3) have income within the limits of the Program; and (4) purchase the Residence for (i) owner-occupancy (ii) located within Salinas City limits and (iii) meets minimum housing standards and inspected by a FHA certified inspector before a release of funds.
2. The City, upon its approval thereof, will provide a deferred PLHA MDPAP of up to $125,000 or 17% of purchase price, whichever is less for gap financing. Gap financing is the difference between the purchase price with closing costs and the amount of the borrower’s first mortgage loan and down payment requirement. This Loan will be secured with a promissory note and deed of trust that will record subordinate to the primary loan (second lien position). This Loan will be provided at a three percent (3%) interest rate with no monthly payments required. The accrued interest on this loan, in its entirety, is forgivable in 30 years or payable upon the earlier of: (1) sale, transfer of title, lease or encumbrance, (2) the Residence ceases to be owner -occupied, or (3) the maturity date or full repayment of any senior deed of trust upon the property.
3. The purchase shall be subject to Buyer qualifying for a Program -eligible first trust deed through conventional Fannie Mae, FHA or CalFHA underwriting criteria. It shall be Buyer's responsibility to ensure that all appropriate documentation is received by Department to process the Loans, including title insurance, a title report (as necessary), credit report, appraisal, income, and employment verifications, etc. Buyer will select and cooperate with a real estate agent, title /escrow company and/or lender participating in the Program. The Residence shall be decent, safe, and sanitary housing and be inspected by a FHA certified inspector. This verification is for the City’s internal underwriting purposes only and makes no representations or warranties to Buyer. Buyer is encouraged to have their own independent home inspection performed.
4. Buyer agrees to attend a homebuyer education class and provide a certificate of attendance.
5. Buyer hereby certifies that he/she in all respects qualifies under the City’s Mortgage Down Payment Assistance Program
as a moderate-income household and
is not purchasing the property for any purpose other than a principal place of residence.
6. Funding of the Department's Loans will be made into escrow at the time the first trust deed loan funds. Buyer agrees to cooperate in completing the loan process for the first trust deed and City's second deed of trust. Buyer hereby certifies that he/she is not qualifying as a non-occupying co-borrower or co-owner.
7. Buyer and City’s agree that all revisions to the purchase price, location, change in lender or title companies, supplemental escrow instructions, etc. during the course of loan approval and escrow shall be by signed writing. It is expressly understood between Buyer and City that misrepresentation of the qualifications and eligibility of Buyer or renting of the Residence will cause outstanding Loans to be accelerated and become immediately due and payable to the City. The City Loans are not assumable and refinancing of the primary loan will not accelerate the City Loans as long as the refinance does not include any "cash out" or costs of the refinance transaction in the new loan.
8. Buyer agrees to assist and facilitate annual monitoring procedures as administered by the City on all loans provided. The monitoring may consist of a letter that will be sent out annually asking participants to verify that the Residence is still Borrower’s principal place of residence, or other means of verification, as identified by the City. Monitoring will continue for a period of 30 years from the date of the close of escrow or until the Residence is no longer the participant’s principal place of residence.
Verification of City being named as a beneficiary on Hazard insurance (and Flood insurance where applicable) and shall be notified of modifications or cancellations of insurance coverage. P ayment of property taxes is required on all loans and will be included as part of the annual monitoring.
9. Buyer agrees to maintain the Residence in accordance with Building Codes, City of Salinas ordinances, Department Quality Standards, and the Uniform Housing Code, and agrees not to accumulate debris, inoperable or abandoned vehicles on site, or have any other unsightly or dangerous conditions on site.
10. Buyer agrees to abide by the terms and conditions of the City’s Mortgage Down Payment Assistance Program in order to participate in the program, including maintaining the Residence as the principal place of residence.
11. To the furthest extent allowed by law, the Buyer shall indemnify, hold harmless and defend CITY, State of California, and their officers, officials, employees, agents and authorized volunteers from any and all loss, liability, fines, penalties, forfeitures, costs and damages (whether in contract, tort or strict liability, including but not limited to personal injury, death at any time and property damage) incurred by CITY, State of California, Buyer or any other person, and from any and all claims, demands and actions in law or equity (including attorney’s fees and litigation expenses), arising or alleged to have arisen out of the performance of this Agreement. Buyer’s obligations under the preceding sentence shall apply regardless of whether CITY, State of California or any of their officers, officials, employees, agents, or volunteers are negligent, but shall not apply to any loss, liability, fines, penalties, forfeitures, costs, or damages caused solely by the gross negligence, or by the willful misconduct, of CITY, State of California or any of their officers, officials, employees agents or authorized volunteers.
12. Throughout the life of this agreement, Buyer shall maintain Homeowner’s Insurance on the property, and the City of Salinas shall be names as a Loss Payee
(Buyer) (Date) (Buyer) (Date)
(Buyer) (Date) (Buyer) (Date)
_ City of Salinas
EQUAL HOUSING OPPORTUNITY
City of Salinas
HOUSING DIVISION
Mortgage Down Payment
Assistance Program 65 W Alisal
St., 2nd Floor Salinas, CA 93901
2025 HCD INCOME
LIMIT GUIDELINES
1 PERSON - $109,725
2 PEOPLE - $125,400
3 PEOPLE - $141,075
4 PEOPLE - $156,750
5 PEOPLE - $169,275
6 PEOPLE - $181,800
7 PEOPLE - $194,400
8 PEOPLE - $206,925
APPLICATION
DATE:
PROPERTY ADDRESS:
APPLICANT NAME:
DATE OF BIRTH: SOCIAL SECURITY:
PHONE (Cell): (Work): EMAIL:
CURRENT ADDRESS:
MALE FEMALE VETERAN YES NO SINGLE HEAD OF HOUSEHOLD YES NO MARITAL STATUS: MARRIED UNMARRIED SEPARATED SINGLE
RACE(S): American Indian/Alaskan Native Asian Black/African American Native Hawaiian/Pacific Islander White Other
ETHNICITY (select only one): Hispanic or Latino Not Hispanic or Latino CO-APPLICANT NAME:
DATE OF BIRTH:
SOCIAL SECURITY:
PHONE (Cell): (Work): EMAIL:
CURRENT ADDRESS:
MALE FEMALE
VETERAN YES NO
SINGLE HEAD OF HOUSEHOLD YES NO
MARITAL STATUS: MARRIED UNMARRIED SEPARATED SINGLE
RACE(S): American Indian/Alaskan Native Asian Black/African American Native Hawaiian/Pacific Islander White Other
ETHNICITY (select only one): Hispanic or Latino Not Hispanic or Latino IS THE HEAD OF HOUSEHOLD/AND OR ANY MEMBER OF THE HOUSEHOLD DISABLED? YES NO
IS THE DISABILITY A MOBILE IMPAIRMENT? YES NO
Household Composition
Property Address:
Please complete this form for yourself and your household members. Include all sources of income even if the primary lender will not include.
Name
Relationship
to Head of
Household
Date of Birth
(MM/DD/YY)
F/T
Student
(Y or N)
* Gross
Income
Employer Name
or Source of
Income
*Submit this form along with copies of supporting documentation for all sources of income. Sources of income include employment, social security, child support, unemployment, etc. **Family members over 18+ wil l be requi red to compl ete a sel f-certification form.
I certify under Penalty of Perjury under the laws of the State of California that the foregoing is true and correct.
Executed on the date shown below.
Signature of Applicant Date
Signature of Co-Applicant Date
ASSETS
NAME OF BANK:
BANK ADDRESS:
CHECKING SAVINGS IRA STOCKS BONDS MONEY MARKET ACCT $
NAME OF BANK:
BANK ADDRESS:
CHECKING SAVINGS IRA STOCKS BONDS MONEY MARKET ACCT $
OTHER REAL ESTATE OWNED? YES NO
DECLARATIONS
ARE YOU A FIRST TIME HOMEBUYER? YES NO
ARE YOU A CO-ENDORSER OF ANY OUTSTANDING LOANS MADE BY OTHER PEOPLE? YES NO IF YES, WHO ARE YOU CO-SIGNING FOR, WHO IS THE LOAN WITH, AND WHAT IS THE OUTSTANDING LOAN BALANCE:
Name of person
you are co-signing for:
Name of
Lending Agency:
Loan
Balance:
HAVE YOU EVER FILED FOR BANKRUPTCY? YES NO
IF YES, WHAT YEAR DID THE BANKRUPTCY OCCUR?
ARE YOU A PARTY TO A LAWSUIT? YES NO
ARE YOU PRESENTLY DELINQUENT OR IN DEFAULT ON ANY FEDERAL DEBT OR ANY OTHER LOAN, MORTGAGE, FINANCIAL OBLIGATION, BOND OR LOAN GUARANTEE? YES NO
IF YES, PROVIDE DETAILS:
CERTIFICATIONS AND ACKNOWLEDGMENTS
I/We understand that the information reported in this application and the information submitted by the lender will be used to determine eligibility for the City’s program, as well as the amount of homebuyer assistance needed from the City. Initials:
I/We acknowledge that approval of all funding is subsequent to meeting all underwriting criteria, stated in the most recent City underwriting guidelines issued to the lender. Initials:
I/We certify that I/we have not owned a home in the past three years. Initials:
I/We certify that the property will be my/our principal place of residence. Initials:
I/We understand that the funding will be provided as a deferred loan, forgivable in 30 years or repayable upon sale, transfer of title or when the home is no longer the Buyer's principal residence, whichever occurs first. Initials:
I/We acknowledge and agree that the loan requested by this application will be secured by a promissory note and deed(s) of trust on the property described herein. Initials:
I/We agree to maintain Hazard insurance (and flood insurance, if applicable) in an amount at least equal to the replacement value of the improvements, and to name the City of Salinas, Housing Division, as a loss payee for that amount. Initials:
I/We further authorize verification or re -verification of the information contained herein, and additional normal inquiries related to or associated with this application from employers, creditors, banks, loan institutions, and from any other sources as may be required. Initials:
I/We acknowledge the City reserves the right to rescind my application at any time upon my failure to comply with the above listed conditions. Initials:
I/We acknowledge that this program is voluntary in nature and the City reserves the right to reject any and all applications at its sole and absolute discretion. Initials:
The City of Salinas will require annual monitoring procedures be accepted by all applicants. The monitoring may consist of a letter that will be sent out once a year asking you to verify that the home is still your principal place of residence, or other means of verification as identified by the City. You will be required to provide principal place of residency verification on the letter, sign, and return the letter to the City of Salinas. This will continue for a period of Thirty ( 30) years from the date of the close of escrow or until the home is no longer your principal place of residence. Initials:
I/We acknowledge and agree that the City makes no representations or warranties, express or implied, to the applicant(s) regarding the property, the condition of the property, or the value of the property. Initials:
NOTIFICATIONS
Applicant(s), shall indemnify, hold harmless and defend the City and each of its officers, officials, employees, agents and volunteers from any and all loss, liability, fines, penalties, forfeitures, costs and damages incurred by the City, Applicant(s) or any other person, and from any and all claims, demands and actions in law or equity (including attorney’s fees and litigation expenses), arising or alleged to have arisen directly or indirectly in the performance of this Program. Applicant’s obligations under the preceding sentence shall apply regardless of whether the City or any of its officers, officials, employees, agents or volunteers are passively negligent, but shall not apply to any loss, liability, fines, penalties, forfeitures, costs or damages caused by the active negligence or by the willful misconduct of the City or any of its officers, officials, employees, agents or volunteers.
Section 504 of the Rehabilitation Act of 1973, as amended, no otherwise qualified individual with disabilities in the United States shall, solely by reason of his or her disability, be excluded from the participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving Federal financial assistance.
Appeals: Any applicant or other person whose interests are adversely affected by any determination or requirement of City staff in regard to the requirements of this Program may appeal to the City Manager of the City of Salinas.
The appeal shall set forth specifically wherein the action fails to conform to the provisions of this Program. Such appeal shall be filed in the office of the City Clerk. The City Manager may reverse or modify any determination if he/she makes the finding that the action under appeal does not conform to the provisions of the Program
I/we understand that if my records are audited and the income information provided is found to be incorrect (over the allowable income limits) at the time of funding, I will immediately start to repay the City funds, plus interest at current rates.
Signature of Applicant
Date Signature of Co-Applicant Date
The Housing Financial Discrimination Act of 1977
Fair Lending Notice
It is illegal to discriminate in the provision of or in the availability of financial assistance because of the consideration of:
1. Trends, characteristics or condition in the neighborhood or geographic area surrounding a housing accommodation, unless the financial institution can demonstrate in the particular case that such consideration is required to avoid an unsafe and unsound business practice; or
2. Race, color, religion, sex, marital status, national origin, or ancestry.
It is illegal to consider the racial, ethnic, religious, or national origin composition of a neighborhood or geographic area surrounding a housing accommodation or whether or not such composition is undergoing change, or is expected to undergo change, in appraising a housing accommodation or in determining whether or not, or under what terms and conditions, to provide financial assistance.
For any person, bank, mortgage company, or other financial institution that provides financial assistance for the purchase, organization, or construction of any housing accommodation to discriminate against any person or group of persons because of race, color, religion, sex, sexual orientation, marital status, national origin, ancestry, familial status, source of income, or disability in the terms, conditions, or privileges relating to the obtaining or use of that financial assistance.
These provisions govern financial assistance for the purpose of the purchase, construction, rehabilitation, or refinancing of one- to-four unit family residences occupied by the owner and for the purpose of the home improvement of any one-to-four unit family residence.
If you have any questions about your rights, or if you wish to file a complaint, contact the management of this financial institution, or:
Department of Fair Employment Fair Housing and Equal Opportunity (FHEO) and Housing U.S. Dept. of Housing & Urban Development
611 West Sixth St., Suite 1500 One Samsome Street, Suite 1200 Los Angeles, CA 90017 San Francisco, CA 94104
(800) 233-3212 (800) 347-3739; TTY (415) 436-6594
If the loan applied for is for the purchase, construction, rehabilitation, or refinancing of a housing accommodation, information regarding your race/national origin, sex of applicant and co -applicant and marital status is requested by the State of California and the Federal government to monitor this financial institution’s compliance with the Housing Financial Discrimination Act, Equal Credit Opportunity Law, and Fair Housing Law. The law provides that a financial institution may neither discriminate on the basis of this information nor on whether or not it is furnished. Furnishing this information is optional.
You have a right to file a written grant application and to receive a copy of this institution’s underwriting standards.
I (we) hereby acknowledge receipt of a copy of this Notice.
Signature Date
Signature Date
CITY OF SALINAS
HOUSING DIVISION
BORROWER’S CERTIFICATION AND AUTHORIZATION
I/We applied for a loan from the City of Salinas Housing Division’s First Time Home- Buyer Program. In applying for the loan, I/we completed a loan application containing information regarding income.
I/We made no misrepresentations in the loan application or other documents nor did I/we omit any pertinent information.
I/We authorize the City of Salinas Housing Division staff to verify information contained in our loan application and other documents, either before the loan is closed or after, as part of its audit program, including obtaining a credit report from a credit reporting agency.
I/We authorize you to provide to the City of Salinas Housing Division any and all information staff requests. Such information includes, but is not limited to, employment history, bank accounts, credit reports, title reports and income tax returns.
A copy of this authorization may be accepted as an original.
I/We understand that it is a federal crime punishable by fine or imprisonment, or both, to knowingly make false statements when applying for this loan, as applicable under the provisions of Section 1014 of Title 18, United States Code.
Signature Social Security Number
Print Name Date
Signature Social Security Number
Print Name Date
MORTGAGE DOWN PAYMENT
ASSISTANCE PROGRAM
ELIGIBILITY WORKSHEET
Name of Applicant(s):
Address of Property
Being Purchased:
Zip Code: Assessor’s Parcel Number (APN):
Principal Lender:
MDPAP Requirements:
• Has borrower owned a home in the past three years?
Yes No
If yes, the borrower is not eligible for assistance; stop here. • Has borrower completed the Homebuyer's Education class? Yes No
Date Completed:
• Has the property to be purchased had an appraisal?
Yes No
Date of Appraisal:
If no to either of the last two questions, borrower must first obtain appropriate certification before proceeding with this worksheet.
If the answer to both questions is yes, please proceed.
• Loans such as No Income Verified, Quick Qualifier, or E. Z. Docs are NOT allowed.
Full Documentation Loans Only. Is this loan (check one):
FHA (fully amortized with NO call or balloon dates)?
Fannie Mae (fully amortized with NO call or balloon dates)? or Freddie Mac (rate, fully amortized with NO call or balloon dates)? If the proposed loan is not one of the options above, financing is not eligible for assistance; stop here.
If the proposed loan is one of the options above, please proceed.
Eligibility:
1. Applicant Eligibility
(a) Number of persons residing within household:
Total*
* This total must be supported by documentation.
(b) Monthly gross household income:
If borrower is married, but taking title as sole and
separate property, does the spouse receive any income?
If applicable, state amount and add to the monthly
gross income of borrower. In addition, please include
all income from a second job, child support, disability, and social security.
Total income from all sources $
(c) Enter maximum allowable gross monthly income for total household size listed on line 1(a); (refer to Income Eligibility): $ If income listed on line 1(b) exceeds the amount on
line 1(c), borrower is not eligible for assistance;
stop here.
If income listed on line 1(b) is less than or equal
to the amount on line 1(c), borrower is eligible for
assistance; please proceed.
(d) Enter the debt-to-income ratio:
If the debt-to-household income ratio exceeds 35/43 or if the housing ratio (top ratio) is not between 30 and 35, borrower is not eligible for assistance; stop here.
Two exceptions are allowed; see guidelines.
If the debt-to-income ratio does not exceed 35/43 and the housing ratio is between 30 and 35, borrower is eligible for assistance; please proceed.
2. Property Eligibility
(a) Is property located within the City of
Salinas?
Yes No
(b) Is property being purchased for use as the principal residence of the applicant? Yes No
If no to either of the last two questions, property is not eligible for assistance; stop here.
(c) Does the property to be purchased include any accessory living quarters such as mother-in-law units, guest quarters/apartments or any form of unit which may be used for rental income?
Yes No
If yes, stop here; property is not eligible for assistance.
If no, please proceed.
(d) Sales price of home being purchased: $
(e) Maximum allowable sales price:
(100% of the current median sales price for the county) $ If amount entered on line 2(d) is greater than line 2(e), property is not eligible for assistance; stop here.
If amount entered on line 2(d) is less than or equal to line 2(e), property is eligible; please proceed.
(f) Required inspection - please enter the name and telephone number of the person who will provide access to the home for the City inspector. The City will schedule the inspection.
(Name) (Telephone Number)
3. Calculation of Amount of Mortgage Down Payment Assistance Program Loan
$
(a) Sales price of home:
$
(b) Non recurring closing costs (whole dollars only)
$
(c) Recurring closing costs (whole dollars only)
(d) Total Purchase Price [(a) + (b) + (c)] $
(e) First mortgage amount (base loan only): $
(f) Total buyer contribution: $
(g) Mortgage Down Payment Assistance Program
Loan Amount [(d) – (e) - (f)] **$
** NOTE: This amount must be rounded to the nearest dollar and cannot exceed the amount of first loan and should agree with the amount entered on Page 5 of 6.
Failure to provide all of the following materials could cause your package to be returned by mail. Materials must be provided in the order listed. *All working family members aged 18 years and older must provide copies of the following documents, marked with “*”.
Mortgage Down Payment Assistance Program Eligibility Worksheet (all pages original) with “Page 5 of 6” signed by the lender’s authorized signatory. Mortgage Assistance Application
Owner Letter of Participation
Fair Lending Notice
Borrower Authorization Form
Household Composition Form
Verification that applicant has received the “Protect Your Family from Lead in Your Home” pamphlet for any home built prior to 1978. Must state “ I have received the Protect Your Family from Lead in Your Home”, sign and date.
Copy of borrower’s identification and copy of social security card. Typed and signed primary loan application (1003). Must be signed by applicant and loan officer. Mortgage Credit Analysis Worksheet or the Uniform Underwriting and Transmittal Summary signed by the underwriter (1008).
Good Faith Estimate.
Documentation of applicant’s income (3 months of current pay stubs). * Verification of Employment (no processor’s certification).* Six current statements for checking, savings, money market accounts, stocks, bonds, 401K, retirement accounts and other forms of capital investments. *
All pages of the last three years income tax returns (with W2's) or affidavit of non-filing. The copy of the income tax returns must be signed by the borrower(s). * Credit report.
Preliminary Title Report with legal description.
Lender's Property Appraisal prepared by a State-licensed, residential property appraiser. This appraisal shall use the sales of comparable properties approach to determine value. This must include a statement from the appraiser regarding “chipping, peeling paint.” They must state on an addendum whether there “is” or “is not” chipping, peeling paint on the interior or exterior of the home. If chipping, peeling paint is identified, it must be corrected before the homebuyer package is submitted.
Executed Residential Purchase Agreement and Joint Escrow. Signed Supplemental Vesting Amendment from escrow.
Certification of participation in Homebuyer's Education class.
(Signature of Preparer) (Date)
CERTIFICATION OF ELIGIBILITY
Borrowers’ Name(s)
Property Address
Pursuant to the Letter of Participation between (Lender/Broker) and the City of Salinas, I have reviewed the foregoing information and find that it is true and accurate to the best of my knowledge and certify that the applicant is eligible for the following Mortgage Down Payment Assistance Program loan.
Mortgage Down Payment
Assistance Program
loan: $
(Signature of Authorized Official) (Date)
(Name) (Title)
(Telephone No.) (Email)
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * (for City Use Only)
Source of Funds: PLHA Mortgage Down Payment Assistance Program Funds
Approved: City of Salinas
Community Development Department (Date)
Reviewed By: (Date)
TABLE 1
INCOME ELIGIBILITY
Moderate Income – High Cost Area
Mortgage Assistance
A B
HOUSEHOLD SIZE
MAXIMUM ALLOWABLE
GROSS INCOME
(For Household Size
Listed in Column A)
1 $ 109,725
2 $ 125,400
3 $ 141,075
4 $ 156,750
5 $ 169,275
6 $ 181,800
7 $ 194,400
8 and Over $ 206,925
Date of Last Revision: 4/2025