Q: I used to own a home, but it was foreclosed on. Can I still participate in the program?
A: Possibly. The City’s definition of a first-time homebuyer is someone who has not owned a home in the previous three years, so if your home was foreclosed on more than three years ago you may qualify. Keep in mind we will look at the date the bank took ownership of your home, not the date you moved out.
Q: I’m not sure how good my credit is. How can I find out?
A: The best way to find out is to attend a free homebuyer session at NeighborWorks. At the one-on-one session, they will pull a free credit report for you and discuss whether you can probably get a loan given your credit and income. To register, call (916) 452-5356 or visit www.nwsac.org. You could also talk with a lender, who will pull a credit report as part of their qualification process.
Q: Do you look at my gross income or my take-home pay?
A: We look at gross income. The most common income sources we include are wages/salary, Social Security or disability payments, unemployment, child support, alimony, and many types of public assistance (excluding food stamps). If you have substantial assets, we also include some projected income associated with those.
Q: Can I really get $59,650?
A: The maximum loan amount is $59,650 or 20% of the purchase price of the house, whichever is less. Most buyers will not receive the maximum loan amount. The actual loan amount is based on what you need to make a particular home affordable to you, and we can’t calculate the exact amount until you find a home and we get some information from your lender. The City expects that you will spend between 26% and 32% of your gross income on housing costs.
Q: Does the City have a preferred lender?
A: No. All institutional lenders who are licensed and in good standing with the State are welcome to participate in the program. The City does not make lender recommendations.
Q: Who has to take the homebuyer education class?
A: All borrowers who will be listed on the title to the home must take the 8-hour homebuyer education class. You do not need to take this class until you have preliminary approval from the City to participate in the program.
Q: I would like to put down a large downpayment using my own funds. Can I still qualify?
A: Probably. The only requirement that the City has related to a maximum amount that you can put down on the house is that you need to have a housing debt-to-income ratio of at least 26% and a total debt-to-income ratio of at least 30%. This means that your first mortgage payment (plus taxes and insurance) needs to be at least 26% of your gross income and your total debt payments (for housing costs plus any credit cards, auto loans, etc.) need to be at least 30% of your gross income. If you have no debt, our subsidy will not be more than what is needed to get you to spending 30% of your monthly income on housing costs.
Q: Will I need to pay back the loan if I refinance?
A: If you refinance the house, the City may consider subordinating our loan to your new loan. If approved, this would mean that you do not need to start paying back your loan. There are certain circumstances under which the City will consider subordinating (e.g., for you to get a lower interest rate) and when we will not (e.g., if you are trying to take cash out to buy a new car). We have no obligation to approve any subordination request, and if your request is not approved, you probably will not be able to refinance unless you pay off the City loan. However, many lenders will roll the City loan balance into your new loan if there is equity in the property.
Q: I’m pre-approved for a loan of $200,000. Does that mean I can look for a $259,000 house if I get approved by the City?
A: Probably not. Most lenders calculate your pre-approval amount based on you spending up to about 48% of your gross income each month on housing expenses and other debt. The City will only let you spend up to 36% of your income on housing costs and 42% of your income on total debt (including housing costs). Receiving a City loan may not mean you can buy a much more expensive house, but it will make your monthly payments lower so that you can afford the house you buy.
Real Estate Agent Answers
Q: If a home has a 95624, 95757, or 95758 zip code, does that mean it’s in Elk Grove and thus eligible?
A: No. These zip codes contain some areas that are not within the City of Elk Grove’s boundaries. The best way to determine if a home is in Elk Grove is to visit the Sacramento County Parcel Viewer and type in the address. If it lists the jurisdiction as “City of Elk Grove,” then it is inside the City.
Warning: Google Maps and other mapping websites largely base their information on zip codes and are not a reliable source for determining the jurisdiction of a property.
Q: What is the deadline to get in contract and close escrow on a house?
A: The deadline for entering into contract is 60 days after the buyer receives preliminary approval to participate in the program. The City can grant an additional 30 days with acceptable justification. Once buyers enter into a contract, they have 45 days to close escrow, although we can grant exceptions for circumstances beyond the buyer’s control.
Q: My borrower has a medical account in collections. Will they need to pay it off in order to receive the City assistance?
A: Yes, the City requires all accounts in collections or charge off status to be paid, including medical collections. The account will need to be paid through escrow. City funds cannot be used to pay for this.
Q: My borrower took a homebuyer counseling course offered by another HUD-approved agency. Will that count?
A: Unfortunately, at this time the City is able to accept certificates from NeighborWorks only. The eight-hour homebuyer counseling course needs to be taken prior to purchase, and must be taken in person. Applicants can register for either the course or the workshop by calling (916) 452-5356 or visiting www.nwsac.org.
Q: What types of loans will the City accept?
A: The City will work with conventional, FHA, and VA loans. Please note that the required buyer contribution of 1% is not waived for any loan type.
Q: How much funding is available?
A: The City received grants totaling $1 million for the program and expects to make around 20 loans.
Q: When is funding reserved?
A: Funding is reserved at the time the buyer receives a preliminary approval letter.
Q: I calculated my buyer’s income and it is below the limit listed. Does that mean they will qualify for the program?
A: Not necessarily. The City performs its own income qualification using standards that are different from most lenders. The City includes all of a buyer’s household income and projects it for the next 12 months using current information. In almost all cases, the City’s income calculation is higher than the lender’s.