FREQUENTLY ASKED QUESTIONS
The following list of Frequently Asked Questions (FAQ) about Heritage Housing Partners (HHP) and our projects provides general information.
It is not intended to address every detail of the project nor cover every aspect of the topics introduced.
I’m interested in becoming one of your homebuyers. What should I do first?
The first, and most important, step for any potential applicant is to join the interest list at www.hhplist.org. Registering on the interest list will ensure that you receive e-mail notification about how to apply to our homeownership opportunities as these opportunities become available.
Who is eligible for HHP’s homes?
HHP’s homes are available to income-eligible, first-time homebuyers.
What do you mean by income eligible?
Each year both the United States Department of Housing and Urban Development (HUD) and the State of California provide estimates of median income for each county in California. Based on these median income figures, HUD and the State also publish income ranges for different size households at “very-low,” “low,” and “moderate” income levels. HHP’s homes are typically available to low- or moderate-income households. The source of project funding determines whether State or HUD income ranges are used to determine eligibility; these can vary.
Can you give me an example of what you mean by low- or moderate-income?
Yes. Below is a chart showing this year’s (based on 2015 Area Median Income) income-eligible ranges. Please note that this range is based on both HUD and State incomes and that projects may be targeted to narrower segments of the below ranges as stated in application materials. In addition, be aware these figures change on an annual basis. 2015 ranges for Los Angeles County are as follows:
Low- & Moderate-Income Range (2015)
$48,650 to $69,720
$55,600 to $79,680
$62,550 to $89,760
$69,450 to $99,600
$75,050 to $109,680
How do I figure out what my annual gross income is? Do you look at last year’s taxes?
While you will typically be asked to submit a copy of your tax returns for the previous two tax years, HHP calculates a projected income by annualizing your current income and compares that projected income to the eligibility range for your household size. For W2 employees, HHP will look at your current gross income (income before taxes). For self-employed applicants, HHP will look at your current net income. Please note that for some of our projects, if you have savings in excess of your required down payment, then 2.5% of those savings will be included as part of your annual income.
Do the eligible income ranges ever change?
Yes, the eligible income ranges are revised by HUD and the State of California each year (usually in Spring).
What do you mean by household size?
Your household size is the number of people who living in your household at the time you apply for a project and who will live in your new home. Please note that unborn children are not counted as household members under State law. In cases where there is shared custody of a minor, that minor is considered as a household member if he/she resides with the applicant 50% or more of the time per custody agreement.
Why does the eligible household income change with family size?
The eligible household income ranges are higher for larger households because HUD and the State of California believes that larger households will have more employed workers contributing to the household’s annual income.
What is a “First-time Homeowner” or “First-time Homebuyer”?
You would be considered a first-time homebuyer if neither you nor your spouse owns or has owned residential real estate in the last three tax years. If you are a divorced or legally separated homemaker or single parent who owned a home in the past three tax years with your former spouse, you may be eligible as a first-time homebuyer. If you believe you might fit this category, please contact HHP.
Why do you call it “affordable” housing?
HHP’s projects receive government funding that ensures that homebuyers are sold homes at “affordable” sales prices. The Affordable Sales Price is calculated using a State mandated formula that ensures that the typical buyer does not spend more than 35% of his or her monthly total income on housing expenses. Housing expenses include: mortgage payment; property insurance; property taxes; HOA (homeownership association) fees; and, estimated utilities. The Affordable Sales Price is calculated each year. In a market where many families pay 40% to 50% of their income to housing costs, HHP’s homes are a great value.
What are the advantages of buying one HHP’s homes?
When you purchase one of HHP’s homes, you are buying a market-rate home that has been subsidized by HHP and its government partners. This government financing assistance means that you will secure your first mortgage financing and make your down payment based on an Affordable Sales Price rather than on the true market or appraised value of the home, which can be up to 50% more than the Affordable Sales Price. In addition, your property taxes will be based on the Affordable Sales Price rather than on the market value of the home. Most of HHP’s buyers are able to make the minimum down payment of 5% without incurring mortgage insurance due to the government subsidy. Finally, as a homeowner, you will receive additional tax benefits.
Sounds great. What else should I know?
In exchange for the benefits of this government assistance, there are some restrictions. HHP’s homes are required to be owner-occupied as your primary residence, meaning that you are not allowed to rent your home out. In addition, when you decide to sell your home, you will work with HHP or one of its government partners to sell your home to an eligible household for that year’s Affordable Sales Price.
Does that mean that I won’t earn any equity?
No. You can build equity as an HHP homeowner. However, HHP’s affordable homeownership program is designed for long-term ownership. While you can sell at any point, HHP typically recommends that if you anticipate owning an HHP home for five years or less, that you don’t purchase one of our homes.
How do I build equity then?
Equity is built two ways for HHP’s buyers. The first way you build equity is by paying down principal on your first mortgage loan. During the first few years of homeownership, most of your monthly mortgage payment goes towards interest. As in all homeownership, the longer you own the home, the more principal you pay down. The second way that HHP’s buyers build equity is through the change in Affordable Sales Price. You purchase the home for an Affordable Sales Price set the year you purchase the home; when you sell to another eligible buyer, they purchase for that year’s Affordable Sales Price. Historically, the Affordable Sales Price increases 1% to 3% each year. The difference between your Affordable Sales Price and the new Affordable Sales Price is yours to keep, minus Seller closing costs.
How much savings do I need to buy one of HHP’s homes? Do you help me with my down payment?
You will need to have funds available for your down payment and to pay some of the closing costs associated with your home purchase. Typically, you need to put down five percent (5%) of the affordable sales price, plus have another three percent (3%) available for closing costs. For most of HHP’s projects, the total available funds you might need are in the range of $15,000 to $30,000.
If you need assistance with your down payment or closing costs, you might consider applying for one of CalHFA’s downpayment assistance loans. You can learn more at www.calhfa.ca.gov. Please note that these loans are not compatible with all of HHP’s homeownership opportunities.
If I start making more money after I move into my new HHP home, will I need to sell my home?
No. Regardless of how much your household income increases after you close escrow, you will not be required to sell your home due to increases in your income. Both your household size and your income can change after you close escrow.
Do you provide me with a mortgage loan? Who helps me with this?
In order to purchase one of HHP’s homes, you will need to secure a conventional 30-year fixed-rate mortgage from a reputable mortgage lender. While HHP designates preferred lenders who are highly experienced with affordable housing programs, you are ultimately able to work with the lender of your choice, provided that your lender can approve the affordable housing component.
Can I use FHA financing when I purchase an HHP home?
Yes, you can for some of HHP’s developments. You will work with your mortgage lender to determine the best financing for you based on your credit and debt profile. Please reach out to HHP if you have questions about whether or not a homeownership opportunity is FHA approved.
Can I use VA financing when I purchase an HHP home?
No. The government subsidy restrictions are not currently compatible with VA requirements.
I’m income eligible and I have savings, but I have a very low credit score. Will I still be able to buy one of HHP’s homes?
Possibly. HHP requires that you be able to secure 30-year fixed first-mortgage financing from a reputable lender. Since all buyers are required to make at least a 5% down payment, your first mortgage will need to be no greater than 95% of your Affordable Sales Price. Most people have trouble securing a first-mortgage loan in the appropriate amount with a credit score of less than 640. If you are interested in using any CalHFA down payment assistance programs, you will need a credit score of at least 640. Note that CalHFA down payment assistance is not available for all of HHP’s homes.
My FICO score is less than 640. What should I do?
HHP recommends that you work with a HUD-approved credit counseling agency to improve your credit profile before considering homeownership. Clearpoint Credit Counseling offers free budget, credit, and debt management counseling services. They can be reached toll free at 1-800-750-2227 or via their website at: http://www.clearpointcreditcounselingsolutions.org.
What else do you recommend I do to get ready?
HHP encourages all applicants to complete a HUD-approved live 8-hour first-time homebuyer counseling course. Ultimately, our homebuyers will be required to complete one before they close escrow, but we recommend that anyone interested in first-time homeownership complete one of these courses. These are offered by a number of non-profit organizations for nominal or no charge and provide potential homebuyers with important information about the home purchase process. Below is a list of providers:
Clearpoint Credit Counseling: http://www.clearpointcreditcounselingsolutions.org.
Los Angeles Neighborhood Housing Services: http://www.nhslacounty.org/about/events
East Los Angeles Community Corp: http://www.elacc.org/first_time_home_buyer
New Economics for Women: http://www.neweconomicsforwomen.org/Homebuyer%20Education
West Angeles Community Corporation: http://www.westangelescdc.org
Shalom Center for T.R.E.E. of Life: http://www.shalomcenter.net