About this Tool

Description:

This publication is intended to be a tool to help NSP grantees and their partners educate potential homebuyers about the process of purchasing a home with NSP assistance.

The Buyer’s Guide itself is intended to speak directly to homebuyers providing themwith general information about the home purchase process as well as specific information about how they can utilize NSP assistance that may be available to them.Information about administering a buyer financing program can be found in the companion Administrator’s Manual tool.

How to Adapt this Document:

This guide is intended to be presented to homebuyers who are potentially interested in utilizing NSP assistance as part of their home purchase. The information presented in this guide is intended to be adapted by the grantee to the particulars of a local program.Information such as the pre-approval requirements, specific type(s) of properties eligible for assistance, and the type(s) of assistance the grantee can or willprovide via the local program should be included.The word selection / language used in your guide should be both easy to read and easy to understand.Be careful to use language that speaks directly to the home buyer and, if appropriate, to their real estate representative.

Specific information about the local program should be inserted by the grantee in areas that are marked by [gray-shaded brackets].

Please explain all program requirements in simple, straightforward and user- friendly language. Where possible avoid using acronyms and technical language that may cause confusion or frustration.The final document should be as short as possible but still provide all of the critical information needed by a homebuyer and their agent.

Source of Document:

Portions of this document have been drawn from program guides of NSP grantees as well as tools already available on the NSP Resource Exchange.

Disclaimer:

This document is not an official HUD document and has not been reviewed by HUD counsel. It is provided for informational purposes only. Any binding agreement should be reviewed by attorneys for the parties to the agreement and must conform to state and local laws.

NSP BuyerFinancing:

A Buyer’s Guide to Purchasing a Home with NSP Assistance

Neighborhood Stabilization Program

NSP Buyer financing: A BUYER’s GUIDE TO purchasing a home
with Nsp assistance

PROGRAM SUMMARY

INTRODUCTION

PHASE 1 -PREPARE TO PURCHASE

Step 1 - Prequalify for NSP Assistance

Step 2: Obtain Homebuyer Counseling

Step 3: Obtain a Pre-Approval for Your Mortgage Loan

PHASE 2 – SEARCH FOR A HOME

Step 1: Identify NSP Eligible Properties

Step 2: Make an Offer to Purchase

Step 3: Obtain NSP Program Approval of Property

PHASE 3 – PREPARE FOR CLOSING

PHASE 4: NSP REQUIREMENTS AFTER PURCHASE

Appendix 1: Key Roles in the NSP Homebuying Process

Appendix 2: NSP Homebuyer Checklist

1. NSP Program Pre-Qualification Checklist

2. Home Search Checklist

3. Pre-Closing Checklist

Appendix 3: Where to Obtain an Application for NSP Assistance

Appendix 4: Where to Obtain Counseling for NSP Assistance

Appendix 5: Lenders Working with NSP Assistance

Appendix 6: Inspectors and Contractors Working with NSP Assistance

Appendix 7: Real Estate Agents Registered and Trained to Work with NSP Assistance

Appendix 8: General Outline of Local NSP Rules and Regulations

Appendix 9: NSP Fund Recapture Process

Appendix 10: NSP Property Resale Guidelines......

1

NSP Buyer Financing: A Buyer’s Guide to Purchasing a Home with NSP Assistance

PROGRAM SUMMARY

[Describe your program:]
Eligible Buyers / [Insert buyer eligibility requirements.Use positive terms and language that is, easy-to-understand (e.g.YES: Householdsof four persons that report an annual income of $XXX or less are eligible to apply. NO: To Be eligible for NSP assistance, annual household income may not exceed $XXX for a family of four ). Do not use language that may be difficult to understand,You may want to consider developing a small chart showing household size and maximum income for eligibility. ]
Eligible Homes / Type / [Insert types of housing eligible – e.g., single family, condo, co-op, manufactured housing, two-family,add others as is appropriate to your local program.]
Locations/ Neighborhoods / [List your local NSP eligible areas]
Pricelimits / [List any purchase price limits]
Status/ Condition / [List the types of property eligible(e.g., foreclosed, abandoned, vacant),and other condition descriptions (e.g., move-in ready, needing some refreshing, needing repair, etc.). Be sure that any terms used are defined in the appendix area of your guide so there is no confusion about what the term mean – do not assume the terminology you use is understood by the public in the way you understand it.
NSP financial assistance available / [List the types of assistance that are available in your program, (e.g., DPA, CCA, 2nd mortgages, etc.) – but do not use these or any other acronyms in your document without defining them first]
Key Requirements & Deadlines /
  • [Your Counseling certificate must be obtained
  • by ______(enter a date)
  • within ______months of your application approval]
  • [Your Purchase agreement must be executed
  • by ______(enter a date)
  • within ______months of your application approval]
  • [Your Closing must be completed
  • by ______(enter a date)
  • within ______months of your application approval[

Program Contact & NSP Administrator / [insert name, phone number, and E-mail address of the program contact person and NSP Administrator]

INTRODUCTION

This guide is designed to help you get ready to purchase a home with assistance from the Neighborhood Stabilization Program (“NSP”).

NSP was created by Congress in 2008. Among the many purposes of the legislation was an effort by Congress to help communities affected by foreclosures. Under NSP, counseling and financial assistance are available to help you purchase a home. Like all programs there are certain guidelines and deadlines. This guide will help you understand the guidelines and deadlines.

Because NSP is designed to be a helpful “add on” feature to your home buying process this guide reviews the entire home purchase process, and specifically outlines what you will need to consider if you decide to use this program and are approved forNSP assistance for your home purchase.

If youuseNSP assistance, you will receive counseling that will help you make a well informed and less stressful home purchase decision. You will also receive financial assistance that will help reduce the costs associated with your home purchase and/or help reduce your mortgage expenses. In short, NSP assistance will make the cost of owning your home more affordable for you.

NSP is designed to help only buyers who intend to purchase and live in the home they buy – commonly referred to as “owner occupants.” Home buyers interested in purchasing a home only for the purpose of renting it as an investment are not eligible for NSP assistance.

To help ensure that NSP assistance is only used for owner occupants,you will be required to live in the home you purchase for a minimum period of time.This time period is called the “Affordability Period.” If you do not or cannot meet this time requirement you may be required to pay back some or all of the assistance you received, or pass your assistance on to the new buyer of your home. [Review the previous sentence to ensure that it matches the particulars of your local program. If it does not match, modify the sentence as needed.]

NSP assistance may come in the form of a grant, a loan, or a combination of the two. [Review the previous sentence to ensure that it matches the particulars of your local program. If it does not match, modify the sentence as needed.] This guide will help you understand the types of assistance available and what you need to know about the obligations and limitations connected with NSP.


This guide is divided into 4 key sections:

  1. Prepare to Purchase
  2. Search for a Home
  3. Prepare for Closing
  4. NSP Requirements After Purchase

The Home Buying Flow Chart shows you the steps of buying a home in the order they will occur. At the end of this guide is the NSP Homebuyer Checklist. This checklistwill help you simplify and keep track of all of the steps you will need to take to successfully complete your home purchase using NSP.

PHASE 1 -PREPARE TO PURCHASE

Before you begin your search for a home or sign a purchase agreement for a new home, there are several steps you should take to (1) make sure that you are able to obtain a mortgage loan for your home, and (2) that you are financially and mentally ready to purchase and maintain your home.

Steps in Phase 1 – Prepare to Purchase
  1. Determine if you can take advantage of NSP assistance and if it is right for you - also referred to as ”pre-qualifying for NSP assistance.” Find out (a) if you meet the program’s basic requirements for participation, and, (b) how much assistance you may beeligible to receive.
  2. Obtain homebuyer counseling. At this step, you will work with an approved and experienced mortgage specialist and/or real estate professional who will help you determine the dollar amount of a monthly house payment you can afford - and that works best with your particular budget and financial situation. Counseling will also help you be certain that you are taking into account ALL of the homeownership costs that will occur and that you can live comfortably with all the monthly expenses you will be responsible for paying. Counseling will help you be sure that you are setting up a personal and household budget system that provides enough money for your purchase and the ongoing maintenance your home will need.
  3. Obtain a Pre-Approval for your home mortgage. At this step, you will work with a licensed and experienced mortgage professional who will review the level of house payment you can afford and identify the type(s) of loan that is right for you. The professional will let you know what the interest rate will be, the number of years the loan will be approved for, and the dollar amount of the monthly payment you should expect to pay.
Details for each of these steps appear in the following pages.

Step 1 - Prequalify for NSP Assistance

a)Meeting NSP Requirements

NSP financial assistance, like any mortgage or assistance program, requires that you complete an application and be qualified to participate. Applications for NSP assistanceare readily available from the participating agencies, and at the locations, listed on the page entitled “Where to Obtain an Application for NSP Assistance”located at the back of this publication.[In an Exhibit at the end of this document, insert a list of where applications can be obtained, including local participating agency and lender names, their addresses, and phone numbers. Consider including each site’s hours of operation and, if appropriate, their websites if buyers can access an application, secure other NSP related services, or schedule appointments for services online.]

As part of the application process, you will be asked to provide proof of your income (usually a copy of your latest pay stub and/or your most recent income tax filing). You will also be asked to provide or givepermission for the participating agency or lender to obtain:

  1. proof that you are currentlyemployed or have a regular verifiable source income; and
  2. a copy of your credit history/report.

If you have no credit,or a credit history with some challenges, it may affect your ability to obtain a mortgage loan from a private lender.As a result,you might not be able to immediately qualify for NSP assistance. BUT DO NOT MAKE ANY ASSUMPTIONS, GOOD OR BAD, ABOUT YOUR CREDIT OR YOUR ABILITY TO QUALIFY FOR NSP ASSISTANCE.For example there may be alternatives to the traditional credit report for persons with no credit.EACH PERSON IS UNIQUE AND YOUR CIRCUMSTANCES WILL BE REVIEWED INDIVIDUALLY.In some cases a husband and wife may be reviewed as completely separate applicants for a loan. Let a counselor at one of the participating agencies help you determine if, and how, you can obtain a mortgage and meet the NSP rules for obtaining assistance.

As part of the application process, you will be asked to provide evidence that you have enough money to pay your estimated downpayment and closing costs. If you do not have enough money saved, NSP may be able to provide you with some assistance.

Your counselor will help you determine the likelihood of your ability to obtain a first mortgageapproval from a lender. Your counselor will also help you determine if the mortgage you can qualify for, together with the NSP assistance,will be enough to cover the cost of ahome that meets your needs and desires.

Using the following general guidelines,the NSP Administrator will determine how much subsidy and/or down payment assistance you may qualify to receive:

[Insert local criteria and guidelines here – be careful to avoid jargon and bureaucratic language. To keep things clear, consider inserting all program criteria and guidelines in a single tab at the end of the document. If guidelines are placed at the end of the document, adjust the previous sentence accordingly by referencing the page where the information can be found.]

b)Amount and Type of NSP Assistance

[This guide includes all types of NSP assistance. Include only the types of NSP assistance that your local program provides and remove any of the assistance listed here that isnot locally available.]

Down Payment Assistance

Youmay be eligible to receive down payment assistance in the form of a [grant or loan or both – select the term that best fits your local program]that will beprovided to you atthe time you sign the loan for your mortgage (your mortgage closing). The maximum assistance you may receive is [insert $ or % limit of the loan, or home purchase price, or other locally created federally compliant basis]. However, it is very important for you to note that, under federal NSP rules, any down payment assistance you receiveMAY NOT exceed 50 percent (50%) of the total minimum down payment that will be required by your lender.

Closing Cost Assistance

You may be eligible to receive closing cost assistance for the various fees and charges related to services required to purchase your home that are collectively called “closing costs.” The maximum assistance you may receive for closing costs is[up to $ ______or ___% of your total closing costs.]

Eligible closing costs that can be included are [from the list provided below include only those provided by your local program and remove the rest]:

  • Lender fees
  • Loan application
  • Loan origination fee/points
  • Credit report
  • Underwriting
  • Lender’s attorney/legal
  • Document preparation
  • [Other items, if any]
  • Third-party fees
  • Survey
  • Title search
  • Title insurance
  • Flood certification
  • Appraisal
  • Termite inspection
  • [Other items, if any – such as mold inspection, whole house inspection, radon inspection, etc.]
  • Government fees
  • Deed and mortgage document recording fees
  • Transfer tax
  • State/local mortgage taxes

[Other items, if any]

  • Escrows and prepaid costs
  • Homeowner's insurance premium
  • Real estate tax escrow payments
  • Current month’s mortgage interest

(Mortgage interest you pay from the date of your closing through the end of the month in which you close)

  • Prepaid mortgage insurance
  • [Other items, if any]
NSP 2nd Mortgages [or Deed of Trust]

You may be eligibleto receive a loan funded byNSP to assist you with the purchase and, if determined necessary, the rehabilitation of your home. Any NSP loan will be secured by a second mortgage [or deed of trust] on your property. The terms for this assistance are:

[select and complete the terms that apply, and remove all others]:

  • Maximum amount of loan: $ ______
  • Term of Affordability Period: ______years[or if the period varies in your local program, provide a simple explanatory chart,like the one below, modified as necessary to clearly identify any extended affordability period requirements]

Amount of NSP Assistance Per Unit or
Total NSP Assistance to the Buyer / Affordability Period
Under $15,000 / 5 years
$15,001-$40,000 / 10 years
Over $40,000 / 15 years
  • Term of mortgage [if different than the Affordability Period]: ______years
  • Interest rate [if applicable]: ______%
  • Monthly payment [If required]: $ ______
  • Due on sale: Enter the local terms for due on sale provisions here. If you want to include a full “sample document for buyers to review, consider adding the document to the Appendix and place a reference to where it can be found here
NSP Purchase Price Discounts

Sometimes, local governments(you can replace “local government entities” with the actual local government /participating jurisdiction name)or non-profits or other entity acting on behalf of the government will acquire and rehabilitate homes that became vacant or abandoned after foreclosure. Once these homes are livable again they may be offered for sale to a new owner-occupant.

If the home you decide to purchase is one of these, the funds already spent to buy and fix up the home might be reflected in a “discount” on the price you pay. They may also be reflected in a second mortgage so that your monthly mortgage payment is affordable. (This is to as a “seller carry back”).

The actual amount of a discount or seller carry back that will be available to you on any one of these homes will depend on your financial need and the amount of NSP funds that were invested in the home. Because each home buyer’s financial situation is unique, the home sale price and monthly payment that is considered “affordable” for you will be different from a sale price or monthly payment that is “affordable” to someone else. So no two discounts or seller carry backs are ever likely to be the same.