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Home My WebLink AboutAgenda - 06-07-1993 - VIII-D 1 ORANGE COUNTY BOARD OF COMMISSIONERS Action Agenda Item No.yam j) ACTION AGENDA ITEM ABSTRACT Meeting Date: June 7, 1993 SUBJECT: Orange County HOME Consortium Program Amendment DEPARTMENT: Housing/Comm. Dev. PUBLIC HEARING YES: NO: x ATTACHMENT(S) : INFORMATION CONTACT: Tara L. Fikes Project Description TELEPHONE NUMBER- Hillsborough - 732-8181 Chapel Hill - 968-4501 Mebane - 227-2031 Durham - 688-7331 PURPOSE: To approve an amendment to the Orange County HOME Consortium Program to reprogram $300,000 set-aside for the Orange Community Housing Corporation and authorize the Chair to sign the necessary documents on behalf of the Board. BACKGROUND: The Orange County HOME Consortium received an award of $803,600 in HOME Investment Partnerships Program funds to be used for acquisition, housing rehabilitation and new construction activities in Orange County. Of this amount, $300,000 had been targeted for new construction activities to be carried out by the Orange Community Housing Corporation (OCHC) . Specifically, funds had been committed to the Erwin Village project which has now been abandoned. Therefore, OCHC has proposed the following projects to utilize the $300,000 allocation. 1. Land Acquisition/Second Mortgage $ 32,000 2 . Countywide Existing Townhome Second Mortgage Program 68,000 3. Single Family New Construction for First-Time Homebuyers 200,000 TOTAL $300,000 (See Attached Project Description for details. ) In order to amend our HOME Program to accommodate these new projects, the County, as lead entity, must approve this amendment and then transmit amended application forms along with a cover letter signed by the Chair of the Board of Commissioners to the N.C. Department of Commerce-Division of Community Assistance. Additionally, the elected boards of the Towns of Carrboro, Chapel Hill and Hillsborough must also approve this amendment. Carrboro officials will consider this amendment on June 8th and Chapel Hill and Hillsborough on June 14th. After approval by all boards, the formal written request will be sent to the State. RECOMMENDATION(S) : The Manager recommends approving an amendment to the Orange County HOME Consortium Program to reprogram $300, 000 set-aside for the Orange Community Housing Corporation as proposed and authorize the Chair to sign the necessary documents on behalf of the Board. 2 PROJECT DESCRIPTION LAND ACQUISITION/SECOND MORTGAGE OCHC has offered purchase agreements to the owners of these two lots for $15,000 each. The additional $2,000 requested will pay closing costs. As soon as the lots are purchased, OCHC will work with Knolls Neighborhood Association to select qualified buyers for the properties, and they plan to work with modular builders to construct homes for the lots. The HOME funds will remain as a second mortgage on each lot, with the buyers financing the balance and providing a $1,000 downpayment. See Attached Project Budget. $32,000 COUNTYWIDE EXISTING TOWNHOME SECOND MORTGAGE PROGRAM OCHC proposes to administer a program that offers second mortgages up to $15,000 for qualified buyers under 80% of the area median to purchase townhomes in the existing market. The proposed funding level would result in four (4) or five (5) second mortgages for existing townhomes. If the program is a success, we will apply for additional funds. See Attached Proposed Guidelines for Existing Townhome Program. $68,000 SINGLE FAMILY NEW CONSTRUCTION - HOMEOWNERSHIP OCHC proposes to create opportunities for first-time homebuyers in the Hillsborough area. Homes will be affordable to families with incomes below 80% of the area median family income, with a special emphasis on families at 60% of the area median. Currently, two sites are being explored, with the potential at both sites for new homes with first mortgages between $60,000 and $70,000. The funds will be used during the development and construction phase, then remain as second mortgages to the homebuyers to promote long-term affordability. $200,000 PROJECT TOTAL $300,000 ESTIMATED BUDGET 3 CREEL STREET LOTS Unit Count: Uses of Funds Current Estimate Current Per Unit Raw Land Cost 15,000 Sales Commission on Land Other Costs of Land Purchase 1,000 Site Improvements 0 Site Grading and Earthwork Erosion Control Streets and Sidewalks Water/Sewer/Storm Drainage—On Site Water/Sewer/Storm Drainage—Off Site Site Landscaping and Buffers Project Sign/Entrance Other Site Improvements Land Development Loan Interest Subdivision/Special Use Permit Application Fees Recreation Payment/Other Town Impact Fees OWASA Water and Sewer Impact Fees 3,000 Planning and Engineering Design Fees SUBTOTAL LOT DEVELOPMENT 19,000 Average Builder Contract Price 50,000 Additional water lateral cost 1,000 Additional lot preparation/foundation cost Additional unit landscaping cost 750 Other costs not included in builder price Building Permits and Other Fees Construction Loan Interest 2,000 Construction Management 0 SUBTOTAL HOUSE CONSTRUCTION 53,750 Project Legal Expenses 500 Project Financing Fees and Closing Costs 500 Taxes During Construction 500 Inventory Maintenance on Spec Houses Model Operations (Rent, Utilities,Phone, Maint.) Sales/Marketing/Advertising Expenses Sales Commissions or Referral Fees on Homes Buyer Closing Costs 2,000 SUBTOTAL OTHER EXPENSES 3,500 Contingency/Developer Fee (minimum 5%) 4,000 TOTAL PROJECT COSTS 80,250 Sources of Funds Current Estimate Current Per Unit First Mortgages for Homebuyers 64,750 Buyer Con tribution/Downpayment 500 Second Mortgages SOURCE: 15,000 Third Mortgages SOURCE: TOTAL SOURCES OF FUNDS DRAFT 80,250 HOMEOWNERSHIP AFFORDABILITY ANALYSIS 4 TARGETED TO FAMILIES WITH INCOMES AT 60% MEDIAN Median Income 46,500.00 Number in Family I 41 Your income is 55.2 % of Median ****:*****************3********************;********************************************************************* 1 Cost of House I 80,2501 2 Buyer Contribution/Downpayment 500 3 Second Mortgage 15,000 4 Third Mortgage 0 7 First Mortgage Needed 64,750 8 Interest Rate 8.00% 9 Term 30 ears 10 Mortgage P+I 475 I 475 I 11 Plus Taxes/Insurance 114 114 12 Plus Private Mortgage Insurance 13 13 13 Plus Other Debt 250 0 14 Available for Total Debt 853 603 15 Divided by Debt/Income Ratios I 0.38 J I 0.33 I 16 Effective Monthly Income Needed 2,245 1,828 17 Less MCC (108) (108)1 18 Actual Monthly Income Needed 2,137 1,720 Annual Income Needed I 25,6451 1 20,636 1 ****:*****************;********************;********************************************************************* ESTIMATED CLOSING COSTS MONTHLY PAYMENT 19 Origination Fee 647.50 Principal + Interest 475.11 (1% of loan value) Taxes 85.33 20 No. of Discount Points 0.00 Insurance 29.17 (1% of loan per point) 0.00 Private Mortgage Insurance 13.49 21 Appraisal 275.00 Total Monthly Payment I 573.93 I 22 Credit Report 50.00 Loan—to—Value Ratio 23 Attorney 475.00 0.81 24 Title Insurance 129.50 ESTIMATED PREPAID EXPENSES ($2 per$1,000) Taxes(5 months) 426.66 25 Recording Fees 20.00 Insurance (14 months) 408.33 26 Survey 200.00 P.M.I. (14 months) 188.85 27 Tax Service Fee 50.00 Odd Days' Interest for 28 Termite Inspection 0.00 5 days 71.94 29 MCC Fee 275.00 TOTAL Prepaids 1095.79 30 Final Inspection (New) 50.00 ' TOTAL Closing Costs 2,172.00 CASH NEEDED AT CLOSING Estimated Closing Costs 2,172.00 Estimated Prepaid Expenses 1,095.79 Cash Needed to Close 3,267.79 Less OCHC Contribution (2,000.00) Borrower Pays 1,267.79 Plus Downpayment 500.00 Total Cash Needed I 1,767.79 i • DRAFT LI 5 Proposed Guidelines for Existing Townhome Second Mortgage Program 1. OCHC/HOME Consortium would offer 20% second mortgages up to $15,000 for 5 buyers to purchase townhomes in Orange County. The 20% second mortgage would allow the first mortgages to be 80% of the purchase price and allow financing without private mortgage insurance, a reduced cost to the buyer. 2. Maximum purchase price of the townhomes is $91,500 for existing, $94,000 for new. However, first mortgage must be no more than 80% of purchase price and equity must make up the difference. For example, if the borrower contributes $500 and OCHC/HOME contributes $15,000, the maximum purchase price would be $77,500. ($15,500 = 20% of $77,500) The borrower must still qualify for a first mortgage of $62,000. 3. Borrower income limited to 80% of the area median by family size. $37,200 for family of four; $34,248 for family of three; $28,760 for family of two; 26,080 for family of one. 4. Minimum downpayment $500. Borrower will also be required to pay certain pre- paid expenses and may be required to pay other closing costs, based on availability of funds. OCHC/HOME may contribute to closing costs if funds are available, at the discretion of OCHC. 5. Loan terms would follow HOME guidelines. No interest would accrue and no payments would be made until sale or refinancing. HOME requires equity be shared if necessary to make home affordable to next borrower. 6. Eligible families must complete OCHC homebuyer education program, a 5-week training program for first-time buyers, plus at least one individual counseling session with an OCHC representative. F 7. Underwriting and pre-qualification by OCHC; selected borrowers must then qualify for a first mortgage at a private financial institution. 8. Pre-applications will be taken until a specific deadline; applications will be screened for pre-qualification; pre-qualified applicants (and three to five back-up applicants) will be randomly selected for program. After selected applicants complete homebuyer education program, each applicant will receive a certificate for the amount of the second mortgage and then will have 90 days to find a townhome and execute a purchase agreement. They must file a first mortgage application within 10 days of execution of purchase agreement, and close within 90 days of the same date. 9. All homes must be inspected prior to purchase and the inspections report i. submitted to OCHC. OCHC will also review the Homeowners' Association to make sure the townhome development is run efficiently. OCHC reserves the right to reject any property that has Housing Code violations or an inadequate Homeowners' Association. DRAFT 1 6 1 Proposed Underwriting Criteria for Existing Townhome Second Mortgage Program 1. MAXIMUM INCOME LIMITS. Applicant must bring three previous year tax returns and a current pay stub. Maximum income: a. Family of 1: $26,080 maximum income b. Family of 2: $28,760 maximum income c. Family of 3: $34,248 maximum income d. Family of 4: $37,200 maximum income 2. MINIMUM INCOME NEEDED. Generally, in order to qualify for a first mortgage loan of 80% of the purchase price, a family would need a minimum income of: a. $90,000 home, $72,000 first mortgage: $24,000 minimum income b. $80,000 home, $64,000 first mortgage: $21,000 minimum income c. $70,000 home, $56,000 first mortgage: $19,000 minimum income d. $60,000 home, $48,000 first mortgage: $17,000 minimum income e. $50,000 home: $40,000 first mortgage: $15,000 minimum income 3. DEBT RATIOS. a. Mortgage payment (P+I+T+I+HOA) may not exceed 33% of total gross monthly income. b. Total debts (mortgage plus other loan payments) may not exceed 41% of total gross monthly income. 4. CREDIT. a. Applicants must meet credit requirements in order to be eligible for a second mortgage. b. No late rental payments for a period of twelve months prior to application. c. Credit report must show an intent to have good credit. A history of late payments during the twelve months prior to application may result in rejection. d. No judgments or collections within the last 12 months; however, exception may be made for judgments relating to medical treatment that have been paid. No bankruptcies showing on credit report. 5. OTHER. a. Borrower may not have owned a home for three years. DRAFT