Frequently Asked Questions
- Can the city loan me the funds to buy a rental house or vacant land?
No. Loan funds from the HOME program can be used only for renovations or new construction of rental housing.
- Is it ok if I already have a loan on the property when I apply for a city loan?
Yes. The city can take a second lien (deed of trust) behind a conventional lender (but not an individual) so long as the property appraises for a value on an "as-improved" basis sufficient to cover all debt on the property. If the property is seller-financed or another individual holds the first deed of trust, then they would be asked to subordinate their lien to a potential city loan during the application process.
- Can I do the work myself and be the general contractor?
Usually not, unless you are experienced, licensed and creditworthy as a contractor. We have a contractor list where all contractors are notified of your project and given an opportunity to bid, which provides the necessary competitive bidding when federal funds are involved.
- Can I rent the unit(s) to relatives?
No. Regulations do not allow relatives of borrowers to occupy HOME-assisted projects.
- What if I don't have a very good credit report?
Derogatory items on your credit report will require explanation. However, a bad credit report will not necessarily prevent you from obtaining a city loan, depending on the circumstances. Good credit is preferable, but there are other factors that are considered.
- Can I utilize the loan program to fix-up a house and then sell?
No. The HOME program requires a long term commitment for the property to be maintained as affordable housing for rental purposes, for anywhere from five (5) to twenty (20) years, depending on the renovation cost per unit or if the project involves new construction. Should you decide to sell the property during the affordability period, subsequent buyers will be required to remain in compliance with the covenant in the HOME agreement, and complete the affordability period.
- What are the other HOME requirements?
- Project data application form for cash flow projections.
- Competitive bids required; City will provide an eligible contractor list.
- Residential prevailing wage applies if over 12 units.
- After-rehabilitation or as-improved appraisal.
- Covenant that runs with the land must be signed by existing lender (when applicable) regarding affordability requirements.
- City performs on-site inspections of the unit(s) every three (3) years for projects with 1-4 units and every two (2) years for 5-25 units. This is done to verify compliance with property standards.
- City handles all loan closings, fund disbursement, and loan servicing.