Homebuyer Purchase Rehabilitation Program (HPR)

HPR was created to help low-moderate income individuals and families purchase existing homes, and rehabilitate them. Rehabilitation helps new home owners avoid costly repair expenses during their first few years of home ownership. Qualified home buyers may receive up to $10,000.00 in funding assistance for down payments and closing costs as well as up to $25,000.00 for moderate repairs. Northern Homes CDC acts as the developer during the entire HPR process; lending guidance and stewardship in order to protect everyone’s interest.

 

Selection Process

Home buyers are selected on a first-come, first-qualified, first-served basis. First qualified means that when a full application is received, we will verify that the home buyer meets the Program Eligibility Criteria in Section II. Interested homebuyers must qualify for the program before they select a house for purchase.

 

Eligibility Criteria

  • Household gross income must be between 40% and 80% of the area median income, adjusted for family sized for Charlevoix, Cheboygan or Emmet Counties, depending on the county where they purchase their house. Income and assets are verified using the MSHDA IRS Form 1040 income definition.
  • Liquid Assets must be below current MSDHA limits.
  • Homebuyers must demonstrate ability to contribute a minimum of 1% of the purchase price amount.
  • Homebuyer must attend Homebuyer Education and One-on-One Counseling through Northern Homes.
  • The homebuyer must purchase a home within approved target areas. The approved target areas are within the city limits of Alanson, East Jordan, Boyne City, Petoskey, Charlevoix and Cheboygan.
  • Homebuyer must receive mortgage with interest rates and closing costs at the best available to borrowers with good credit in the local market.
  • Homebuyers must spend at least 25 % and no more than 33% of their income for housing.
  • Homebuyers must provide a pre-qualification letter from a lender or provide proof that they are mortgage ready.
  • Homebuyers are expected to complete their portions of the program in a timely manner. Program delays that are 10 business days or more caused by action or inaction of the buyer may cause Northern Homes to move on the next buyer on the Homebuyer List.

 

Eligible Mortgages

Northern Homes relies on homebuyer’s ability to qualify for a mortgage to purchase their home. Assistance is provided to help applicants with shopping for mortgages and avoiding predatory lending. Lenders need to understand and accept that MSDHA records a lien/second mortgage against the property. Homebuyers are encouraged to shop for a mortgage product that best suits their needs. Visiting local lenders and requesting a Good Faith Estimate will help homebuyers understand what mortgage product is being offered at what interest rate, repayment terms, and an estimate of down payment and closing costs. Generally acceptable mortgage features include the following:

  • Interest rates should be no more than 2% above MSDHA Single-Family Mortgage standard interest rate. No discount points.
  • Loans should be fully amortizing, fixed interest rate, and term of at least 30 years. ARMs, balloons or interest-only are not acceptable.
  • Closing costs must be competitive and reasonable. MSHDA will allow a 1% origination fee and up to a maximum $200 underwriting fee in addition to actual third-party closing costs (such as the appraisal, credit report fee, etc.). See attached list of MSDHA first mortgage requirements and allowable closing costs.
  • Loan products used should generally allow Loan to Value (LTV) ratios of at least 97%.
  • The Buyers must not attempt to purchase a home with a higher cost than they can afford.

Exceptions to these guidelines are permitted on a case by case basis. Exceptions shall be approved by MSDHA and Northern Homes in writing prior to closing.

The Rural Development Guaranteed mortgage is recommended and works well with Northern Homes’ Homebuyer Purchase Rehab program.

 

MSDHA Second Mortgage

The HPR Program includes an interest-free second mortgage that bridges the gap between the maximum mortgage a buyer can afford and the after rehab appraised value of the home plus buyers closing costs and prepaid items. The MSHDA second mortgage is a lien on the home, however, it does not accrue interest and no payments are required. The MSDHA second mortgage is forgiven over 10 years with 1/120 of the loan forgiven every month. The second mortgage is secured by a note and mortgage signed and recorded at the when the home is purchased.

 

Property Qualifications

Northern Homes helps homebuyers purchase a basic home that will meet the needs of the family. Homebuyers meeting eligibility criteria will search for houses that meet their preference and affordability. Please note that homes requiring a substantial amount of rehabilitation are not eligible for this program. The rehabilitation funds that are available are not sufficient for major rehab.

  • Manufactured homes, double-wides single-wides are not eligible.
  • Recreation and water front properties are generally not eligible.
  • Properties that are currently rented are not eligible unless the current tenant is applying to purchase the home.
  • Homes must be single-family homes or condominiums.
  • Home must be adequate in size and function for the family that will live in it. Homebuyers are encouraged to carefully evaluate the utility costs associated with a home.
  • Houses must be located within approved target areas. Approved target areas are within the: City of Charlevoix, City of East Jordan, City of Boyne City, City of Petoskey, Village of Alanson, and City of Cheboygan.
  • All purchase agreements must include the following statement: “This sale is contingent on Northern Homes CDC and MSDHA approval.” A Northern Homes representative will release this contingency in writing upon appropriate approvals.
  • Northern Homes must approve all houses through an inspection process described below.

 

Inspection

Once a homebuyer selects a property a Northern Homes representative will make a preliminary inspection of the property to determine if it can be brought up to HUD minimal housing quality standards (HQS) within program spending parameters. A second inspection will then be completed by a certified home inspector. The home inspector will be selected by the buyer and the fee will be paid by the buyer. All assisted developments will meet HQS and applicable county rehabilitation building code standards. Northern Homes has the legal right to refuse any property being assisted with agency funds to ensure compliance with agency property standards. This is accomplished by requiring the following language in each purchase agreement, “This sale is contingent upon Northern homes CDC’s Board and MSDHA approval.” The Northern Homes CDC Board and MSDHA makes all final decisions regarding assistance for a particular property, renovation details, and any other assistance provided on behalf of Northern Homes.

 

Renovation Specifications

Northern Homes inspectors determine what renovations are needed to bring the residential property to HUD minimal housing quality standards within budget guidelines. Renovations generally include basic home systems such as:

  • Installation and/or repair of sanitary water and waste disposal systems, plumbing and fixtures to meet local health department requirements
  • Energy Conservation measures such as: Insulation, Insulated windows, and/or exterior and storm doors
  • Repair or replacement of the heating system
  • Electrical wiring
  • Replacement of deteriorated floor coverings
  • Repair or replacement of the roof
  • Replacement or repair of deteriorated siding or porches
  • Alterations of the home’s interior or exterior to provide accessibility for any handicapped occupant within the household
  • lead based paint remediation
  • general safety

Funds may not be used for:

  • Any items not already on the Work Specifications as of the date of signing the Home Buyer/Contractor Contract
  • Cosmetic remodeling

Northern Homes specifies the renovations to be done and reviews this list with the homeowner. Renovation specifications are then emailed to Northern Homes approved contractors seeking bid proposals. Contractor selection is typically made based on the most responsible and responsive bid and expected completion date. All renovations must be complete within 90 days after purchase of the property.

 

UPCS Final Inspection

A final inspection is made by a Northern Homes representative after renovations are completed to ensure the property meets UPCS.

  

Please call (231) 535-0195 for more information, or email by clicking here here. 

 

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