Updated 2/11/2010- I just called today, funding is currently available.
The City of Watsonville offers a First Time Home Buyer Program (FTHB) to help people buy their first home. For detailed information, please see the Program Guidelines. Some of the basic information about the Program is provided below.
Who is eligible?
Lower-income, first time homebuyers are eligible for the FTHB Program. See the Program Guidelines for definitions and more detail.
Applicants who live and/or work within the Watsonville City Limits will receive funding priority for FTHB loans.
Eligible Homes
The home proposed for purchase with FTHB assistance must meet all the following requirements:
* Located within the Watsonville City Limits
* Cost no more than $608,000
* Must be a single family home, townhouse or condominium
* Must have been vacant or owner-occupied for 3 months prior to offer to purchase
* Must pass Housing Quality Standards and, if built prior to 1978, lead-based paint, inspections.
* For new homes: foundation must be poured prior to offer to purchase.
FTHB Loan Terms
FTHB loans are sometimes called “silent second” loans because the payments are deferred for up to 30 years. The loan must be repaid in full when the first of any of the following events occurs:
* The home, or any partial interest in the home, is sold or transferred;
* The home is refinanced;
* The borrower no longer lives in the home as their principal residence;
* The first mortgage loan becomes due; or
* 30 years from the purchase date.
Interest Rate
The FTHB loan does not charge any interest on the loan principal. Instead, a payment of “shared appreciation” will be due, in addition to repayment of principal, when the loan becomes due. Shared Appreciation is explained below.
Shared Appreciation
Shared appreciation is the share (percentage) of the home’s appreciation that equals the percentage of the purchase price that was paid for by the FTHB loan (also known as loan to value ratio). If, for example, the FTHB loan amount was equal to 20% of the home’s purchase price, the shared appreciation payment on the FTHB loan will equal 20% of any price appreciation that has occurred between the time of the purchase and when the FTHB loan becomes due. Price appreciation is the difference between the new sale price (or appraised value) and the original purchase price.
Other Program Requirements
Minimum Downpayment
The minimum downpayment required by the FTHB Program is at least 3% of the purchase price of the home. This amount must come from the homebuyer’s own funds or verified gift funds. Your first mortgage lender may require a larger down payment.
First Mortgage Requirements
The first mortgage must be a 30-year, fully amortized, fixed interest rate loan. No balloons, interest-only, stated income, or other such loan options may be used. Loan terms longer than 30 years are only allowable from certain USDA or VA mortgage loans. Maximum debt ratios are 45% front, 50% back. See Program Guidelines for further detail.
FTHB Loan Limits
Purchase of Market-Rate Homes
For purchase of market-rate homes, the loan amounts are limited to the buyer’s “affordability gap”. This is the difference between the home’s purchase price, and the sum of the first mortgage and buyer’s downpayment. For instance, if you have been prequalified for a first mortgage for $250,000, and you have a downpayment of $20,000, and you would like to buy home that costs $300,000, your “gap” is $30,000. The City will determine your gap based on your downpayment amount, your first mortgage amount (provided that it meets the FTHB requirements), and the proposed home price. The gap is generally in the range of 10% to 25% of the home’s purchase price. In addition, the loan amount may not exceed the HOME Program Subsidy limits and the amount of Program funds available to the City at the time your application is completed. Please see the Program Guidelines for the current Subsidy limits.
Purchase of Watsonville Affordable Homes
Between 15% and 20% of the new homes built in Watsonville must be sold at prices affordable to moderate and lower income households. These homes are available for sale periodically when new developments are constructed, or when an existing affordable home is resold by its owner. The FTHB loan limits for purchase of these affordable homes is also based on the buyer’s affordability gap, as explained above, but may not exceed $30,000 in any case. Higher limits may apply for lower income households purchasing higher-priced units. Please see Program Guidelines for more detail.
How to Apply
First, review the Program Guidelines. Then, look for a mortgage lender who is familiar with the FTHB Program, or who is willing to learn about the Program and complete the FTHB application for you. You may refer your lender to this website for more information. If your lender has not previously provided loans with the Watsonville FTHB Program, we encourage them to review the Guidelines, and then call the Housing Division for more information and application materials. All lenders are encouraged to call to confirm current funding availability prior to underwriting a loan in conjunction with a FTHB application.
Once you have been pre-qualified for a first mortgage that meets the Program requirements, start looking for properties within the price range your lender has recommended and that do not exceed the FTHB purchase price limit above. This price range should be based on your first mortgage amount plus your downpayment amount, and with the FTHB loan limits in mind, should you require additional funds toward your purchase. Once you have found a home within the appropriate range and are ready to make an offer, have your lender contact the Housing Division to begin the FTHB application process. You must submit a purchase contract signed by buyer and seller as part of your complete application.
To view the City of Watsonville’s website,please CLICK HERE
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