Homeownership Assistance: City of Ann Arbor

The primary goal of the Homeownership Program is to assist qualifying families in meeting the down payment, closing cost or other financing requirements associated with the purchase of an eligible home located within the City of Ann Arbor which will be owned and occupied by the qualifying family as their primary residence. The City of Ann Arbor is also participating in the new Federal American Dream Downpayment Initiative (ADDI).

Applicant Eligibility
Applicants must meet the following eligibility criteria to be assisted with Homeownership Program funds:

Income Eligibility: Applicant’s annual household income may not exceed 80% of the Ann Arbor median income, as established by the U.S. Department of Housing and Urban Development (HUD), adjusted for family size. Applicant also must satisfy normal credit granting criteria and qualify for mortgage financing from a local lending institution.

Asset Limitation: Applicants shall not have other financial assets in excess of $50,000 at time of application. This total does not include retirement fund or pension assets.

First Time Homebuyer and Primary Residence: The applicant must not have owned a home for at least three years prior to application to the program and must occupy the property to be purchased as his/her primary residence.

Homebuyer Education: The applicant must complete a certified, lender-approved Homebuyer Training/Education Course before closing on the property.

Property Eligibility

Maximum Purchase Price: The value (lesser of appraised value or purchase price) of the property may not exceed the Single Family Mortgage Limits under Section 203(b) of the National Housing Act, as adjusted. The Year 2004 limit is $226,000.

Location and Type: Properties must be located in the City of Ann Arbor and must be either a single-family residential stick built unit, manufactured or modular unit attached to a permanent foundation, a zero-lot line, condominium unit, or other equivalent form of owner property approved by the Office of Community Development.

Property Standards: Properties purchased with Homeownership Program assistance must meet minimum HUD Section 8 Housing Quality Standards as documented by a third party, qualified inspector. Properties must also conform to the Residential Lead-Based Paint Hazard Reduction Act.

Funding Limits

Maximum and Minimum Levels: The maximum amount of assistance provided to a qualifying homebuyer shall be up to $20,000 under the City program and up to $10,000 under ADDI. The minimum assistance is $2,000. The amount of assistance shall be based on need and a review of the applicant’s qualifications, loan-to-value ratio, debt-to-income ratio and other funding obtained to purchase the property. Applicants must contribute a minimum of $2,000 toward the purchase.

Type of Assistance: Funds may be used to pay for closing costs including but not limited to; appraisal fees, owner’s title insurance, recording fees, origination and closing fees, sales (Realtor) commissions, and/or other reasonable and customary closing costs. The ADDI Program allows for costs of needed rehabilitation.

Funds may also be used to reduce the amount of the primary loan for which the homebuyer qualifies. If necessary to achieve affordability, a buy-down of the first mortgage in an amount not to exceed $15,000 will be considered as a second mortgage. For the purpose of this type of assistance, the payment ratio on the first mortgage should generally be 25% (or greater) of the buyer’s gross income used to qualify for the first mortgage. This percentage may vary slightly due to recalculation of mortgage payments at time of closing.

Form of Assistance: Funds will be provided to qualified homebuyers in the form of a zero-interest rate, deferred payment loan, repayable upon sale of the property or when the property changes ownership, either by sale, mortgage, gift, sale by land contract, inheritance or conversion to a rental property. Homebuyers must execute a Note and Mortgage securing the property as collateral for the loan and other documents specified by the City.

Sharing of Equity Upon Sale: In addition to the repayment of the City's loan at the time of sale, any appreciation in value of the property will be shared between the homeowner and the City using the formula defined below. The formula shall be calculated based on the City's share of the original total purchase price as a percentage of the total purchase price. This same percentage shall be applied to the sales price less selling costs and outstanding mortgages. If the homeowner stays in the home for a period of 30 years, the repayment of the shared equity amount shall be forgiven.

Contact Charlene Johnson at 622-9019 for more information.