Houston's Homebuyer Assistance Programs: Building the American Dream for Low-Income Families

Achieving the American dream of homeownership can be challenging, especially for low-income individuals and families. Fortunately, Houston offers several programs designed to assist prospective homebuyers in overcoming financial barriers. One such initiative is the Single-Family Homebuyer Eligibility Programs (SFHEP), which aims to create new single-family homes in targeted communities and provide financial assistance to homebuyers.

The City of Houston in partnership with the Houston Land Bank, utilizes properties obtained through tax foreclosures to construct new single-family homes in various Houston communities. The program provides up to $50,000 in subsidies based on the applicant's financial need. This initiative not only helps low-income families achieve homeownership but also invests in neighborhoods to create sound infrastructure and improve the quality of life for residents.

Targeted Communities

The Houston Land Bank focuses on the following Houston communities:

• Acres Homes

• Settegast

• Sunnyside

• Denver Harbor

• Fifth Ward

• Third Ward

• Independence Heights

These areas have been identified for their need for revitalization and investment in housing infrastructure.

Eligibility Homebuyer Requirements

To qualify, applicants must meet several specific criteria:

1. Citizenship Status: Applicants must be U.S. citizens or permanent residents.

2. Income and Household Size: Applicants must meet specific income and household size restrictions.

3. Mortgage Qualification: Applicants must qualify for a fixed-rate mortgage.

4. Homebuyer Education: Both the applicant and co-applicant must complete a HUD-approved first-time homebuyer education course.

5. Personal Contribution: Applicants must contribute towards the transaction.

6. Eligible Property: The property must pass environmental review and property inspection.

7. Secondary Lien Agreement: Applicants must agree to a secondary lien if required.

The programs have income eligibility requirements to ensure assistance reaches those who need it most. These requirements are based on the Area Median Income (AMI) for Houston and are updated annually.

Initial Steps and Required Documents

Recommended Initial Steps

1. Find a Realtor: It’s highly recommended to find a realtor to navigate the homebuying process. Homeownership can be complex, and a knowledgeable realtor can be an invaluable guide. The good news is you have me.

2. Complete Homebuyer Education: Take a HUD-approved 8-hour homebuyer education course within the last 365 days. This is mandatory for all applicants. View list of HUD-approved agencies.

3. Get Pre-Approved: Obtain a pre-approval letter for a fixed-rate mortgage. This letter is a crucial requirement before applying for the SFHEP.

Required Documents

To apply, you’ll need several key documents. Here’s a checklist to ensure you’re prepared:

• Government-Issued ID: A valid government-issued ID or driver’s license.

• Proof of Legal Status: For all loan applicants, proof of U.S. citizenship or permanent residency.

• Birth Certificates/Guardianship Documents: For all minor household members (ages 17 and younger).

• Income Verification: The most recent three months of pay stubs. If paid weekly, this means 12 weeks’ worth of pay stubs.

• Benefit Statements: Most recent award letters for all benefits received, such as Social Security, annuities, insurance policies, unemployment, disability compensation, workers' compensation, and severance pay.

• Child Support and Contributions: Documentation of child support payments and regular contributions or gifts.

View the complete checklist of required documents.

Application Process Overview

The programs follow a structured process to ensure applicants meet all requirements.

Phase 1: Intake and Eligibility

1. Initial Contact and Intake Survey

• Call Center Intake: Start by calling the HAP call center (832.394.6200) to complete an intake survey and receive an application number. This number is crucial as it identifies your application throughout the process.

• Document Submission: Submit all required documents via the application portal, email, mail, or in person. The application portal is preferred because it automatically attaches documents to the correct profile using the application number.

1. Document Checklist

• Applicant Document Checklist: Print out and go through the applicant document checklist with your realtor to ensure all necessary documents are gathered and correctly submitted. This checklist includes specifics for each required document.

  • Program Application

  • Affidavit of Child Support: Non-Delinquent

  • Statement and Explanation of Facts (Form 1010)

  • Statement and Explanation of Facts for Bank Deposits (Form 1010)

  • First-Time Homebuyer Status and Certification of Property Ownership

  • Conflict of Interest Form

  • Certificate of Zero Income

  • Asset and Income Certification

  • Communication Designee

  • Household Member Composition Form

1. Eligibility Review

• City Review: The City of Houston’s eligibility team reviews the submitted documents to verify income, residency, and other eligibility criteria.
  

Phase 2: Underwriting

1. Property and Lender Checklist

• Submission of Documents: Once the client has found a home and it is under contract, the property and lender checklist documents must be submitted. These documents include property data sheets, loan disclosure forms, and any necessary inspection reports.

• Environmental Inspection: The property must pass an environmental review to ensure it is not located in a floodway or other restricted zones. If the property is in a 100-year floodplain, flood insurance is required.

1. Property Inspection

• Property Inspection: An inspection is ordered to ensure the home meets the Housing Quality Standards (HQS). This inspection checks for structural soundness, safety, and compliance with local building codes.

1. Underwriting Review

• Underwriting Criteria: The underwriting process involves a thorough review of the borrower’s financial status, including debt-to-income ratios, credit history, and other financial obligations. Student loans, car loans with 12 months or less remaining, and collection accounts are considered during this review.

• Commitment Letter: If all criteria are met, a commitment letter is issued, indicating that the applicant is approved for the program and can proceed to closing.

Phase 3: Closing

1. Pre-Closing Preparation

• Collect Pre-Closing Documents: Gather and submit any remaining documents needed for closing. This includes finalized loan documents and any additional forms required by the title company or lender.

• Closing Instructions: Detailed instructions are sent to all parties involved, including the title company, lender, and applicant.

1. Fund Transfer

• Wire Funds: The City of Houston wires the down payment assistance funds directly on the day of closing. It is important to note that the city requires three business days to process wire transfers.

1. Post-Closing Procedures

• Post-Closing Documents: After the closing, collect and send all post-closing documents to the loan servicing division. These documents confirm that the transaction is complete and that the funds were properly disbursed.

• Move-In: Congratulations! The final step is moving into your new home. Ensure all post-closing documents are properly handled to avoid any future issues.

FAQs and Additional Information

• Income Certification: The income calculation includes all household members’ income, even if they are not on the loan. This ensures an accurate assessment of the household’s financial situation.

• Environmental Review: Properties must not be in a floodway and require flood insurance if in a floodplain. This is to protect both the homeowner and the city from potential flood damage risks.

• Credit Score: The program does not require a specific credit score but considers debt-to-income ratios. This allows applicants with varying credit histories to potentially qualify.

• Liquid Assets: Capped at $15,000. This ensures that assistance is provided to those who need it most.

• Appraisal Fees: These can be used towards the minimum personal contribution. This helps reduce out-of-pocket costs for the applicant.

Important Notes

• Program Timeline: The process can take up to six weeks. Timely submission of documents can expedite this.

• Funding Restrictions: The City of Houston cannot wire closing funds from late June to mid-July due to the end of the fiscal year.

• Holiday Considerations: Processing may be slower during holidays when city employees are out.

• Program Guidelines: View here.

The Single-Family Homebuyer Eligibility Programs (SFHEP) is a valuable resource for low and moderate-income families in Houston looking to achieve homeownership. By understanding the eligibility requirements, initial steps, required documents, and program process flow, you can navigate this program effectively and make your dream of owning a home a reality. Take advantage of these resources and take the first step towards homeownership today!

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