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Downpayment Assistance Loan Program (DALP)

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The Downpayment Assistance Loan Program is available through MOHCD Approved Participating Lenders Only

Click here for the Participating Lender List 


Effective July 1, 2014

    DALP Application Fee $544 (non -refundable) Application Fee; $657 if applying MCC together with DALP

Please note- MOHCD is experiencing a high volume of applications for DALP.  Please allow 20 days review and process time for loan packages submitted after July 1, 2014.


PROGRAM OVERVIEW

The Down Payment Assistance Loan Program (DALP) is a down payment and closing cost assistance loan to low-moderate income first time homebuyers purchasing a single family home in City and County of San Francisco.  The DALP is a silent second loan that requires no payments for 40 years. The principal amount plus an equitable share of the appreciation shall become due and payable at the end of the term, or repaid upon sale or transfer. The DALP has been approved by CalHFA and most other first mortgage lenders. The Mayor’s Office of Housing and Community Development reviews and updates these guidelines annually to reflect changes in the market and better meet the  needs of the low to moderate income homebuyers.  The most recent guidelines were updated March 1, 2014.

Borrower Eligibility
Property Eligibility
Maximum Loan Amount
DALP Loan Terms
Repayment of Loan
Owner Occupancy Requirements
Loan Documents
Application Process
DALP Program Manual
DALP Application Forms
Review and Processing
Participating Lenders Workshops and Training
Homebuyer Education Counseling Agencies

 

BORROWER ELIGIBILITY

First-time homebuyers: All members of household of the Borrower must have not owned any interest in a dwelling unit, any commercial real estate or land for the past three year.

Meet Income Limits: All members of household of Borrower's income cannot exceed 120% of the area median for the San Francisco Metropolitan Statistical Area, as established by the U.S. Department of Housing and Urban Development, adjusted by household size.

Current Year Maximum Income Limits as of January 1, 2014 (PDF)
Please note:

  • The combined income of all household members who will be living in the property must be included in the determination of income. The combined household’s income must be projected as an annual income. It should be assumed that the current income would continue for the next 12 months, unless there is verifiable evidence to the contrary.
  • Household income requirements will include all income of persons 18 years old or older who will be living in the property. Maximum loan limits are tied to the household income category.

Asset/Reserve Limitation: The combined household liquid assets after purchase of the property cannot exceed $60,000. Liquid Assets includes all source of monies from savings, checking accounts , gift fund, cash received from settlement or inheritance and investments and properties held by any member of the Borrower’s household including minors and any fund that is available for liquidation to purchase the property. Liquid Assets do not include funds held in pension accounts, retirement funds, 401(k) plans, or similar assets which are not available for liquidation without substantial financial penalty to the Borrower.

Liquid Asset Restrictions:
Prior to purchase, a borrower household may hold no more than $200,000 in liquid assets. This includes all sources of liquid assets and gift funds. After purchase, the maximum liquid assets held by a household must not exceed $60,000.

Eligible Household Member: Household Size Determination and Requirements - An eligible household member must either be:
1) On title and loan of the property. All spouses or domestic partners must be included in the household and must appear on the application, title and loan for the DALP loan.

2) As a dependent on the tax returns - All household members who are under 18 years of age must be the legal dependent of an adult household member. An unborn child will be counted as a household member with verifiable medical documentation. Elderly adult household members may be considered as dependent as long as they are listed as a dependent on the most recent tax return. All income from dependent adults and children must be included in the total household income. Spouses and Domestic Partners are not considered dependents.

Household Size Compatibility
The size of a household must be compatible with the size of the unit being purchased. A minimum of one person per bedroom is required. In other words, a single person may purchase a studio or a one-bedroom unit; a two-person household may purchase a two-bedroom unit or a smaller unit if they choose; a three-person household may purchase a three-bedroom unit; and so on. There is no restriction on purchasing a unit that has fewer bedrooms than the household size.

Minimum Down payment: Borrower must contribute minimum of five percent (5%) of the purchase price toward the downpayment of the property. Of the total 5%, 3% must come from the Borrower’s own funds from a verifiable source (held in a financial institution) and 2% can be grant or gift funds (not DALP funds). Borrower must have sufficient funds to meet the required down payment plus necessary reserve funds as well as sufficient income to meet the monthly mortgage payments, property tax, homeowner insurance and homeowner association dues. Borrower is limited to a total down payment of 50% towards the purchase including any loan from the City. The borrowers 5% contribution shall be applied as downpayment and not as closing costs.

Post Purchase Reserve Funds: Borrowers using DALP must have a minimum of three months total monthly housing expenses post purchase. Some borrowers may qualify for first-mortgage financing with fewer than three months reserves. Recognizing that the financial circumstances of each homebuyer are unique and that there may be other factors besides 3 months reserves that reflect the borrowers ability and willingness to repay mortgage loans, the MOHCD may consider 2 months reserves if two or more of the following indicators are present:

a) Proven ability to devote a larger amount of income to housing expenses. The borrower has successfully demonstrated an ability to make mortgage or lease payments for twelve consecutive months that are equal to or greater than the proposed monthly payments for the housing being purchased;
b) Substantial net worth as demonstrated through non-liquid assets and retirement accounts;
c) FICO credit score greater than 700;
d) Demonstrated potential for increasing his/her earnings;
e) Housing expense will not increase more than five percent over previous housing payments

Homebuyer Education Requirement:  All adult household members on title must complete the first-time homebuyer education course through one of MOHCD’s 5 approved housing counseling agencies. A certificate of completion of homebuyer education must be included with the application package. For a schedule of the homebuyer course, borrower may call or visit the housing counseling agencies website: www.sfmohcd.org or post on www.homeownershipsf.org.  Certifications must have been issued within the last 12 months from the date of the DALP application submission.

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PROPERTY ELIGIBILITY

Property Requirements: All properties purchased with downpayment assistance loan funds must be Single-Family Residences located in the City and County of San Francisco. The residences may be a single-family house, Condominium, Town Home, Loft or Live Work Unit (as long as the property will be used as the owner’s principal residence).   A DALP Borrower cannot purchase a residential unit in which a No Fault Eviction occurred during the preceding 10 years from the date of Borrower's DALP application. For purposes of the preceding sentence, a No Fault Eviction shall mean an eviction under San Francisco Administrative Code section 37.9(a)(8) through (13) and (15).

Property Size Requirements: Property size must be compatible with the size of the household. Properties containing Rental Units and In-Law units in addition to the unit to be purchased are not eligible for a DALP loan. 

Property Flipping:  DALP loan cannot be used to purchase properties resold within 90 days and with more than 20% profit to the seller. .

Inspection Report Requirement for DALP: All properties purchased with DALP loan must be inspected by a certified, independent third party home inspector at the borrower’s expense. The inspection report must be acceptable to the borrower and submitted to MOHCD within 5 business days of the DALP application. All reported deficiencies that pose immediate health and safety hazard must be corrected as a condition prior to any funding of a DALP Loan. The City of San Francisco will not be held liable for any misrepresentation, false claims or information contained in the inspection report.

For newly constructed properties (single family and condominium units) an inspection report is recommended but not required.

Appraisal Report: MOHCD requires a fair market appraisal as part of the lending and closing process. A copy of the appraisal report must be attached to the DALP application. The appraisal report should be no more than 90 days old at the time of submission of the DALP loan application.

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FINANCING REQUIREMENTS

Primary Financing:  Borrowers who apply for a downpayment assistance loan must be able to qualify for a first mortgage from a Participating Lender prior to submitting an application for a downpayment assistance loan. Borrowers must have sufficient funds to meet the required down payment, and necessary reserves as well as sufficient income to meet the impounded monthly mortgage payments. The primary lender must collect and manage impound accounts for payment of property tax and hazard insurance for the term of the primary loan. Unless pre-approved by MOHCD, the DALP loan must be in second position behind the first mortgage.

First Mortgage Requirements:  The first mortgage loan must be a fixed rate mortgage, the mortgage payment must be fully amortizing. Loan Type not allowed: reverse mortgage, stated income, ARM – adjustable rate mortgage, reverse mortgage, interest-only, negative amortizing and balloon payments.

Co-Signing: Co-signing for a DALP loan by a non-household member is not allowed.

Seller/Realtor/Lender Credits –Credit funds are allowed for non-recurring loan closing costs. All credits must be used in escrow, no more than $250.00 cash back to borrowers at close of escrow. The amount of non-recurring closing costs cannot exceed 3% of the sale price.

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MAXIMUM LOAN AMOUNT

Maximum DALP Loan Amount is up to $200,000 of the purchase price. Qualifying loan amounts are based upon a graduated scale depending on income levels, adjusted by household size, not to exceed 120% median income and debt to income ratio. The maximum loan available per household depends on the household’s income in relationship to the Area Median Income (AMI).

 

Household Income

100% AMI and under

101%-120% AMI

Loan Limits

Up to $200,000

Up to$140,000

BMR-DALP Plus – A homebuyer purchasing a Below Market Rate unit with income above 80% AMI and below 120% AMI may apply for DALP. The maximum loan available to a homebuyer using the DALP to purchase a BMR unit shall be $57,000 or the maximum loan amount allowed in the BMR DALP program.

DALP Loan Reservation: DALP Loan as specified in the commitment letter will be placed on reserve for a period of 45 days from date of the commitment.

Combined Maximum Loan-to-Value Requirement (CLTV) cannot exceed 95% of the purchase price, which includes the first mortgage; the City’s Downpayment Assistance Loan and any other borrowed subordinate financing. The minimum CLTV cannot be less than 50% of the purchase price. If a portion of DALP loan will be used towards closing costs, the CLTV cannot exceed 98%; borrower must contributes 5% towards the purchase price (3% must come from borrower’s own funds and 2% can be gifts OR 5% in full from borrower).

Debt to Income Ratio:  Borrowers monthly housing debt, including property taxes, property insurance, and if applicable mortgage insurance and homeowner’s association dues cannot be less than 28% (front-end-ratio) of the household’s gross income. The front end ratio shall not be more than 40%. The ratio of monthly housing costs, plus all other household monthly debt (including credit cards, car payments, etc.) cannot exceed 43% (back-end-ratio) of the household’s gross income.

Some borrowers may qualify for first-mortgage financing at higher ratios than those cited above. Recognizing that the financial circumstances of each homebuyer are unique and that there may be other factors besides debt-to-income
ratios that reflect the borrower's ability and willingness to repay mortgage loans, the MOHCD may consider higher ratios if two or more of the following indicators are present:

a) Proven ability to devote a larger amount of income to housing expenses. The borrower has successfully demonstrated an ability to make mortgage or lease payments for twelve consecutive months that are equal to or greater than the proposed monthly payments for the housing being purchased;
b) Substantial net worth as demonstrated through non-liquid assets and retirement accounts;
c) FICO credit score greater than 700;
d) Demonstrated potential for increasing his/her earnings;
e) Housing expense will not increase more than five percent over previous housing payments.

Lenders and borrowers seeking City approval of higher debt ratios should submit a written request and a letter of explanation seeking higher ratios to MOHCD as part of the borrower’s loan application. The decision to approve or deny higher ratios will be made in accordance with the above stated compensating factors; however, the maximum back end ratio may not exceed 43%.

Reserves: Borrowers use DALP must have a minimum of three months total monthly housing expenses post purchase. Some Borrowers may qualify for first-mortgage financing with fewer than three months reserves. Recognizing that the financial circumstances of each Borrower are unique and that there may be other factors besides 3 months reserves that reflect the borrowers ability and willingness to repay mortgage loans. The MOHCD may consider 2 months reserves if two or more of the following indicators are present:

a) Proven ability to devote a larger amount of income to housing expenses. The borrower has successfully demonstrated an ability to make mortgage or lease payments for twelve consecutive months that are equal to or greater than the proposed monthly payments for the housing being purchased;
b) Substantial net worth as demonstrated through non-liquid assets and retirement accounts;
c) FICO credit score greater than 700;
d) Demonstrated potential for increasing his/her earnings;
e) Housing expense will not increase more than five percent over previous housing payments

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DALP LOAN TERMS

The term of the DALP is 40 years. The DALP is a no interest, no monthly payment, deferred loan due upon sale, rent, or title transfer of the property. The principal balance amount plus a share of the appreciation should become due at the end of term or when the borrower sells, rents or transfers title on the property. The appreciation is calculated by subtracting the original sales price from the current sales price or the current appraised market value. The share of appreciation is computed as a ratio of the City loan amount to the purchase price, that is, if the loan amount equals 31% of the purchase price, the share appreciation is 31%. If the borrower receives the DALP loan in the amount of $200,000 with the purchase price of $650,000, the share appreciation would be 31%:

$200,000 DALP Loan Amount

=

31% of share Appreciation

$650,000 Purchase Price

 

 

Prepayment Penalty: There is no prepayment penalty associated with payment of these loans prior to the due date (sale or rental). However, prepayment must be in full; the loan cannot be partially repaid. If there is a prepayment, the amount due and owing will be determined by an appraisal, at the homeowners own cost, (to determine the amount of appreciation) and approved by the MOHCD Director.

Assumable/Transferable: The City loans are not assumable or transferable. The loans must be paid in full upon sale or title transfer of the property.

Payoff Requests- Borrower must submit a written request for payoff. If the borrower wishes to have a third party submit a request for payoff on their behalf, the borrower must submit a signed consent form allowing MOHCD to provide information to the third party. In addition, the requesting borrower must submit at their own cost, a current fair market appraisal report (appraisal report should be no more than 90 days old at the time of request for payoff).  Upon receipt the above requested information, MOHCD will generate a payoff statement within 5 – 7 business days.

 

Refinance/Subordination - The DALP loan can be subordinated to the refinancing of the existing first mortgage for a lower interest rate and better loan term. Borrowers are allowed to take up to 3% of the new first mortgage amount as cash out to cover the cost of the refinance. Under no circumstances can the refinance amount be more than the original loan amount. If the refinance meets the City subordination requirements, the DALP loan will subordinate to the new first mortgage.

Subordination Requests - Borrowers must work with one of our participating lending officers to refinance their DALP Loans. For mortgage brokers, the funding lender needs to be approved as well. MOHCD will reject a subordination request for none participating lending officers. Please visit our website for Subordination Document Checklist: located in our website: www.sfmohcd.org

Home Equity Lines of Credit and Home Equity Loans - MOHCD does not allow DALP borrowers to open Home Equity Lines of Credit and Home Equity Loan. Borrowers who use such programs are in violation of their Program restrictions and will not be allowed by MOHCD to refinance their DALP loans. The DALP loan program will be due and payable with share of appreciation if household is deemed out of compliance with this policy and all other applicable program policies.

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REPAYMENT

Unless a default occurs, the Downpayment Assistance Loan is deferred for forty (40) years from the date of the initial purchase. As of the closing date of the sale, the loan is due and payable. The payoff amount due by Borrower is (i) the principal amount of the loan plus (ii) the proportional share of the appreciation of the property.

The proportional share shall be based on the ratio of the original downpayment assistance loan amount to the original Purchase Price of the property or the fair market value of the property at the time of purchase; whichever is higher (both called hereafter the “Purchase Price”). At the time that the property is sold or refinanced, the City will determine the value of the property (hereafter the “Sale Price”). The value of the property at sale is the contracted sale price or the Fair Market Value at the time of refinance.

The amount of appreciation is determined by subtracting the original purchase price to the borrower at the time of purchase from the sales price or fair market value at the time of sale or refinance. The Fair Market Value shall be the sales price or the appraised value of the property at the time of repayment, whichever is higher. If the property has not increased in Fair Market Value, the Borrower shall be obligated to repay the principal amount of the loan only.

Sample Calculation of Repayment
For example: When you sell or refinance the property in the future for a new purchase price or fair market value (when refinance) of $650,000, the City repayment obligation will be:

Loan Principal    $200,000 
Appreciation Share    

a. New Purchase Price/Fair Market Value:

 $700,000  

b. Original Purchase Price:

 $650,000  
Appreciation (a - b)  $ 50,000  
31% of Share Appreciation ($50,000 x 31%)    $15,500
TOTAL REPAYMENT DUE TO CITY $215,500

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OWNER OCCUPANCY REQUIREMENTS

A borrower must occupy the purchased property as its primary residence within 60 days after close of escrow.  Properties that have received DALP funding must remain owner occupied throughout the term of the loan. Compliance monitoring may be performed and documented proof of occupancy required at intervals determined by the Mayor's Office of Housing and Community Development.

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LOAN DOCUMENTS

The City will provide the required loan documents to the title company for borrower's signatures.

City Deed of Trust: The City Deed secures the loan against the title of the property. The City loan will subordinate to first mortgage, the City loan will always be on the second lien of the property.

City Note: The City Note contains an acceleration clause, which will call the entire loan due and payable upon the sale; rental and title transfer of the property. The City Note also outlines terms of repayments.

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DALP APPLICATION PROCESS

  • The borrower must complete the first-time homebuyer education course through one of MOHCD’s 5 approved housing counseling agencies. A certificate of completion of homebuyer education must be included with the application package.
  • Borrower must work with one of the participating lenders to get pre-approval or pre-qualification.
  • Find out the maximum first mortgage for which you can qualify, combined with your own downpayment and the DALP loan amount you can qualify, that is the maximum purchase price you can afford. The lender should be able to help you make a good estimate of how much property you will be eligible to buy with those combined resources.
  • Find a property, enter a purchase agreement.
  • Once you have a ratified purchase agreement, go to the lender whom you are working with and submit the following documents:
    1. DALP application (DALP-1)
    2. Complete set of past 3 years Federal income tax returns (included all schedules, signed and dated) and W-2 forms.
    3. 3 current and consecutive pay stubs with year-to-date (YTD) and VOE.
    4. For self-employed borrowers, provide a current profit and loss statement (signed and dated) and sign and notarize a Self-Employed Affidavit
    5. Unemployed borrower or co-borrower must sign and notarize an Unemployed Affidavit
    6. Income Tax Affidavit (DALP-3) (if applicable)
    7. First Time Homebuyer Affidavit (DALP-4)
    8. Homebuyer Education Certificate (Must issued with the last 12 months)
    9. Homeownership SF Consent Form
    10. All pages of last 3 months bank statements for checking, savings & other pertinent investment accounts
    11. Ratified Purchase Agreement
    12. Inspection or contractor report of the property
    13. Gift letter (if applicable)
    14. IRS form 4506-T
    15. General Release and Waiver of Liability
    16. $530 (non -refundable) Application Fee; $640 if applying MCC together with DALP (must be a signed Cashier’s Check payable to the City and County of San Francisco) $544 DALP, $657 DALP & MCC after July 1st
  • Lender will submit the DALP application package to the City and provide the following information along with the application:
    • Copy of Final Mortgage Loan Application (Form 1003), signed and dated by borrower
    • Underwriting Summary (Form1008)
    • Approval or commitment letter from the Lender
    • A copy of the borrower’s credit report (including credit score)
    • A copy of final Good Faith Estimate (GFE) or Estimated Settlement Statement (HUD-1)
    • Fair Market Appraisal
    • Preliminary title report
  • MOHCD will email a letter of approval or denial to the borrower and lender within 10-15 working days of receipt a complete package from the lender. DALP Loan as specified in the commitment letter will be placed on reserve for a period of 45 days from date of the commitment
***Please note that beginning January 1, 2015, MOHCD will only accept digital files. More information about digital file requirements will be available as that date approaches.***

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    DALP PROGRAM MANUAL & FORMS

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    REVIEW AND PROCESSING

    MOHCD receives a complete and bound application in a legal size manila folder with two fasteners (application follows instructions suggested on Transmittal Form)

    • MOHCD will email an approval or denial letter to the lender within 10-15 working days of receipt of a complete package. Incomplete packages will be returned without review.
    • Email notice includes draft loan documents and a request for buyer(s) to sign & date a commitment letter, which must be returned to the City within 5 working days.
    • After MOHCD receives the signed commitment letter back from the borrowers:
      • MOHCD will email escrow instructions and closing documents to the title company.
      • 7 working days funding period will begin.
    • Funding as specified in the commitment letter will be placed on reserve for a period of 45 days from date of the commitment. If for any reason, escrow cannot close within the commitment period, please notify the Mayor’s Office of Housing and Community Development immediately or the loan will be void.
    • Funding will be wired to the escrow account after we have received and reviewed all closing documents by 11 a.m. the fund will be wired in the 4th working day. If we receive the closing documents after 11 a.m. the fund will be wired on the 5th working day. We require 4 working days for wire transfer.
    • Attention All Title Companies: The Mayor’s Office of Housing and Community Development requires that all beneficiaries, vendors or Title Companies register for ACH pay mode for Electronic Funds Transfer. This is standard for all of our funding transactions. For information and enroll to the ACH pay mode system, please visit the San Francisco Controller’s Office website.

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    WORKSHOPS & LENDER TRAININGS

    Mortgage Loan Officers (MLO) or mortgage brokers who would like to become participating lenders for MOHCD's homeownership programs, including DALP, MCC, PIC and TND must complete the required training and pay the required fee. Each individual MLO or mortgage broker must complete the training every year. All participating loan agents must provide their NMLS ID# to MOHCD and sign the Lender Participation Agreement.

    Lender Training for DALP & MCC is now online. To register and take the training, please visit:
    Online Lender Training for DALP & MCC

    Click for List of DALP/MCC Participating Lenders

    Click for List of Homebuyer Education Counseling Agencies

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    Last updated: 7/11/2014 3:47:56 PM