General Parameters for establishing the program

Program Option requirements

PHA Options within the program

Family Participant Requirements

Homeownership is a new "special housing type" under the Housing Choice Voucher program

Basic Concept: Instead of using the voucher subsidy to help family with rent, the homeownership option allows first-time homeowner to use voucher subsidy to meet monthly homeownership expenses

PHA must operate a Housing Choice voucher program

The option is for families that are qualified applicants or participants in the PHA's Housing Choice Voucher Program.

Homeownership may only be provided for families receiving "tenant-based assistance". The option is not available for units receiving section 8 project-based assistance.

PHA has the choice whether to offer homeownership assistance as a Housing Choice Voucher Program option.

If the PHA chooses to offer the program option, The PHA may also choose to make homeownership assistance available for any qualified applicant or participant, or to restrict homeownership assistance to families or purposes defined by the PHA.

The family must qualify for the Section 8 housing choice voucher program and also qualify for the homeownership assistance option

There is no additional or separate funding or set-aside for homeownership assistance

PHA may not reduce a family's choice by limiting the use of homeownership assistance to particular units, neighborhoods, developers, or lenders

The PHA may not set aside program funding from special housing types or require applicant to use the voucher for a particular housing type.

General Parameters for homebuyer and property eligibility

Program Option requirements and options

Exceptions

Program is generally limited to first-time homebuyers and/or a family that owns or is acquiring a home under a PHA approved lease-purchase agreement or through the purchase of shares in a cooperative.

The family must be moving for the first time from rental housing to a family-owned home.

To qualify as a "first-time homeowner", the assisted family may not include any person who owned a "present ownership interest" in a residence of any family member during the three years before the commencement of homeownership assistance for the family. Such interest includes ownership of title or of cooperative membership shares.

No family member may have present ownership interest in a second residence while receiving homeownership assistance

The PHA may provide assistance for a cooperative member either under the new homeownership option or under the special procedures for cooperative housing within the Section 8 tenant-based rental program. Each form of assistance is designated as a separate special housing type under the Section 8 voucher program.

The law and rule explicitly permit Section 8 homeownership assistance for a family that purchases a home that the family previously occupied under a "lease-purchase agreement". The PHA may provide Section 8 homeownership assistance for an eligible family that purchases "a unit under a lease-purchase agreement"

The rule defines the term "first-time homeowner" to include:

A single parent or displaced homemaker who, while married, owned a home with his or her spouse, or resided in a home owned by his or her spouse

A family of which a family member is a person with disabilities, and use of the homeownership option is needed as a reasonable accommodation. The PHA determines whether the use of the homeownership option is necessary as a reasonable accommodation

Cooperative homeowners may be first-time or a family that owned its cooperative unit prior to receiving Section 8 assistance. Cooperative membership shares may be purchased at or before commencement of homeownership assistance

The right to purchase title under a lease-purchase agreement does not constitute a prohibited "present ownership interest". The family will be subject to the homeownership regulatory requirements at the time the family is ready to exercise the homeownership option.

Eligibility for homebuyer/property

PHA program requirements and options

Family participant requirements

Exceptions

Family Participation in the homeownership program is

optional

At the briefing of families selected to participate in the tenant-based Section 8 program, the PHA must discuss any homeownership option

The PHA may not maintain a separate waiting list or provide selection preference for homeownership voucher applicants

Family must meet the participant qualification parameters established by the PHA

Subsidy amount

The PHA uses the same payment standard schedule, payment standard amounts, and subsidy standards for the homeownership option as for the rental voucher program.

The 40% of adjusted monthly income limitation does not apply to homeownership families

Family total tenant payment (TTP) is the greatest of:

1. 30% of adjusted monthly income,
2. 10% of gross monthly income,
3. welfare rent in "as paid" states,
4. minimum rent ($0 to $50) established by the PHA

In addition to the TTP, the family is responsible for all homeownership expenses not covered by the housing assistance payment

A home may be purchased which is either under construction or already existing.

The homeownership assistance may only be used for the purchase of a one unit property or single dwelling unit in a cooperative or a condo.

(e.g., a townhouse or condo is permissible, owning both units of a duplex is not)

Two types of housing are allowed.

A unit owned by the family (one or more family members hold title to the home).

A cooperative unit (one or more family members hold membership shares in the cooperative.

Eligibility for homebuyer/property

PHA program requirements and options

Family participant requirements

Exceptions

The family must satisfy all of the initial requirements established by the rule at commencement of home ownership assistance for the family and any other initial requirements established by the PHA

The PHA may not establish different eligibility requirements for the minimum income standard or the employment requirement.

1. Minimum income requirements
2. History of full-time employment
3. The family has not defaulted on a mortgage under the homeownership option
4. Except for cooperative members, no family member has a present ownership interest in a residence at the commencement of homeownership assistance for the purchase of any home; and the family has entered into a PHA approved contract of sale

The PHA may add other local eligibility requirements such as participation in the Family Self-Sufficiency (FSS) program

The family must satisfy all of the requirements established by the rule and any other requirements established by the PHA

There are exceptions to the income and employment requirements for families who are disabled or elderly

Statutory employment requirement.

The final rule requires that one or more adult members of the family who will own the home at the commencement of home-ownership assistance:

Is currently employed on a full-time basis (defined to mean not less than an average of 30 hours per week);

Has been continuously so employed during the year before commencement of homeownership assistance

The law explicitly provides that the employment requirement only applies at the time the family initially receives homeownership.

The PHA has the discretion to determine whether (and to what extent) an employment interruption is considered permissible in satisfying the employment requirement. The PHA may consider successive employment during the one-year period and self-employment in a business.

With the exception of elderly and disabled families, the family must meet the employment requirements established by the final rule and the PHA

The employment requirement does not apply to an elderly family or a disabled family.

If a family, other than an elderly family or a disabled family, includes a person with disabilities, the PHA must grant an exemption from the employment requirement if the PHA determines that an exemption is needed as a reasonable accommodation.

Eligibility for homebuyer/property

PHA program requirements and options

Family participant requirements

Exceptions

Minimum Income requirement

A PHA may not provide homeownership assistance for a family unless the PHA determines that the family satisfies the minimum income requirements.

Except for an elderly or disabled family,

Welfare assistance may not be considered in determining if the family meets the minimum income requirement.

PHAs may limit homeownership assistance to families with substantial non-welfare income available to pay housing/non-housing costs.

HUD has decided that any minimum income requirement will only be applied to determine initial qualification to purchase a particular home, not as a continuing requirement.

Any minimum income requirement will only apply again if the family purchases a subsequent home with Section 8 homeownership assistance.

The requirement to disregard welfare assistance income only applies in determining whether a family has the minimum income to qualify for homeownership assistance. Welfare assistance income is counted for other program purposes: in determining income-eligibility for admission to the voucher program, in calculating the amount of the family's total tenant payment (gross family contribution); and in calculating the amount of the monthly homeownership assistance payment for a family assisted under the homeownership option.

1. A family may not receive homeownership assistance unless the family demonstrates that gross monthly income is at least two times the voucher "payment standard" or an "other amount" established by the Secretary.
2. In addition, the final rule establishes that the adult family members who will own the home at the commencement of the homeownership assistance must have annual gross income which meets a national minimum income requirement equal to 2,000 hours of annual full-time work at the Federal minimum wage ($10,300 at time of final rule).
3. Except for families who are elderly or disabled, income counted in meeting any minimum income requirement under the homeownership option must come from sources other than welfare assistance.

The rule requires that the PHA count welfare assistance of an "elderly family" or a "disabled family" -- a family whose head or spouse is elderly or disabled -- in determining whether the family meets the minimum income requirement for homeownership assistance.

This requirement applies to families which satisfy the statutory definition of an elderly or disabled family. In particular, the requirement to count welfare assistance income does not apply in the case of a family that includes a disabled person other than the household head or spouse (and where the household head or spouse are e not elderly or disabled). Welfare assistance is defined in HUD's regulations at Sec.5.603,

Eligibility for homebuyer/property

PHA program requirements and options

Family participant requirements

Exceptions

Once determined eligible for the homeownership program, the family must participate in a homeownership and housing counseling program provide by the PHA.

Homeownership counseling may be done by PHA staff or another entity such as a HUD-approved housing counseling agency, or by both the PHA and another entity. The final rule contains a list of suggested topics for the PHA-required pre-assistance counseling program

The PHA may also offer additional counseling after commencement of homeownership assistance (ongoing counseling). If the PHA offers a program of ongoing counseling for participants, the PHA has the discretion to determine whether the family is required to participate in the on going counseling.

Before commencement of homeownership assistance, the family must attend and satisfactorily complete the pre-assistance homeownership and housing counseling program required by the PHA.

Families selected to participate in the homeownership program must secure their own financing. All regular lender underwriting and property inspection requirements apply.

A PHA may establish requirements for financing purchase of a home to be assisted under the homeownership options. All PHA financing or affordability requirements must be described in the PHA administrative plan. The PHA may also set requirements concerning qualifications of lenders and terms of financing.

The PHA may disapprove proposed financing, refinancing or other debt if the PHA determines that the debt is unaffordable. PHAs may wish to establish minimum initial downpayment requirements to ensure that the family has a personal financial stake in the home.

The PHA must establish reasonable time limits to for using the homeownership voucher. The PHA does not issue a voucher to the family.

1. The PHA must advise the family of any deadlines on locating a home, securing financing and purchasing the home.
2. The PHA should ensure that a family who has executed a sales contract is provided reasonable time to close on the purchase of the home.
3. If the family is unable to locate a home to purchase within the PHA established deadlines, the PHA may issue the family a rental voucher.

Family must qualify for and purchase a home within the timeframes established by the PHA.

General Parameters for Homeownership financing

Program Option requirements

Family participant requirements

Home Inspections. Two kinds of physical inspections are required (in addition to, and separate from, any lender required inspections)

1. An HQS inspection by the PHA

The PHA inspection is the normal initial HQS inspection conducted by the PHA for the tenant-based rental assistance program.

2. An independent professional home inspection by an inspector that is used in the private market by homebuyers

1. The home must pass an initial PHA (HQS) inspection. The initial HQS inspection is the only PHA inspection required for homeownership units during the entire time the family is receiving homeownership assistance.
2. In addition, the family must hire an independent, professional home inspector to identify physical defects and the condition of the major building systems and components. The PHA may establish standards of qualification for the home inspector.
3. The PHA must review the home inspector's report to determine if repairs are necessary

Family must select the home inspector, pay for the independent home inspection and give a copy of the report to the PHA.

The family and the PHA must determine if prepurchase repairs are necessary

There are no Section 8 funds for home purchase financing (e.g. downpayment and closing costs, etc.). Instead, the Section 8 housing assistance will be provided monthly to help the family meet homeownership expenses

Homeownership housing assistance payments may be made directly to the family. Two-party checks to the family and lender are not authorized. Before the housing assistance begins, the family and the PHA must execute a "statement of homeowner obligations".

If the PHA makes payments directly to the lender, and the assistance payment exceeds the amount due to the lender, the PHA must pay the excess amount directly to the family.

Comply with the requirements of the "statement of homeowner obligations" a written agreement signed by the family to comply with all family obligations under the homeownership option

Combining Financing: There is no prohibition against using local or State Community Development Block Grant (CDBG) or other subsidized financing with the program

The PHA may prohibit certain forms of financing, require a minimum downpayment, or determine that the family cannot afford the proposed financing.

The family must secure its own financing for the home

Guarantees on Financing: Financing for purchase of a home under the program is to be insured, or guaranteed by the state or Federal government, comply with secondary mortgage market underwriting requirements, or comply with generally accepted private sector underwriting standards

If the home is financed with FHA-insured mortgage financing, such financing is subject to FHA mortgage insurance credit underwriting requirements. Otherwise the underwriting standards of the individual lender and/or financing program will apply in cases where the financing is not FHA- insured.

The PHA may not require the family to use a certain lender or financing approach

The family must provide a copy of the contract of sale to the PHA. The contract must specify the price and terms of sale, provide for pre-purchase inspection, and contain a seller certification that seller is not debarred, suspended, or subject to limited denial of participation

General Parameters for ongoing homeownership financing and eligibility

Program Option requirements

Family participant requirements

Exceptions

All PHA financing or affordability requirements must be described in PHA administrative plan

The PHA may establish requirements or other restrictions concerning debt secured by the home and may review

lender qualifications and loan terms before authorizing assistance.

The PHA may disapprove proposed financing, refinancing or other debt if the PHA determines that the debt is unaffordable, or that the lender or the loan do not meet PHA qualifications.

Section 8 homeownership assistance may only be paid for a maximum period of 15 years if the initial mortgage incurred has a term that is 20 years or longer. In all other cases, the maximum term of homeownership assistance is 10 years.

The PHA may not establish shorter or longer maximum terms.

The maximum term applies to any member of the household who has an ownership interest in the unit during any time that home ownership payments are made, or is the spouse of any member of the household who has an ownership interest in the unit at the time homeownership payments are made

The maximum term for homeownership assistance does not apply to an elderly family or a disabled family.

1. In the case of an elderly family, this exception is only applied if the family qualifies as an elderly family at the commencement of homeownership assistance.
2. In the case of a disabled family, this exception applies if at any time during receipt of homeownership assistance the family qualifies as a disabled family
3. If, during the course of homeownership assistance, the family ceases to qualify as a disabled or elderly family, the maximum term becomes applicable from the date homeownership assistance commenced. However, such a family must be provided at least 6 months of homeownership assistance after the maximum terms becomes applicable.

Continued program eligibility:

The PHA will annually reexamine family income and composition and make appropriate adjustments to the amount of the monthly housing assistance payment

Family must continue to be qualified for Section 8 program

General Parameters for ongoing Homeownership financing/eligibility

Program Option requirements

Family participant requirements

Exceptions

Net Family Assets

The final rule revises the definition of "net family assets" to exclude the value of a home currently being purchased with Section 8 homeownership assistance. This exclusion is limited to the first 10 yeas after the purchase date of the home.

Homeownership expense determination

The PHA must adopt policies for determining the amount of homeownership expenses to be allowed by the PHA. These expenses may only include amounts to cover: principle and interest for the original mortgage debt, refinancing of such debt, any mortgage insurance premium, real estate taxes, assessments on the home, home insurance, and allowances for utilities, maintenance, major repairs and replacements. Expenses may include principal and interest on mortgage debt incurred to finance costs for major repairs, replacements or improvements for the home.

The utility allowance is the same schedule as used in the rental voucher program. The PHA allowance for maintenance expenses is the amount the PHA thinks is appropriate for routine maintenance for a home. If the home is a coop or condo, may include operating charges or maintenance fees. The allowance for major repairs and replacements is the amount the PHA thinks is appropriate for a replacement "reserve" for a home.

The allowances should be set for the program as a whole, not based on actual costs or the condition of the home. A PHA may contact counseling agencies, local realtors and others for advice on the appropriate level for these local allowances.

Families are not required to put the amount for maintenance expenses and major repairs and replacements in the bank or in escrow.

The Family is responsible for all homeownership expenses not covered by the homeownership assistance payment.

If homeownership expenses exceed the payment standard, the family pays the difference out-of-pocket in addition to the Total Tenant Payment (TTP).

If a member of a family is a person with disabilities, such debt may include debt incurred by the family to finance costs needed to make the home accessible for such person, if the PHA determines that allowance of such costs as homeownership expenses is needed as a reasonable accommodation so that the homeownership option is readily accessible to and useable by such person.

General Parameters for ongoing homeownership financing

Program Option requirements

Family participant requirements

Exceptions

Recapture of homeownership assistance

PHAs shall recapture a percentage of homeownership assistance defined in the regulations upon the sale or refinancing of the home. Only those proceeds realized upon refinancing that are retained by the family are subject to the program recapture provision.

The amount of homeownership assistance subject to recapture shall automatically be reduced over a 10-year period, beginning one year from the purchase date, in annual increments of 10 percent. At the end of the 10-year period, the amount of the homeownership assistance subject to recapture will be zero.

Sales proceeds that are used by the family to purchase a new home with Section 8 homeownership assistance are not subject to recapture. The recapture amount is lesser of:

1. Homeownership assistance subject to recapture
2. Difference between sales price and purchase price, less any capital expenditures, sales costs, amount used toward purchase of a new home, previous recapture amounts

A family may refinance to take advantage of lower interest rates, or better mortgage terms, without any recapture penalty. The lien securing the recapture of homeownership subsidy may be subordinated to a refinanced mortgage. The recapture amount is lesser of:

1. Homeownership assistance subject to recapture
2. Difference between current mortgage debt and new mortgage debt (cash-out) less costs of any capital expenditures, refinancing costs, amounts previously recaptured.

The family shall execute documentation as required by HUD, and consistent with state and local laws, that secures the PHA's right to recapture the homeownership assistance.

Sales proceeds that are used by the family to purchase a new home with Section 8 homeownership assistance are nut subject to recapture.

A family may refinance to take advantage of lower interest rates, or better mortgage terms, without any recapture penalty

General Parameters for ongoing homeownership financing and eligibility

Program Option requirements

Family participant requirements

Exceptions

Continued Assistance after mortgage defaults

The PHA must terminate voucher homeownership assistance for any member of a family that is dispossessed from the home pursuant to a judgment or order of foreclosure on any mortgage securing debt incurred to purchase the home, or any refinancing of such debt.

The PHA may consider mitigating circumstances in determining whether to provide a family with rental assistance after a mortgage default and the family may be eligible to receive continued voucher rental assistance.

The PHA may require the family to reapply for rental assistance and may place the family at the bottom of the list, at the top of the list, or wherever the family would normally fall based on PHA preferences.

The PHA may also prohibit the family from re-applying for assistance for a certain period of time.

The family may request an informal hearing if a current participant that has defaulted on a mortgage for a Section 8 homeownership unit is denied a rental voucher.

General Parameters for ongoing homeownership financing and eligibility

Program Option requirements

Family participant requirements

Exceptions

Annual HQS inspections

The PHA is not required by the regulation to conduct annual HQS inspections

Determination of rent reasonableness

The PHA is not required to determine rent reasonableness under the homeownership option

Switching between rental assistance to homeownership assistance and vice-versa

There are a number of circumstances under which a family may switch between rental and homeownership assistance under the voucher program

1. If a Section 8 participant receiving voucher assistance is determined eligible for homeownership assistance, the family would continue to receive rental assistance until the family vacates the rental unit (consistent with the lease)
2. A Section 8 applicant from the waiting list is determined eligible for homeownership assistance but is unable to find a home to purchase. The family opts to rent an apartment and try homeownership at a later time. The PHA issues a rental voucher
3. The family purchases a home under the homeownership option, and several years later decides that they prefer to live in a rental apartment. If there is no mortgage default, and the family has met all obligations under the program the PHA may issue the family a rental voucher after the family sells the home.
4. If there is a default on the mortgage, the PHA may exercise the PHA option to issue the family a rental voucher only if the family vacates the home and conveys the title.

The family is responsible for attending briefing sessions on the Section 8 program and requesting consideration for the homeownership option from the PHA.

A family that has purchased a home under the Section 8 homeownership option and that later decides they prefer to live in a rental apartment must sell the home before the PHA may provide rental assistance.

When there is a mortgage default under the homeownership program, the PHA has the option to issue the family a rental voucher but only if the family vacates the home and conveys the title to the PHA.

General Parameters for ongoing homeownership financing and eligibility

Program Option requirements

Family participant requirements

Exceptions

Portability

Generally, a family determined eligible for homeownership assistance by the initial PHA may purchase a unit outside of the initial PHA's jurisdiction, if the receiving PHA is administering a voucher homeownership program and is accepting new homeownership families.

The receiving PHA may absorb the homeownership family or bill the initial PHA for the homeownership housing assistance using the normal portability billing process.

The receiving PHA, not the initial PHA, will determine whether the financing for and physical condition of the unit are acceptable

All of the receiving PHA's administrative policies are applicable to the homeownership family

The family will be required to attend the briefing and counseling sessions required by the receiving PHA.

The family will be required to follow the receiving PHA's homeownership administrative policies

Homeownership assistance as a reasonable accommodation for disability and other reasonable accommodation allowances

A family containing a family member with disabilities who requires homeownership assistance as a reasonable accommodation is eligible for the homeownership option, regardless of whether the family is a cooperative member, or a first-time homeowner.

The PHA must approve a live-in aide if needed as a reasonable accommodation

The provision of homeownership assistance as a reasonable accommodation is determined on a case-by-case basis by the PHA. The PHA will determine what is reasonable based on the specific circumstances and individuals needs of the person with a disability. It is the sole responsibility of the PHA to determine whether it is reasonable to implement a homeownership program as a reasonable accommodation.

General Parameters for ongoing homeownership financing and eligibility

Program Option requirements

Family participant requirements

Exceptions

Buying another home with Section 8 Assistance

A homeownership family may purchase another home with Section 8 assistance provided there is no mortgage loan default.

The PHA may prohibit more than one move during any one-year period.

The family need not meet first-time homebuyer requirement.

The maximum term of homeownership assistance applies to the cumulative time the family receives homeownership assistance.

Proceeds invested in the purchase of another home are exempt from recapture

Most of the homeownership requirements applicable to the first home purchase remain applicable to a subsequent purchase (e.g., the family must once again meet the employment threshold)

The necessity of counseling will be determined by the PHA, an independent home inspection will be conducted and the PHA will determine the acceptability of the financing.

The family must sell its current home in order to purchase another with homeownership assistance

Meet all initial eligibility requirements (e.g., work and minimum income requirements) with the exception of first-time homeowner and pre-assistance counseling (the PHA may require additional counseling)