An Overview of the Section 8 Homeownership Program

The use of Section 8 vouchers for homeownership will give many Americans who have low incomes the opportunity to purchase their own homes. In addition, the use of Section 8 vouchers for homeownership will provide many new opportunities for people to contribute to their local economy. Homeownership will allow individuals and families to obtain loans from their local banks, hire members of their communities to perform maintenance and repair work on their homes, and pay property taxes that contribute to the purchase of local services enjoyed by community members. Homeowners express a feeling of greater safety, security, and belonging in their communities.

Public Housing Authorities (PHAs) that choose to participate in the Homeownership Program can:

1) Allow eligible individuals and families to convert current Section 8 vouchers from rental supplements to mortgage supplements, and

2) Allow future eligible individuals and families to choose between mortgage subsidies and rental subsidies.

HUD anticipates that mortgage lenders will consider the Section 8 assistance when underwriting a loan.

The homeownership option will assist families in two types of housing:

1) A unit owned by the family--One or more family members hold title to the home.

2) A cooperative unit--One or more family members hold membership shares in the cooperative.

The final rule on homeownership released by HUD includes provisions that:

1) One or more adult members of the family need to be employed at time of commencement of assistance for at least 30 hours per week. The employment requirement does not apply to an elderly family or a disabled family. Furthermore, 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 so that the program is readily accessible to and usable by persons with disabilities.

2) A national minimum (gross) income requirement (of adult family at time of commencement) that is equal to 2,000 hours of annual full-time work at the Federal minimum wage. The PHA must count welfare assistance of an elderly or disabled family in determining whether the family meets the minimum income requirement for homeownership assistance. (Welfare assistance is defined as: "Welfare or other payments to families or individuals, based on need, that are made under programs funded, separately or jointly, by Federal, State or local governments." 24 CFR 5.603)

3) It is possible to switch from Section 8 homeownership voucher assistance to rental voucher assistance, and vice-versa, after a mortgage default and at other times.

4) 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.

5) A homeownership family may purchase another home with Section 8 assistance provided there is no mortgage loan default. The family must sell its current home in order to purchase another with homeownership assistance.

6) PHAs will recapture a percentage of homeownership assistance defined in the regulations upon the sale or refinancing of the home. Sales proceeds that are used by the family to purchase a new home with Section 8 homeownership assistance are not subject to recapture.

7) A family may refinance their home to take advantage of lower interest rates, or better mortgage terms, without any recapture penalty. Only those proceeds realized upon refinancing that are retained by the family (for example during a "cash-out" of the refinanced debt) are subject to the program recapture provision.

8) Two kinds of physical inspections are required (in addition to, and separate from, any lender required inspections): an HQS inspection by the PHA and an independent professional home inspection by an inspector used in the private market by homebuyers.

9) Section 8 homeownership assistance can be used for a family that purchases a home that the family previously occupied under a "lease-purchase agreement" --generally a lease with option to purchase.

10) The family attend homeownership counseling sessions.

11) The family enter into a contract of sale with the seller and that the family secures its own financing for the home purchase.

12) Homeownership housing assistance payments may be made directly to the family or to lender on behalf of the family.

13) At least one percent of the purchase price comes from the family's personal resources.

14) A mandatory term limit on homeownership assistance of 15 years if the initial mortgage incurred to finance purchase of the home 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 final rule provides that the maximum term limit does not apply to elderly or disabled families.

15) If a member of the family is a person with disabilities, eligible homeownership expenses may include debt incurred to finance costs needed to make the home accessible for the family member, if the PHA determines that the allowance is needed as a reasonable accommodation.

16) If the home is a cooperative or condominium unit, homeownership expenses may include cooperative or condominium operating charges or maintenance fees assessed by the condominium or cooperative homeowner association.

17) The PHA must approve a live-in aide if needed as a reasonable accommodation so that the program is readily accessible to and useable by persons with disabilities

18) The additional requirements for continuation of homeownership assistance established by the PHA may include a requirement for post-purchase homeownership counseling or for periodic unit inspections while the family is receiving homeownership assistance.