The MODEL HOMES PROGRAM is a new construction loan product to builders and also offers down payment assistance to homebuyers in selected areas. It is one of a series of incentives designed to expand the supply of affordable housing, encourage home ownership and enhance neighborhood stability. When used in conjunction with private market mortgage loans, it allows developers, builders and homebuyers to create affordable housing to help upgrade the targeted neighborhood. In order to accommodate a variety of revitalization strategies, this program offers two separate loan products: 1) construction loans directly to developers or builders; 2) Down Payment assistance to buyers purchasing newly constructed homes. This program offers loans to builders at very favorable terms and rates. By accepting this loan at such favorable terms, the participating builder warrants that all homes built or remodeled under this program will meet a high standard of quality and will be sold to eligible homebuyers.
In order to assure that these activities enhance and improve the neighborhood, builders and plans must be pre-approved to access any of the loan products above. (The term “builder” is used in this document to mean, interchangeably, for-profit companies, non-profit corporations, individual licensed contractors, or other housing providers.) Due to administrative requirements of a program such as this, the number of approved builders may be limited. A key component of builder approval is that the proposed design and plans are consistent with neighborhood improvement objectives. Homes built under this program must contribute to upgrading the neighborhood and must not be in conflict with stated design or style preferences of the Community Development Department or the greater community. Additionally, the builder must have a good reputation and offer a top quality product. The builder must also demonstrate a proven history of affirmatively marketing the product being constructed to eligible homebuyers.
Regardless of whether loans are provided to the builder/developer or directly to the homebuyer, the builder/developer must meet underwriting guidelines and must be able to document a successful history of both building a quality product and providing quality customer service. Interested builders (used in this document to mean for-profit or non-profit corporations or individual licensed contractors) must meet with Community Development Department staff to discuss the builder’s area of interest and proposed approach. They must demonstrate an understanding of the program’s purpose, have acceptable credit ratings and have no outstanding complaints registered with the Consumer Affairs Department.
Builder/Developers participating in this program must agree that the newly constructed home meets Energy Star minimum requirements for energy efficiency. In Pinellas County, these requirements apply to insulation, heat pump systems (their SEER and HSPF, controls, ductwork and installation), water heating and weather tightness. An employee of Florida Power Corporation tests the final construction and an independent agency rates the results.
Participating builders must warrant that all homebuyers will meet the income eligibility guidelines. Homebuyers must occupy the home as their principal and sole residence. Seasonal homes are not eligible for this program. Homebuyers are not required to be first time homebuyers.
Homebuyers must qualify for private first mortgage financing; this loan is not assumable by the homebuyer. The first mortgage loan must offer interest rates and closing costs that are typical for Pinellas County at the time of application. Lease-purchase and Agreement-for-Deed sales are not eligible under this program.
Properties may be constructed by approved builders in Pinellas County targeted areas that have a housing improvement objective and an active revitalization program underway. These areas may change from time to time. Area maps are available from the Pinellas County Community Development Department. The sales price cannot exceed $190,000 or the appraised value, whichever is less. The property must be a single-family structure or, if pre-approved, a townhouse or villa. Income producing properties are not eligible under this program. A homebuyer or builder may construct a new home on a currently vacant lot or demolish and replace a house that is not feasible to repair. However, no tenant can be displaced to make property available for this program.
LOAN AMOUNT AND TERMS
As an incentive to builders, the Department offers construction financing for twelve months at 0% interest. This loan is a first mortgage product. Loans must be repaid in full at the end of the twelve-month term whether the house is sold or not. No builder/developer may have more than three construction loans active at any one time. In the instance where a builder is using a home as a model to sell other homes in the neighborhood, and has demonstrated success in completing sales and construction of other units, the construction loan may be extended for up to nine additional months.
Construction financing may be provided with program funds, or private financing may be utilized. If program funds are used, the construction loan amount is limited to 80% of projected sales price or appraised value, whichever is less. The minimum construction loan amount is $50,000.
Upon certification of project completion and occupancy by a qualified household, the builder will receive a refund of County transportation impact fee and water/sewer connection fee. In addition, the builder may be eligible for rebate or refund of certain other impact and review fees. Loan proceeds are dispersed as work is completed or costs incurred. No advance payments will be authorized. Pinellas County charges a $50.00 application fee and a 1-1/2% origination fee but no other processing fees or points.
OTHER PROGRAM REQUIREMENTS
The Department may inspect or contract for the inspection of construction quality at any reasonable time during the construction period. This is solely to insure that public funds invested are being used to produce a quality product. Problems found will be discussed first with the builder but if this does not result in the correction of problems, inspection information may be shared with others, including the homebuyer, first mortgage lender, if applicable, or building officials. If construction is not performed in accordance with approved plans or does not meet acceptable standards for quality and compliance with all applicable codes, construction draws will be withheld until corrections have been made. No additional loans will be approved for builders who do not produce a quality product or who do not deal fairly and honestly with homebuyers in the sole judgment of the Department or its inspectors.
Only a licensed contractor may be paid for labor on the structure. Homebuyers may not be hired by the contractor for the purpose of receiving payment for participating in the construction. Program funds may not be used for furniture or other personal property such as draperies. Costs for built-in kitchen appliances, ranges and refrigerators may be included in the loan. Other appliances are not eligible.
DOWN PAYMENT ASSISTANCE Income Limits
There is no requirement that homebuyers use the down payment assistance provided under this program. However, the assistance described below is available only for homes constructed under this program.
Loans are available to help eligible homebuyers with down payment and closing costs. Down Payment Loans are offered at 3% or 5% interest. Depending on the needs of the applicant, this loan may be amortized over 15, 20 or 30 years, but may not exceed the term of the private first mortgage. Loan repayment may be temporarily deferred, without interest, for up to 60 months only when required by the first mortgage lender in order to meet specific Fannie Mae underwriting guidelines. In no case will the minimum payment be less than $25. Down Payment Loans may not be used in conjunction with adjustable rate mortgages.
To receive down payment assistance homebuyers must meet the Department’s income eligibility and credit underwriting guidelines. In general, total monthly debt, including any payment for this loan, may not exceed 45% of total gross income. However, affordability will be determined on a case-by-case basis. Homebuyers cannot have any outstanding home repair or home purchase loans through Pinellas County Community Development.
DOWN PAYMENT LOAN AMOUNT AND TERMS
The Down Payment Loan is a second mortgage product. The maximum second mortgage is limited to the lesser of $20,000, 25% of the total purchase price and closing costs, or the amount needed to lower the applicant’s monthly housing debt to 32% of monthly household income. However, the total loan amount, when combined with all other encumbrances, cannot exceed 105% of the appraised value. If additional funds are needed, homebuyers may contribute from other sources if loan security and the borrower's ability to pay are not impaired. The homebuyer must provide a minimum down payment of 2% of the purchase price from personal funds. Actual loan amounts are based on an analysis of homebuyers' income, financial situation, and ability to
borrow through the private market; therefore, homebuyers may qualify for less than the maximum loan amount. When required by the first mortgage lender as a condition of meeting Fannie Mae underwriting guidelines, repayment on the County’s loan may be deferred for up to 5 years.
Loan payments must include an amount to be escrowed for real estate taxes and homeowners' insurance, unless such amounts are being escrowed in a senior loan. All loans are secured by a mortgage and note recorded in the Official Records of Pinellas County. Pinellas County will subordinate to a first mortgage lender if loan security and the borrower’s ability to pay are not impaired. Loans will be subordinated to future refinancing only in keeping with the subordination policy approved by the Pinellas County Board of County Commissioners. All loan payments are sent to SunTrust Mortgage, Inc., which is the County's loan servicing agent. All loan payments are due on the first day of the month. A 5% late fee will be assessed on any payment that is more than 15 days late.
Pinellas County charges no application fees, processing fees, points, or origination fees. Most closing costs can be included in the loan. Closing costs associated with the loan are usually title insurance, appraisal, credit reports, documentary stamps and recording fees. All costs are disclosed to the homebuyer prior to and at the time of loan closing. Borrowers may prepay any or all of the outstanding principal balance at any time without incurring prepayment penalties.
These loans are offered as a form of housing assistance to low income and moderate-income homebuyers. They cannot be transferred to another person at the original interest rate. This means that a borrower must pay off the loan if the property is transferred, sold, rented or otherwise vacated. At the Department's discretion, loans may be assumed by subsequent buyers, heirs, or assigns at a negotiated interest rate.
This program is administered through the Pinellas County Community Development Department. Not all applications will meet underwriting criteria. Some will not be approved for a loan. Homebuyers who have been denied a loan are entitled to know why the application was rejected. Any homebuyer who has a complaint or inquiry regarding eligibility or any other determinations made by Community Development personnel are entitled to have their complaint or inquiry reviewed. If any homebuyer has not received an adequate response to their complaint or inquiry, please contact the address and phone number listed below.
For additional information about program requirements or processing, please call or contact:
Our goal is to offer the residents of Pinellas County the highest quality service possible. We are always interested in your comments about the quality of our services or suggestions for ways to improve them.
Model Homes Program
This term sheet is intended as an information sheet and processing guide for lenders, builders, and their staff liaisons. Information contained herein is summarized and is not exhaustive.
|Type:||Fixed rate mortgage loans to assist in financing the construction of new single family homes in partnership with private mortgage primary lenders and builders, also down payment assistance to borrowers.|
|Eligible Properties:||Single family homes, (and townhouses or villas if pre-approved) located within selected Urban County target areas. Income producing properties are not eligible for this program. Properties must meet all local codes and construction standards prior to occupancy.|
|Security:||Mortgage in favor of Pinellas County.|
|Interest Rate:||0% for construction loans. 3% for down payment loans to households earning less than 80% of Area Median Income and 5% to households earning between 80% and 120% of Area Median Income.|
Construction Loans are due and payable upon sale or at the end of 12 months, whichever is sooner. Loans on preauthorized model homes may be extended an additional nine months.
Down Payment Loans are offered for 15, 20, or 30 years but may not exceed the term of the private market first mortgage. Loan repayment may be temporarily deferred. In no case will the minimum payment be less than $25.
|Loan Amount:||Construction financing may be provided with program funds, or private financing may be utilized. If program funds are used, the construction loan amount is limited to 80% of projected sales price or appraised value, whichever is less. The minimum construction loan amount is $50,000.|
|Costs:||All loans will carry a 1.5% origination fee and a non-refundable application processing fee of $50.00|
|Maximum Value:||Sales price of the home cannot exceed appraisal value or $190,000 whichever is less.|
|Loan-to-Value:||For Down Payment Loans, this loan plus all other encumbrances cannot exceed 105% of appraised value. For Construction Loans, this loan plus all other encumbrances may not exceed 100% of actual construction costs.|
|Down Payment:||At least 2% of total purchase price plus certain closing costs is required from homebuyer.|
|Debt Coverage:||For Down Payment Loans, in general, total monthly debts, including any payment for this loan may not exceed 45% of total gross income. However, affordability will be determined on a case-by-case basis. Exceptions must be fully documented and explained by the processor(s).|
|Other:||All entities participating in the program must be approved. All homes built using these loans must have pre-approved plans and meet pre-approved specifications. Only approved title entities may disburse funds under this program.|