There’s only one way of finding out
FYI, for anyone still considering applying, KYHC has announced June 29 is the final day they will take applications.
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Do they pro-rate the assistance amount in order to get you below the 38% DTI … the terms say the average assistance is $61000
Looked into this closely when talking to a friend who owns a home in the SF area and is considering a job change.
Suppose your mortgage principal is fairly high because you bought a home in the past few years in San Francisco county and suppose you work in the technology sector, where wages are fairly high. The KYHC
low-moderate income threshold in SF county is $162,561.
To use this program:
(1) Pay down your mortgage principal if it’s above $729,750.
(2) Calculate what the mortgage payment would become (or ask your lender to calculate what it would become) if your mortgage principal were reduced by $100k. This is a little tricky because of the various quantities that are included in the PITI calculation. As an order of magnitude this is probably a move from a $5k mortgage payment to a $4k mortgage payment (just a very rough order of magnitude). Call this “the if-principal-were-reduced mortgage payment”
(3) Calculate what salary would be required for the “if-principal-were-reduced mortgage payment” to be equal to 38% of your monthly income.
(4) Negotiate this, potentially reduced, salary with an employer as part of a job change or a job role change. As an order of magnitude this involves asking an employer to pay the household somewhere between $120k–$160k.
(5) With the information about the salary change in hand, apply for the KYHC PRP. Explain the situation to a counselor (due to a change in job or change in job responsibilities you have a new salary and your mortgage, while current, is unaffordable at > 38% DTI ratio; but if principal were reduced $100k you would have a <38% DTI ratio.
Soon you should have principal reduced by $100k, with a silent zero-interest lien on the property forgiven at set intervals. At this point your post-assistance LTV ratio is probably below 80%, so you will probably be getting
a thirty (30) year non-recourse, noninterest
bearing subordinate loan in favor of the Eligible Entity (CalHFA MAC)
secured by a junior lien recorded against the property in the amount of the
HHF assistance. The loan is forgivable in the following five (5) year increments
on the anniversary of the CalHFA MAC Note as follows: thirty-five (35) percent
reduction at the conclusion of the (5) year period, thirty (30) percent reduction
at the conclusion of the ten (10) year period, twenty (20) percent reduction at
the conclusion of the fifteen (15) year period and five (5) percent reductions at
the conclusion of the twenty (20), twenty-five (25) and thirty (30) year periods.
The loan will be fully released at the conclusion of thirty (30) years.
If you wait at least 5 years to sell the house it’s a “free” $35k in home equity. If you wait a full 30 years it’s a “free” $100k in home equity. In many cases if you resell the house there will be some of this loan to repay; but no matter how long you wait you’re paying lower monthly mortgage payments on the house (because the principal and thus interest amounts are lower for as long as the zero-interest PRP loan is outstanding).
I did notice that the PRP rules say
The applicant must own and occupy the single family, 1-4 unit home (an
attached or detached house or a condominium unit) located in California
and it must be their primary residence
It wasn’t clear whether my friend would qualify (he owns a condo in a building with about 8 units).
Does anyone know how they verify income - based on past year tax returns or current paystubs(or lack thereof) ?
I have job changes recently that can qualify me for 38%(looking back 3 months), but looking at last year tax return I may not qualify.
Late in the game for this, but obvs upside is huge; should apply if friend can get in under the wire.
techrover, they’ll ask for 3 years of tax returns and last 2 months pay stubs. The 38% (as I understand it) will be the situation as long as that’s what it is now & that you can link it to so kind of demonstrable hardship that led to a drop in income or rise in payment.
Here’s one thing that may come as a surprise: if you’re paying your property taxes by yourself (as I’d imagine is the case for most homeowners on the site), the taxes will NOT be included in what they consider an “unaffordable payment.” If your taxes are escrowed, only then will they use that to calculate your mort + taxes / income ratio, so what they deem an affordable/unaffordable payment can be radically different. Might be too late now to escrow the taxes, but maybe not; ask the servicer if you’re considering this.
Thinking this through, that was surely the easiest way to play this all along: if you had been paying your taxes directly to your county and mortgage payment/income was, say, at 32-35% then just escrow your taxes and bingo! Your payment suddenly has jumped over 38%, making it an unaffordable payment and you qualify for principal reduction.
Thanks for the tip downercow.
I have the property+home insurance escrowed so covered there. I do not have full-time job due to layoff, and not having luck with good jobs now. I am focussed on trying to get some self-employment(consulting) type business going with s-corp, but no solid income yet. So hope the paystubs may not be an issue.