Facts About Deferred Loans

Deferred Loan #1

• Secured as a zero-interest, deferred second mortgage.

• Provides assistance with down payment and/or closing costs.

• Maximum amount of loan is $6,000 and the amount received will depend on mortgage lender’s requirements.

• One-half of the loan will be forgiven following a period of 5 years provided owner occupies the home during the entire 5-year period.

Deferred Loan #2

• Secured as a zero-interest, deferred third mortgage.

• Used only for repairs authorized by the City for a limited time after closing on the home.

• Maximum amount of loan is $5,000 and the amount received will depend on the cost of repairs.

• Loan is not to be used for Health and Safety code violations identified prior to purchase. Those types of repairs are required to be paid for and completed by the seller prior to closing.

• Loan is forgivable after 5 years, provided the owner occupies the home during the entire 5-year period.

The zero-interest, deferred loans are secured as a second and a third mortgage on the home and will be payable to the City when the home is sold, the owner no longer occupies the home as a primary residence, or the owner refinances first mortgage.

Applicants must not have owned a home within the last three years unless they are single parents with custody of minor children.

Program applicants should have a credit history free of delinquent obligations, and have a demonstrated ability to qualify (i.e. pre-qualify) for a first mortgage loan with an approved lender.

• Applicants must be able to provide $1,000 of their own money to complete the home purchase.

• Household income may not exceed the following amounts, based on household size.

           1 person   - $35,200
           2 persons - $40,250
           3 persons - $45,250
           4 persons - $50,300
           5 persons - $54,300
           6 persons - $58,350
           7 persons - $62,350
           8 persons - $66,400

• Are more than one year old. (For new construction, see our “New Construction and Infill Housing Incentives” program.)

• Are located within the City's Homeownership Assistance Areas.

• Sell for $95,550 or less.

• Are free from Health and Safety Defects and meet City Codes as determined by an inspection performed by a City of Wichita designated inspector.

NOTE: HUD homes, homes sold under installment sale agreements, or homes sold under Contract for Deed agreements ARE NOT ELIGIBLE FOR THIS PROGRAM!

1. Submit an application to the City of Wichita Housing and Community Services Department at 332 N. Riverview, or access the HOMEownership Program Application on our website.

2. Attend and complete a city-sponsored homeownership training session by contacting Mennonite Housing at (316) 942-4848, Community Housing Services at (316) 685-2656 or the Urban League of Kansas at (316) 262-2463. There may be a nominal fee to attend the training.

3. After submitting the application, HOME 80 program staff will verify income and credit.  The application must be complete with ALL of the requested documentation or it WILL BE DELAYED. Applicants should review the application package to ensure it includes all requested information, including signatures, before submitting.

4. When the application is approved, HOME 80 program staff will send a HOME 80 funding commitment letter stating that funds are reserved to purchase a home. If not approved, HOME 80 program staff will send a declination letter.

5. When/if approved for the HOME 80 program, a “pre-qualifying” appointment with a reputable lender (e.g., mortgage company, bank, etc.) offering competitive interest rates will need to be scheduled.  Credit problems or other home financing issues need to be resolved prior to qualifying for a home loan. The following links below may be useful:

   HUD > Predatory Lending

   HUD > Don't be a Victim of Loan Fraud!

6. After pre-qualifying for a loan, applicants should begin shopping for an existing home that fits their household budget and needs.

   IMPORTANT: Homes built prior to 1978 are presumed to have lead-based paint. Homes exhibiting defective (i.e. chipping, peeling, scaling, cracked, blistering) paint should be inspected carefully. Lead-based paint can be a health hazard to anyone  in the household, including children, and will likely cause the house to FAIL the City’s inspection. The house must pass inspection to be purchased.

7. The City must notify the seller in writing that there will be  assistance with the home purchase. The buyer must contact the HOME 80 office at (316) 462-3766 before the seller signs a contract so that a Relocation Letter can be sent to the buyer or  realtor. If the City isn't informed beforehand of the intended purchase agreement, the property may no longer be eligible under the program. Federal rules regarding lead-based paint and relocation apply to the subsidy and require the advance notification of assistance.

8. A copy of the purchase contract signed by all parties and the original relocation letter signed by the seller must be provided to the HOME 80 office. Staff will then request the City inspection. If the inspection reveals that deteriorated paint is present in the home, the seller will be required to correct this problem, as well as other health and safety defects. The seller may not be willing to contractually commit to doing so. If the house does not pass the City’s inspection, it cannot be purchased with the City's financial assistance.

9. Once the approved property is under contract, a commitment for a first mortgage loan must be obtained from a lender. The lender must send a copy of the "good faith estimate" to the HOME 80 office.

10. After closing on the loan and the home purchase, it is the owner's  responsibility to make all monthly payments. As stated previously, the zero-interest, deferred loan(s) received from the City are secured by a second mortgage for the down payment and closing costs loan, and if utilized, a third mortgage for the City-approved repairs loan. The owner will be required to repay the deferred loans in full at the time of resale, or when the  property is no longer the principal residence, or upon refinancing the first mortgage. The loan provided for the City-approved repairs will be forgiven after a period of 5 years from the date of the original purchase provided the original HOMEownership 80 buyer occupies the home during that time. In addition, one-half of the loan provided for down payment and closing costs will be forgiven after 5 years, under the same conditions.

Revised 7/2009

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