The City of Kenosha is able to assist applicants who are buying a home within the City of Kenosha and who have a financing gap. The City can offer a deferred second mortgage, up to the amount of the financing gap or 17% of the purchase price, whichever is lower. HOME second mortgage purchase loans for eligible homebuyers will be written as deferred payment loans at 0% interest for the first ten (10) years, then monthly payments will be required for the next twenty (20) years at an interest rate of 3% annually. The homebuyer cannot own any other residential property at time of closing.
In all cases, the second mortgage will be based on the financing gap, less the amount of the first mortgage and required down payment. As part of its underwriting review, the City will evaluate debt-to-income (dti) ratio for all applicants. Generally, the front end dti should not be any greater than 30%, including the first mortgage principal and interest, taxes and insurance, and the back-end dti should be less than 45%. Where the front-end dti is greater than 30% or the back-end dti is greater than 45%, the City may provide a second mortgage for a larger amount than the financing gap to reduce the front-end dti to 30% or less, or to reduce the back-end dti to 45% or less.
Applicants to purchase properties for sale through the City of Kenosha's HOME Program must be US citizens or have “Qualified Alien” status under Section 431 of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996.
Eligibility for buyers through the HOME Program is based on annual household income. Total annual household income cannot exceed 80% of the County’s median income per family size as determined by HUD. In accordance with the federal HOME Program Rules, the City has chosen to use Federal Income Tax IRS Form 1040 adjusted gross income to determine annual income. All homebuyers must sign IRS Form 4506 “Request for Copy of Tax Form” and the City will request a copy of the applicant's federal tax return transcript from the IRS. For IRS tax returns older that six months, the City will require an updated income verification, including third party verification of employment and recent earnings statements.
Ability to Obtain Mortgage Financing
Potential homebuyers must have the ability to obtain a Fixed Rate mortgage loan from a private lender for a minimum of 80% of the purchase price of the property offered for sale. The minimum financing is based on a 3% down payment. Where the homebuyer provides a larger down payment, the minimum financing obtained through a private lender or the City may be reduced. The homebuyer cannot own any other residential property at time of closing.
Down Payment Requirement and Down Payment Assistance
All homebuyers are required to provide a 3% down payment at closing. The down payment may be from the buyer’s personal savings or from a Down Payment Assistance Grant provided through the Federal Home Loan Bank, City of Kenosha, or other source of down payment assistance.
The City may provide a Down Payment Assistance Grant to eligible homebuyers through HOME Program funds. The Down Payment Assistance Grant will require the homebuyer to pay a minimum of 25% of the required downpayment amount, or $1,000, whichever is greater. The Homeowner will be required to live in home for minimum of five years, or the grant amount will be required to be paid back in full, less a 20% reduction for every year the homeowner resides in the home.
Down Payment Assistance for VA Loan Borrowers
The City may provide a Down Payment Assistance Grant of up to $5,000 for eligible Veterans Administration Loan borrowers. Down Payment Assistance Grants will be a lien filed on the property and will be forgiven provided the homeowner resides at the property for a period of 5 years after purchasing the property. Where the homeowner lives in the home less than 5 years, the grant amount will be required to be paid back in full, less a 20% reduction for every year the homeowner resides in the home.
Primary Residence and Owner Occupied Single Family Deed Restriction
HOME assisted property must be occupied as the homebuyer’s primary residence. The City will place a Deed Restriction on the property at the time of property transfer: "This property is a single family dwelling and will always remain a single family dwelling and owner occupied for as long as it remains on the land." The homebuyer cannot own any other residential property at time of closing.
Homebuyer Counseling Requirement
All homebuyers receiving assistance through the City’s HOME Program must participate in homebuyer training offered through a HUD certified Local Housing Counseling Agency and provide the City with certification they have successfully completed such training.
Closing Cost Assistance
The City may provide a Closing Cost Assistance Grant, up to 3% of the purchase price, to eligible homebuyers through HOME Program funds. The Homeowner will be required to live in home for minimum of five years, or the grant amount will be required to be paid back in full, less a 20% reduction for every year the homeowner resides in the home.
Recapture and Resale Provisions
HUD requires either a Recapture or Resale Lien recorded to protect the assistance provided to the homebuyer. In most cases, the Recapture Lien will be recorded.
This option will be used by the City to recapture the HOME funded second mortgage purchase assistance loans provided to the homebuyers if the HOME recipient decides to sell the house within the required affordability period. The homeowner is able to sell the property at whatever price the market will bear.
Affordability periods for home ownership assistance through the HOME Program
|HOME Funds Provided (Per Unit) *||Affordability Period|
|Less than $15,000||5 Years|
|$15,000 to $40,000||10 Years|
|Greater than $40,000||15 Years|
*Per unit HOME Program assistance for home ownership is based on the amount of the HOME mortgage purchase assistance provided to the homebuyer. For example, if the City's HOME funded second mortgage to the buyer is $25,000, the affordability period on the home is 10 years. Therefore, the City will provide second mortgage purchase loans with monthly payments deferred for 10 years at 0% interest. After the initial 10 years, the loan converts to a 3% monthly installment loan at 3% interest for a 20-year term.
The resale option will only be used by the City in those cases where the homebuyer declines to accept a HOME funded second mortgage to purchase a HOME Buyer Program property. This option ensures that the HOME-assisted unit remains affordable over the entire affordability term. Resale requirements under the “resale option” include the following:
- The new purchaser must meet HOME Program income eligibility requirements (annual adjusted income below 80% of Kenosha County median income for family size).
- The new purchaser must occupy the property as their principal place of residence.
- The sales price must be affordable to the new buyer.
- Affordability is defined as: Monthly payment for principal, interest, taxes and insurance (PITI) cannot exceed 40% of the purchasers gross annual income.
- The seller is entitled to a “fair return” on their investment upon sale of the property. “Fair Return” on investment for purposes of the City’s HOME Program includes the homeowner’s initial investment (first mortgage, down payment and closing costs) and any documented capital improvements to the property completed after the initial sale.
Enforcement of the Recapture or Resale Options
The City will use the following legal instruments to meet and enforce the requirements of the recapture or resale restrictions:
|HOME Requirement||Recapture Option||Resale Option|
|Principal Residence||Deed Restriction & HOME Lien||Deed Restriction & HOME Lien|
|Affordability Period||Promissory Note & HOME Lien||Deed Restriction & HOME Lien|
|Repayment of HOME Subsidy||Promissory Note & HOME Lien||Deed Restriction & HOME Lien|
|Fair Return to Owner||N/A||Deed Restriction & HOME Lien|
|Affordable Resale Price||N/A||Deed Restriction & HOME Lien|
|Subsequent Buyer’s Income||N/A||Deed Restriction & HOME Lien|
|* HOME Lien is a separate document recorded with the HOME Program Mortgage securing repayment of the HOME subsidy.|
The City of Kenosha has partnered with area lenders who have reviewed and approved the City of Kenosha programs. These lenders will typically be able to approve applicants more quickly than lenders who have not previously approved the City of Kenosha programs.
The applicant may choose any lender; however, not all lenders may approve the City of Kenosha programs. If the lender has not previously approved the City of Kenosha programs, the applicant will need to allow more time for approval of their financing.