Memphis Habitat Homebuyer Program Orientation - June 2023

Homebuyer Program Orientation Session

Mission statement: Seeking to put God’s love into action, Habitat for Humanity brings people together to build homes, communities and hope.

Since 1983, Habitat for Humanity of Greater Memphis has built nearly 600 homes!

Habitat for Humanity International was founded in 1976 by Millard and Linda Fuller who developed the concept of “partnership housing.” The concept centered on those in need of housing working side by side with volunteers to build affordable homes. The houses would be built at no profit. New homeowners’ house payments would be combined with nointerest loans provided by supporters and money earned by fundraising to create “The Fund for Humanity,” which would then be used to build more homes.

Thanks in no small part to the personal involvement of President Jimmy Carter and his wife Rosalynn and the awareness they have raised, Habitat now works in nearly 1,400 communities across the U.S. and in approximately 70 countries and has helped 29 million people achieve strength, stability and independence through safe, decent and affordable shelter.

Why Habitat?

Habitat exists to make the dream of homeownership a reality for local individuals and families who cannot qualify for traditional mortgages due to income requirements.

Income Guidelines

Having income within these guidelines does not guarantee eligibility. Applicants must prove their ability to afford the monthly payments and household expenses.

How are our affordable mortgages possible?

 Our program is an opportunity for you to PURCHASE a NEW home!

 Homes are sold to qualified buyers at no profit and with an affordable mortgage loan.

 A 30-year loan, with basically 0% interest over the life of the loan.

 We don’t charge you what it costs us to build a home.

 Your mortgage payment will include PTI:

 Principle (The “principle amount of the loan” is the amount you borrowed and will pay over 30 years.)

 Taxes (City of Memphis and Shelby County)

 Insurance (Homeowners Insurance is required.)

NOTE: Volunteers, faith-based organizations & businesses give their time, money & effort to help you build your home.

* Total payment has been rounded to the nearest dollar.

** For Truth in Lending Act (TILA) purposes, the “Total interest” shown as $2,086.40 includes Earnest Money, Closing Cost, and Credit Report Fee.

Comparison: A Habitat Mortgage vs a Traditional Mortgage

Based

Based on a 30-year traditional mortgage with an annual percentage rate of 7%. (As of June 2023.)

$135,000

$188,473

$321,028

When you buy your home through Habitat – you will obtain a basically interest-free mortgage.

*Numbers rounded to the nearest dollar

**includes financed Mortgage insurance on FHA Loan example

Bedrooms/Family Size

• 3 Bedrooms (1-4 person household)

Examples of HFHGM Mortgage Payments

Approx. Mortgage Payment

• 3 Bedroom = $125,000 total/ $632.00/month

• 4 Bedrooms (4-6 person household)

• 4 Bedroom = $135,000 total/ $660.00/month

• 5 Bedroom (6–8 person household)

• 5 Bedroom = $150,000 total/ $720.00/month

Examples above include Principle, Taxes and Insurance. The payments may also vary based on insurance rate and tax rates.

*The sales price can/may vary based on appraised value.

 We build ADA-compliant, 3-, 4- and 5- bedroom, 2-full bathroom homes that are approx. 1,200 to 1,800 square feet. They can be 1- or 2-story.

How We Build Our Homes

 Partner families select exterior colors, brick, countertop, and flooring which includes carpet and vinyl choices.

 Homes come with a 1-year limited builder’s warranty.

 We are an eco-friendly or ecological builder (beneficial or non-harmful to the environment and resource efficient). Otherwise known as green building, this type of construction is efficient in its use of local and renewable materials, in the energy required to build it, and the energy generated while living in it.

 We install new, high-efficiency air conditioning and heating units.

 Energy-efficient double-paned windows with screens!

 Upgraded 3-dimensional shingles.

• Ceiling Fans

Habitat Home Amenities

• Free lawn mower

• Smoke detectors in every room

• Sodded and landscaped front and back yards

• Monitored alarm system is optional and will require a fee.

• New, energy-efficient appliances:

 Refrigerator

 Stove

 Dishwasher

 Washer and Dryer

 Garbage Disposal

We are currently building in North Memphis on various streets and South Memphis in Castalia Heights on Carver Avenue.

We will inform you of the exact lot location when those the details are available.

How becoming a Memphis Habitat homebuyer works:

Qualifying, Partnering, and Paying the Mortgage

The Three Tenants of Habitat for Humanity’s Homeownership Program QUALIFY PARTNER PAY

Just like a traditional mortgage, applicants must meet various qualifications, including having a need for our services. We look at 4 living situations to determine need:

Each family accepted into the program is required to: Qualify for a 30-year mortgage at 0% by having stable, verifiable income sufficient to support a monthly mortgage payment and your other expenses. (HUD guidelines)

• Substandard Conditions

• Temporary/Transitional Housing

• Overcrowding

• Cost-Burden

• Attend our 13-week Homebuyer Education class

• Complete 350 sweat equity hours

• Start a savings plan and have $1,000 emergency fund in a savings account. Will be monitored

• Pay $2,000 earnest money toward closing costs

• Make monthly mortgage payments on time!

• Meet with Memphis Habitat Homeownership Service Manager regarding issues around on time payments.

Applicants Must Have Enough Income to Pay Their Current Debt and the New Mortgage Payment

How to Qualify

Housing Expense Ratio = 30%

To calculate, divide your new monthly mortgage payment by your monthly gross income (the amount you earn before anything is taken out). The result should not exceed 30%.

Debt To Income (DTI) Ratio = 43%

To calculate, add up all your current expenses & bills + your new mortgage payment. Divide that total by your monthly gross income. The result should not exceed 43%.

Note: Depending on our funding source, a 620 credit score may be required as well as lower DTI and Housing Expense Ratios.

STUDENT LOANS are calculated into the DTI, even if they are in DEFERMENT.

If you have student loans in deferment, the new rule allows FHA lenders to assume that you’re paying .50% of the balance each month for the purposes of calculating DTI. So if you have $25,000 in deferred student loans, an FHA lender will add $125 to your assumed monthly debt obligations, instead of $500 under the old rule.

You will be asked to provide a copy of your deferment letter, Income-driven payment plan, or student loan statement.

 Applicants need to have passable credit with no outstanding judgements, tax liens or collections. Cannot currently be or have in the last two years Bankruptcy.

Credit & Background

 All collections need to be paid in full (this includes medical bills). (Tax time = good time to pay off debts!)

 Applicants must pass a Background and Sex Offender Registry check, as well as any household member 18 or older.

Note: See Memphis Habitat Homeownership Program flyer/Page Two of application.

1. Bring in your completed application with all applicable supporting documentation.

The Process

4. Approved files are then sent to the Habitat Board for final approval.

2. The Mortgage Services team will inform you if you’re approved to move to the next phase, which is a home visit.

5. You will receive a Letter of Acceptance or Denial regarding your acceptance into the program.

3. After the home visit, your file will be presented to the Family Selection Committee for approval.

6. Attend the 13-week Homebuyer Education classes.

7. STAY APPROVABLE!

HOMEBUYER PROGRAM APPLICATION CHECKLIST (Part 1)

ITEMS BELOW MUST BE RETURNED WITH YOUR APPLICATION TO AVOID PROCESSING DELAYS:

 The fully completed application with all signatures.

 A money order or cash for $35.00 or $70.00 for joint applicants ($36.00 or $72.00 for joint applicants if paying by debit/credit card) payable to Habitat for Humanity of Greater Memphis, to cover the tri-merge credit report fee.

 Three forms of identification (drivers’ license, birth certificate, and social security card) for every person 18 or older who will occupy the Habitat home for which you are applying. Two forms of identification for any person under age of 18 who will occupy the home.

 All income is considered (i.e. W-2 income, Disability, SSI, Retirement, and Pension). If your income is from W-2 income, then a 2-Year work history is required. Your most recent paycheck stub with year to date earnings. (If the applicant is self-employed, we require the past two years of tax returns with all schedules and a year to date profit and loss statement). This is required for every person over the age of 18 who will occupy the Habitat home for which you are applying.

ITEMS BELOW MUST BE RETURNED WITH YOUR APPLICATION TO AVOID PROCESSING DELAYS:

 Two most recent years of tax return, 1040 and applicable schedules (no worksheet) with all W-2s and/or 1099’s (If self-employed, two years’ tax returns must be provided). There are many reasons people are not required to file taxes. If you do not file taxes, we will require a letter from the IRS that states they have no record of your filing for each year requested. This is called a Verification of Nonfiling and can be obtained from at irs.gov, by phone -1-800-829-1040 or in person at the local IRS center – 22 N. Front Street, Memphis, 38103.

 The most recent Social Security award letters for any individual who will occupy the Habitat home for which you are applying that receives Social Security benefits.

 If child support is being received or, if you are required to pay child support, we must be provided the case number or a printout from the court clerk or TN child support program showing that all required support has been received or paid for a period of at least one year without interruption.

 Checking & Savings Bank statements (all pages) for the two months immediately preceding the month in which the application is made (for applicant and co-applicant).

 Acknowledgment/Consent to Sex Offender Registry search for every individual who will occupy the Habitat home who is over the age of 18.

How to Apply

We will process your application in a timely manner once it is received.

Remember, there is a credit bureau fee of $35 (or $70 for joint applicants) that can be paid with money order or cash. (If paying by card, the fee is $36 or $72 for joint applicants.)