City of San Jose: Homeownership Loan Programs / Down-Payment Assistance Programs
Homeownership Loan Programs
General Underwriting Guidelines
Homebuyer Program Guidelines Page 2 of 27
Homebuyer Program Guidelines Page 3 of 27
Table of Contents
Mission and Goals of the City of San Jose’s Programs………….…. 4
I. Program Requirements…………………………………………… ........ 5
A. Borrower Eligibility……………………………………………….…. 5
1. First Time Buyer……………………………………………….…. 5
2. Income Eligibility…………………………………………………. 6
3. Asset Limitations…………………………………………………11
4. Definition of Household Size and Eligible
Household Members………………. ....................................... 11
5. Allowable Size of Home to be Purchased………………….… 14
6. Homebuyer Education Requirement…………………….……. 15
7. Credit Requirements and Underwriting………………………. 16
8. Welfare Reform and Immigration Status…………………….. 19
B. Property Eligibility…………………………………………………. 19
1. Eligible Housing……………………………………………. ..... 20
2. Property Conditions…………………………………………. 20
3. Maximum Sales Price………………………………………. 21
C. Additional Requirements………………………………..……. ...... 21
II. Application Process………………………………………………….. 24
III. Program Monitoring………………………………………………… 25
IV. Appeals Procedure…………………………………………………… 25
Appendix 1……………………………………………………………. ........ 26
Appendix 2……………………………………………………………….. 27
Appendix 3………………………………………………………………. .... 28
Homebuyer Program Guidelines Page 4 of 27
Mission and Goals of the City of San Jose’s Programs
The mission of the City of San José’s Homebuyer Program is to assist low and
moderate-income households attain homeownership in San Jose’s
neighborhoods through down-payment assistance loans provided by the City.
The City’s Homeownership funds are targeted to households that would not be
able to purchase a home without City financing. The City strives to assist as
many homebuyers as possible by limiting the subsidy levels to the amount
needed by the household to purchase a modest home that is appropriately sized
for the household.
The City’s Homeownership Programs are comprised of three main programs:
Building Equity & Growth in Neighborhoods (BEGIN) Program
Inclusionary Second Mortgage Program
The City requires a minimum loan amount of $5,000 for all the City of San
José’s homebuyer programs:
BEGIN Program: Downpayment assistance program in new construction
developments for low- and moderate-income first-time homebuyer.
CalHOME Program: Downpayment assistance program in specific new
construction developments for low-income first-time homebuyer.
Inclusionary Second Mortgage Program: The Inclusionary second mortgage
program is currently dormant. Some new construction builders may offer
second mortgage programs to comply with the City’s Inclusionary Housing
Policy. However, the City provides the builders with an array of possibilities
when it comes to meeting compliance; the second mortgage program is just
Homebuyer Program Guidelines Page 5 of 27
I. Program Requirements
A. Borrower Eligibility
1. First-Time Buyer
All household members are required to be first-time homebuyers. A firsttime
homebuyer is a household whose household members have not
owned any real estate during the prior three calendar and tax years. The
City may utilize any reasonable method of documenting first-time
homebuyer status including, but not limited to, a review of the households’
tax returns and credit report. For example, if a household has received
tax benefits through Schedule A on their itemized deductions within
the last three years or if the household has a real estate loan appear on
their credit report and ownership on the grant deed within the last three
years, the household will not qualify as a first-time homebuyer.
All City loans will allow households to have owned and sold a
mobilehome prior to application, however, they cannot own any
real estate at the time of applying.
A displaced homemaker is considered a first-time homebuyer.
A displaced homemaker is someone who, while a homemaker,
owned a home with his or her spouse/domestic partner or
resided in a home owned by the spouse/domestic partner. A
displaced homemaker must have not worked on a full-time basis
as a member of the labor force for a consecutive twelve-month
period and who must have been unemployed or underemployed,
experienced difficulty in obtaining or upgrading employment, and
worked primarily without remuneration to care for his or her
home and family. A displaced homemaker must not occupy a
previously owned residence and must not be obligated to make
mortgage payments and maintain a property. A displaced
homemaker must not occupy the previously owned residence
and must provide verifiable documentation that the household is
renting and occupying another property. Note: If the
spouse/domestic currently occupies a previously owned home
Homebuyer Program Guidelines Page 6 of 27
partner of a household, then the City will require the household to
provide verifiable documentation that the household is not required to
contribute to the housing costs from the previous home.
A displaced homemaker may also be a single parent (example: a
divorced person) who, while married, owned a home with his or her
spouse/domestic partner or resided in a home owned by the
spouse/domestic partner. A single parent is an individual who is
unmarried or legally separated from a spouse and has one or more minor
children for whom the individual has custody or joint custody.
All households with previous ownership of a primary residence (e.g.
previously married and presently separated or divorced thereby
changing the martial status of the household to a displaced person) will
be required to submit a Final HUD-1 from the sale of a previously owned
home to verify eligibility as a first-time homebuyer.
2. Income Eligibility
Overview: There is no presumption of income eligibility. Verification from
all income sources, for every household member who is 18 and over,
must be obtained. All income documentation will be reviewed and any
questions or concerns that arise as a result of the review, must be
explained, and documented. It may be necessary to request
additional information and documents BEFORE final approval can be
obtained. The file must include sufficient written detail that documents
how all questions and concerns were addressed. The most
conservative income calculation approach will be used if information
cannot be verified to the City’s satisfaction.
Total gross income for the entire household may not exceed the income
limit in effect at the time of application to the homebuyer program. In
general, Income is defined as income earned from all household
members age 18 years and above and projected forward at the same
level for the next twelve months. Income includes earnings from
employment, government benefits, investments, interest income, and
other cash-generating activities. All household members, 18 and over,
must submit three of their most recent paycheck stubs as part of their
loan application. City staff will use the following methods to calculate
income for all household members:
A signed letter explaining the concern MAY NOT be sufficient. All
attempts must be made to verify the information stated in the affidavit.
If the concern cannot be adequately documented, the application may
Homebuyer Program Guidelines Page 7 of 27
A. Income from full-time employees will be calculated as follows:
Hourly Employees- Income documentation and
information will be obtained from the household’s three
most recent paystubs. Base pay income will be calculated
by taking the gross year-to-date (YTD) earnings and
annualizing the income over the number of months
employed during the year to obtain the gross monthly
income. The gross monthly income will be projected
forward at the same level of earnings for 12 consecutive
months. Paystubs are considered outdated after 60 days.
For these purposes, months will be pro-rated using a
Salaried Employees- Income will be calculated and
projected forward by multiplying the bi-weekly gross salary
by 26 weeks or the bi-monthly gross salary by 24 payperiods
and adding in the amount earned from annual
bonuses, commissions, in-lieu payments, etc.
Third party verification- Third party verification will be
obtained to support paystubs. If the third-party verification
is not available or was attempted with no success, then a
review of paystubs will be sufficient to document income.
All employed household members must submit a signed
Verification of Employment Form and/or an Employment
Acceptance Offer signed and dated from the employer on
letterhead. The Employment Acceptance Offer must state
the date in which employment shall commence, the salary,
and signed by the employer and employee.
B. Income from part-time or variable income employees will be
calculated as follows: The City will calculate the gross year-todate
income from the most recent paystub and averaging the
income over the number of months employed during the year to
It is important to check the reported income against both
the tax returns and the income provided to the Lender. If
the calculated income does not match both documents,
then further investigation and analysis is required and
must be documented in the file. For example, a
household member may have received either a pay
increase or decrease since the income tax form was
filed. The Verification of Employment Form should also
be reviewed for automatic raises. The raise must be
included in the income calculation.
Homebuyer Program Guidelines Page 8 of 27
obtain the gross monthly income. The gross monthly income
will be projected forward at the same level of earnings for 12
consecutive months. If the year-to-date income covers less than
three months in the current year, the City may include the
average year-to-date earnings from the prior calendar year in
addition to the current year if the employee’s work schedule has
not significantly changed. In cases were hours worked varies for
each pay period, a third-party verification is required. Any income
discrepancies must be verified by multiplying the hourly rate by
the average number of hours worked provided by the
C. Income from overtime, commissions, ongoing stipends, shift
differential pay, and other sources will be annualized (using
year-to-date earnings) and included in the household’s gross
monthly income. Income that is received in lieu of earnings,
despite the temporary nature of such pay (i.e. unemployment,
worker’s compensation, and severance pay) will also be included
as income. Income received from one-time non-recurring
bonuses, non-recurring lump-sum payments from the sale of
stocks or bonds, stock options, lump-sum inheritances, retropay,
insurance payments, or relocation benefits can be
excluded. The non-recurring nature of such income must be
documented by a fully completed Verification of Employment
(e.g. VOE) and/or from alternate source documentation
acceptable to the City.
D. Interest income from investment and capital accounts, such as
checking, savings, money market, certificate of deposit
accounts, dividend income from mutual fund accounts, stocks,
and other income-generating assets must be included in the
household’s income. The interest income earned will be
calculated on all capital account balances, when the household
has over $5,000 in total assets. The interest rate will be
calculated at the greater of the actual annual earnings, 2.5%, or
the current passbook rate as established by the HUD regional
office. These amounts will be included in the household’s
household income only when the interest income meets the
The account is considered liquid, and the household can
withdraw the funds without tax penalty.
If it is determined that the overtime pay or bonuses earned
by the household member will be received on a regular
basis, then the average amount earned over the past 12
months will be added to the total amount of projected
Homebuyer Program Guidelines Page 9 of 27
The interest rate earned on the account is variable, and
subject to change based on market conditions.
E. Current monthly income and annuity payments from retirement
accounts, (including social security and pensions), alimony,
child-support, and other steady, ongoing sources will be included
in the household’s gross annual household income calculation.
Non-taxable incomes will not “be grossed up” by the City,
regardless of the lenders determination of such income.
F. All forms of income from non-household spouses and other
household members who are 18 and over will be included in the
gross monthly income calculation, regardless of the taxability of
such income. Annual income from full-time college students as
described in Section VIII will be included.
G. Income from seasonal and part-time jobs such as coaching,
lecturing, test proctoring, etc., will be included only when the
household can reasonably be expected to continue to be
employed in the same line of work over the coming twelve
H. Capital losses will not be deducted from the income calculation.
I. For self-employed households, income will be based on the net
income before taxes. The borrower must provide two forms of
1. The most recent 3 years’ business and/or
personal federal tax returns, including W-2’s or
1099’s. Positive net income from a business will be
added to the household’s gross income AND
2. A year-to date profit & loss and income statements,
signed by the individual who prepared the statement.
This must include information covered year-to-date
and a letter of explanation, signed and certified by the
household, stating the anticipated net household
income (after deducting business expenses) over the
next 12 months; or
Homebuyer Program Guidelines Page 10 of 27
3. A year-to-date-balance sheet, prepared and signed by
the individual who prepared the statement, reflecting
the financial position of the business at a specific point
in time and a signed letter of explanation regarding
the household’s anticipated net household income
(after deducting business expenses) signed and
certified by the household.
No-income Household members. Each adult household member who
does not receive income from any source shall be required to submit:
1) An Income Affidavit;
2) Letter of Explanation;
3) Social Security Administration Consent for Release of Information;
4) Request for Verification of Benefits, and;
5) An Authorization for Release of Records from the
Employment Development Department.
3. Asset Limitations
All household members are required to provide a minimum of
two months of recent bank statements for all asset accounts.
Statements may not be older than 90 days upon the Housing
Department’s receipt of the application package.
The household is required to liquidate a portion of their assets
when the value of such liquid assets will exceed $75,000 at the
close of escrow. However, liquid assets do not include the value
of equity in real property, cash-value of life insurance plans,
furniture, jewelry, automobiles, pensions, and/or individual
retirement accounts for persons under the age of sixty,
Acceptable sources of down payments include, but are not
limited to the following sources: Checking and Savings
Accounts, Investment or Capital Accounts, Retirement
Accounts, Gift Letters (a copy of the Gift Letter and the source
It may also be important to check both the personal and business bank
statements to determine if the information provided is consistent with
the information provided.
The City may refuse to include a person as an eligible household
member if the applicant does not provide sufficient documentation to
determine program eligibility.
Homebuyer Program Guidelines Page 11 of 27
and origin of the funds must be included with the City’s loan
application, for example the bank statement, Investment
4. Definition of Household Size and Eligible Household Members
A. Household Size
Determining the household size is critical because income limits
used to determine eligibility are based on the total number of
people in the household. The Household is comprised of ALL
individuals who are currently living together and will continue to be
living together in the subject property. New household members
cannot be added to the application to income qualify for a City
loan. In addition, the following individuals are not counted as part
of the household: foster children, unborn children, children who
live with the household (parent) less than 50% of the time,
children being pursued for legal custody or adoption who are not
yet living with the household at the time of application, and nonfamily
B. Eligible Household Members
To be considered an eligible household member, the person must
meet one of the following criteria:
Person is on the title and loan of the property. All spouses and
domestic partners must be included in the household and must
appear on the City application and the City loan; or,
Person is a dependent(s) listed on the tax returns of an eligible
household member. All household members who are under 18
years of age must be the legal dependent of an adult
Members of the household who are not either on the title and/or primary
loan of the property and are not a dependent can only be considered an
eligible household member if they are currently living in the same
household. If adequate proof cannot be provided that a person is
currently living in the household, then the person cannot be included as
part of the household.
In some cases, documentation is required to establish
whether a child is part of a household. If applicable, court
documents verifying child custody or foster care must be
included in the file.
Homebuyer Program Guidelines Page 12 of 27
Full-time college students, 18 and over, who is living away from
To be eligible to be included as a member of the household, the fulltime
student must meet one of the following requirements
Be claimed on a household member’s tax returns as a
Receive over 50% financial support from the household
Student’s income must be counted in the household's total income
calculation. If the student is unable to produce income documentation,
the City will add $480 to the household's annual household income.
A household member MAY NOT self-certify residency NOR can
they be added to an application after it has been submitted.
Examples of documentation that may be provided to substantiate
that the person is a member of the household include the following:
Current lease or rental agreement
Driver’s license or CA ID
Credit card or bank statement
Credit Bureau Report
In either case, documentation from the educational institution
must be provided that shows the student is enrolled for 12 or
more units/credits. If the student is not claimed on a tax return,
then documentation showing that the household provides 50%
financial support must be provided with a letter of explanation
outlining how the 50% threshold was met and backup
documentation to support the calculation. The information cannot
contradict any other funding source. For example, if the student
receives a grant which required that he/she be emancipated,
then the student cannot be counted as part of the household. A
self-certification letter will not be accepted. If it cannot be
established that the student receives 50% of his or her support
from the household, then the student cannot be included in the
Homebuyer Program Guidelines Page 13 of 27
However, if the student is a head of household or a spouse/domestic
partner of the household, the student will be required to produce
verifiable income documentation.
Note: The income of family caretakers (e.g. relatives) who live with the
household will be included in CalHome funded loans.
C. Types of Persons Included in Household Size
Eligibility Determination and Required Documentation
Persons counted in
Other Income and
Head of Household Yes Yes
Other Adult (18 and
over) living in
Child under18 No No
(18 and over)
Only count the first
$480 of earned
Step-by-Step Methodology for Projecting Annual Income
Step 1: Determine household size.
Step 2: Collect all income documentation.
Step 3: Calculate household’s projected income based on
Step 4: Compare the amount of projected income against the
funding source’s current income limits. NOTE: Federal and
state income guidelines are not always the same.
5. Allowable Size of Home to be Purchased
No City loan may be used to purchase a home larger than is
considered adequate to meet the needs of the household. Adequate
home size is established as one bedroom per household member,
plus one (see chart below). This guideline applies to all Cityadministered
and City-funded loan programs.
Homebuyer Program Guidelines Page 14 of 27
Household Size Maximum Number
Households that wish to purchase homes larger than these
guidelines allow should send a written request, and an
explanation of need, included in the household’s loan
application, to the City. The Homebuyer Program Manager
may make an exception for expecting parents; households who
run a verifiable home based business, or a household who is in
the process of applying for legal guardianship of a dependent.
Households seeking exceptions under this policy should submit
verifiable evidence of their projected increase in household size.
Developers of new construction Inclusionary homes may sell a
home to a household outside of this Policy, provided that the
home has been listed for sale on the market and the builder has
actively marketed the home to households in accordance with
this guideline for a minimum of 60 days prior to offering the
home to a household seeking an exception under this policy. To
verify the time, the unit has been on the market, the City may
require the developer to provide supporting documentation
reflecting the release date of the unit.
6. Homebuyer Education Requirement
All household members who will either be on the title of the home or
loan (or both) must complete an in-person, 8-hour; HUD-certified prepurchase
homebuyer education seminar through one of the HUD
certified organizations prior to City loan approval. Households will be
required to submit a certificate of completion, valid for three years
from the date of completion, as a part of their loan application. Please
Homebuyer Program Guidelines Page 15 of 27
contact the City’s Housing Department for a list of Homebuyer
Education Service providers.
7. Credit Requirements and Underwriting
The Lender must provide a credit report and the report will be
analyzed for consistency with the loan application as well as for
complete credit account information from the credit reporting agency.
All borrowers must have a middle FICO credit score of at least 620 on
a merged credit report, no exceptions.
All outstanding liens or judgments must be disclosed at the time of
application and cleared prior to loan approval.
The City requires buyers to contribute a minimum of 1% of the sales
price, from his/her own funds, to close the transaction.
In general, the City’s homebuyer programs are open to use from all
lenders. The City maintains a list of active lenders, but does not
provide referrals to any particular lender. The mortgage lender or
broker will assist the household complete the City loan application and
submit it to the City for review and approval on behalf of their client.
Lenders who have either successfully submitted a minimum of 3 City
loan applications or successfully submitted 1 City loan application and
attended the Homebuyer Educational Class in the prior 12-month
period may request to be added to the City’s active lender list.
The City reserves the right to remove inactive and/or non-compliant
lenders from the list of lenders without notice.
The City also reserves the right to refuse to work with non-compliant
Homebuyer Program Guidelines Page 16 of 27
A. Front-end Ratio: For applicants earning 80% or below of the Area
Media Income (AMI) the front-end ratio (i.e. monthly housing
payment) or the debt-to-income ratio as it is commonly called is
calculated by dividing the total monthly housing payment by the
household's gross monthly income. The front-end ratio shall not be
less than 25%, or exceed 37%. For applicants with an income
between 81%-120% AMI, the front-end ratio shall not be less than 28,
nor exceed 37%.
The front-end ratio includes:
Principal and interest payment on the first mortgage;
Principal and interest payments, if any, on subordinate nondeferred
Real estate taxes;
Hazard insurance premium;
Flood insurance premium, if applicable;
Private mortgage insurance premium, if applicable;
Monthly Homeowners' Association dues for condominiums and
for homes located in planned unit developments (PUD).
B. Back-end Ratio: The back-end ratio, or the total debt-to-income ratio,
is calculated by adding together the total monthly payments of all
existing long-term debt (debt with a remaining term of 10 or more
months) and the total monthly housing payment and dividing that sum
by the household's gross monthly income, as defined in Section III.
The back-end ratio should not exceed 43% of the household’s gross
monthly income. The back-end ratio includes:
The monthly housing payment as defined above;
Long-term installment debt beyond 10 months remaining to be
Revolving accounts and lines of credit;
Alimony, child support or maintenance, if applicable.
Exception: Some households may qualify for first-mortgage financing at
higher ratios than those cited above. Recognizing that the financial
Homebuyer Program Guidelines Page 17 of 27
circumstances of each homebuyer are unique and that there may be
other factors besides debt-to-income ratios that reflect the household's
ability and willingness to repay mortgage loans, the City may consider
the following indicators in approving higher ratios:
The household’s proven ability to devote a larger amount of
income to housing expenses. The household has successfully
demonstrated an ability to make mortgage or lease payments for
twelve consecutive months that are equal to or greater than the
proposed monthly payments for the housing being purchased;
The household’s substantial net worth as demonstrated through
non-liquid assets and retirement accounts;
The household has at least one FICO credit score greater than
The household’s demonstrated potential for increasing his/her
The household’s down payment on the purchase of the
property is at least five percent of the sales price and is
made from his/her own funds;
The household’s substantial non-taxable income such as child
support, disability payments, retirement payments, etc.;
The household’s housing expense will not increase more than
five percent over previous housing payments.
Lenders and households seeking City approval of higher debt ratios
should submit a written request and a letter of explanation seeking
higher ratios to the Homebuyer Program Manager as part of the
household’s loan application. The decision to approve or deny higher
ratios will be made in accordance with the above stated compensating
factors; however, the maximum front end ratio may not exceed 40% and
back end ratio may not exceed 45%.
First mortgages may not include provisions for potential negative
amortization, balloon payments, or principal increases on deferred
interest. For most City loan programs, thirty year fixed-rate mortgages
City loans may only be used for down payment assistance, and not used
to pay for closing costs, buy downs, or prepaid mortgage insurance
premiums. The total loan-to-value of all loans, including City, other junior
and senior loans, cannot exceed one hundred percent of the CLTV.
Homebuyer Program Guidelines Page 18 of 27
8. Welfare Reform and Immigration Status
Welfare Reform Act and Immigration Status: All City Programs are
subject to verification of the legal residence requirements of the
Welfare Reform Act (WRA).
To be eligible for benefits under the WRA, all household members
must be U.S. Citizens, U.S. non-citizen nationals, or “qualified
A “qualified alien” is:
An alien lawfully admitted for permanent residence under the
immigration and Nationality Act (INA);
An alien granted asylum under section 208 of INA;
A refugee admitted into the U.S. under section 207 of the INA;
An alien paroled into the U.S. under section 212(d)(5) of the
INA for at least one year;
An alien whose deportation is being withheld under section
243(h) of the INA as in effect prior to April 1, 1997 or whose
removal is being withheld under section 241(b)(3) of the INA;
An alien granted conditional entry pursuant to section
203(a)(7) of the INA as in effect prior to April 1, 1980;
An alien who is Cuban or Haitian entrant as defined in section
501(e) of the Refugee Education Assistance Act of 1980; or
An alien who (for whose child or parent) has been battered or
subjected to extreme cruelty in the U.S. and otherwise satisfies
the requirements of § 431 (c) of the Act.
All household members must meet the legal residence requirements to
be eligible for City programs.
B. Property Eligibility
The home must be located within the municipal boundaries of the City of
San José (cannot be located in county pockets). If the home is in a FEMA
designated Special Flood Hazard Area, the household will be required to
obtain flood insurance.
Homebuyer Program Guidelines Page 19 of 27
1. Eligible Housing
Eligible types of City-assisted housing types include singlefamily
detached and attached homes including townhomes and
The seller of the home must occupy the property as a primary
residence or the home must be vacant for at least 90 days prior
to listing date. The Property Owner must certify that no third
party had to move out at any time before or after the listing
date in connection with the sale of the Property or to
facilitate the sale of the Property. Properties being occupied by
tenants at the time the property is listed for-sale, are not eligible.
The Housing Department requires the legal owner of the
proposed assisted home to sign a seller’s occupancy affidavit.
The exclusive selling agent of a bank-owned property may sign
the occupancy affidavit on behalf of the seller.
Owners of a new construction unit that had no previous
occupancy are not required to sign the seller’s occupancy
2. Property Conditions
All City-assisted homes must be in good condition and meet
local and federal housing quality standards, and comply with
local building codes. The City will not review the household’s
home inspection report, however, the City may elect to perform
an inspection of the property and a copy of the inspection report
will be shared with Housing staff. If the City elects to perform
an inspection, the buyer’s agent should be prepared to make
arrangements to allow a City inspector into the property in
his/her presence prior to obtaining a loan approval from the City.
In general, all ordered inspections occur within ten business
days of the date the loan application was submitted to the City.
However, if the City determines that a formal Lead Based Paint
Test should be ordered, the inspection time may take up to
fourteen business days. Buyer’s and seller’s agents, lenders,
and the prospective homebuyer should consider the City’s
physical inspection timelines when scheduling escrow closing
dates and removal of contingencies.
During an onsite inspection, housing staff will perform a visual
assessment of the condition of the paint of the unit. All homes
built prior to 1978 with signs of chipping, cracking, or other
Homebuyer Program Guidelines Page 20 of 27
deteriorated paint will be formally tested for the existence of lead
based paint at no cost to the buyer or seller. However, a copy of
the Lead Hazard Evaluation Report will be automatically sent to
the California Department of Public Health and become
available to the public. The City may deny a loan based on
the condition of the property. Property conditions that may
result in denial of the loan include:
The existence of chipping, cracking, or other signs of
deteriorating lead-based paint in either the interior or exterior
of the unit.
Violations of local building codes, or the presence of illegal or
unpermitted structures, additions, or alterations.
The City recommends that all households order their own home inspection
reports from a licensed home inspection company for his/her own protection.
The City’s inspection report should not be used by the buyer as a substitute
for a buyer’s own inspection. Further, a buyer’s home inspection may not be
used in-lieu of a City inspection completed by a Housing Department
For homes that do not meet the City’s property condition requirements, the
household may qualify for a City Home Repair Loan for up to $15,000 to
repair the property after the close of escrow. Contact the Homebuyer Staff
3. Maximum Sales Price
All Lenders must provide an appraisal, from a state licensed
certified appraiser, of the fair market value of the home using the
sales comparison method. The sales price of the home may not
exceed the appraised value. The City’s loan-to-value (LTV),
combined-loan-to-value (CLTV), and other qualifying ratios will
be based on the lesser of the sales price or appraised value.
C. Additional Requirements
The City’s homebuyer programs are a “one-time” benefit per
household. A household cannot have previously received
assistance from the City’s homebuyer programs.
Any household that has been denied or determined ineligible for
any of the City of San Jose Homeownership program, may not
reapply for six months.
Homebuyer Program Guidelines Page 21 of 27
The Housing Department discourages layering of other outside
sources of funding so that scarce down payment assistance funds
are evenly distributed among as many households as possible.
Housing Staff may approve exceptions on a case-by-case basis.
All City homebuyer program loan programs are deferred for the life
of the loan. City assistance loans are not forgivable over time and
they do not convert to grants. All City loans are expected to be
repaid on or before their maturity dates. If the value of the home
decreases after the home is purchased, the homebuyer is still
required to repay the City loan in full at maturity. Assumability of
City loans varies by program and funding sources.
All City loans are structured as deferred repayment loans with an
interest rate of 3% simple interest and a term of 30 years. There is
no prepayment penalty on any of these loans.
The City reserves the right to request additional documents from
the primary lender to verify compliance with funding source
regulations and/or these guidelines.
Co-signers are not eligible for any City Homebuyer Programs, no
The Lender Instructions submitted with loan documents are “Master
Instructions” mandated by the City of San José regarding the
Recording and Closing procedure for all City loans. Contribution of
future City funds may be suspended if escrow fails to comply with
the Master Instructions. All documents must be recorded in
sequential order as indicated in Section A-1/Recording of
Documents as stated in the Lender Instructions. The escrow officer
must sign and return a copy of the Lender Instructions, along with
the complete funding package, to the City prior to funding the City's
loan(s). Escrow must provide the Funding Package of all executed
documents 48 hours prior to Release of City Funds - (further details
located at C-1/Funding Package Compliance). If additional escrow
conditions are required and once compliance of the Lenders
Instructions has been adhered to, funds will be wired 24 hours from
the date and time of receipt and review of the last funding condition
required to fund all City loans.
No financing subordinate to the City’s loan may have a balloon,
deferred, or negative amortization payment prior to 30 years. Fees
and/or charges for subordinate financing shall be consistent with
Homebuyer Program Guidelines Page 22 of 27
Hazard/Flood Insurance: The City requires proof of Hazard
Insurance, or a Master Insurance policy, to be provided at close of
the escrow. Fire Insurance (and flood insurance if the property is
in a FEMA designated Special Flood Hazard Area)
requirements are as follows: Households must maintain insurance
on the property in an amount at least equal to the replacement
value of the improvements; and The City must be named as an
additional loss payee on the policy.
Title Insurance: The City requires an ALTA title insurance that
includes the amount of each City loan, at close of escrow. Any
funds required to close escrow must be deposited into an escrow
account. For multiple City loans, the City will require multiple title
insurance policies on each of the subordinate second mortgages.
The City requires signed documents, and any required
documentation, to be returned to the City, in accordance with the
escrow instructions, prior to funding. Cash out of escrow, to
households, is limited to the amount deposited into escrow and not
needed for any lender-required minimum down payment. The City
will not wire any funds into private lender or broker accounts.
Borrowers can refinance for rate and term. In addition, “cash-out”
refinances are approved once every five years. Subordination
approval must be requested ahead of time.
most City loans are not assumable, refer to the Promissory Note
for details. Under no circumstances is CalHOME loan assumable.
In addition, BEGIN loans are not assumable during the five years.
A Third-Party Servicing Contractor will monitor homebuyers and
their homes to ensure adherence to the program requirements
including, but not limited to, the following:
Owner-occupancy: annual certification, BEGIN loan
requires owner-occupancy for the first 5 years only
Property tax payment
Good standing on first mortgage loan
All City loans are separately secured by a junior deed of
trust and the interest and principal payments are deferred
Homebuyer Program Guidelines Page 23 of 27
for the terms of the loans. All City loans are due payable at
the earlier of the following events:
Transfer of title (exceptions in certain hardship cases) and
sale of residence
Property ceases to be continuously occupied by the
Upon formal filing and recording of Notice of Default
Thirty (30) years from the date of the Note depending on
the loan’s maturity date.
NOTE: Extending/modifying the loan may be possible if the payment
causes hardship to the household.
II. Application Process
1. All adult household members must complete homebuyer education class.
2. Submit a Pre-Qualification Verifications form and City Loan Application to
the City of San José.
3. City will review the pre-qualification applicant within 30 business days and
schedule an appointment. All adult household members must attend the
meeting to discuss the results of the pre-qualification.
4. Select a lender and provide the City’s prequalification approval to the
5. Upon locating a property, the lender will send a new completed application
to the City.
6. If a loan application remains in the homebuyer program for more than 90
days with no activity (e.g. conditions have not been received, no response
from lender, file has not moved forward), the loan may be cancelled by
City staff without advance notice.
7. All City Forms and letters of explanation must be signed and dated by the
Homebuyer Program Guidelines Page 24 of 27
8. Any material misrepresentations, alterations, and/or omissions from the
initial City Loan Application; including but not limited to household size,
Income and asset information, loan details, etc.., are not permissible and
will render all future re-submissions ineligible for review and approval for a
period of one year. The Homebuyer Manager may make an exception for
re-submission of a loan application only for a significant life event such as a
job/career change, marriage, divorce, or the birth of a child.
III. Annual Monitoring
Owner hereby acknowledges that City or designee is required to monitor the Home
and all affordable units under the jurisdiction of City on an annual basis to ensure
compliance with all applicable State of California and County statutes, ordinances,
and regulations. Upon the request of City, Owner shall furnish to City documents
verifying Owner’s occupancy of the Home as Owner’s principal residence, and
verifying that there have been no changes in the way title to the Home is held. Such
documents may include, but are not limited to, copies of current utility bills or
mortgage statements reflecting Owner’s name and the address of the Home.
IV. Appeals Procedure
Any applicant denied assistance from the Program has the right to appeal. The
appeal process will be carried out as set forth below:
1. Complete and submit an “Appeal Form” that clearly states the basis for
why you consider the City determination to be an error. Include any
supplemental information that would be relevant to your appeal (updated
pay stubs, tax returns, letters from employers, etc.)
2. Appeal Forms must be submitted within ten (10) calendar days from the
date of the letter notifying you of the denial.
3. Send your completed Appeal Form to:
City of San Jose Housing Department
Attention: Assistant Director, Housing Director
200 E. Santa Clara Street – 12th Floor
San Jose, CA 95113
4. The Assistant Director will review the appeal and his/her decision will be
5. You will be notified of the outcome of your appeal in writing within seven
(7) business days.
Homebuyer Program Guidelines Page 25 of 27
Appendix 1-Current Limits
2016 Income Limits for Santa Clara County *(updated annually)
California Department of Housing and Community Development Income Limits
are revised annually. Current limits can be found at:
120% (Moderate-Income) of Area Median Income:
1 person $89,950
2 persons $102,800
3 persons $115,650
4 persons $128,500
5 persons $138,800
6 persons $149,050
80% (Low-Income) of Area Median Income:
1 person $59,400
2 persons $67,900
3 persons 76,400
4 persons $84,900
5 persons $91,650
6 persons $98,450
100% of Average Area Purchase Price for
CalHome and BEGIN:
*updated November 2016
Homeownership Program Guidelines Page 26 of 27
City of San José Loan Application Review/Funding Process
Method of Delivery:
City staff will accept and review completed applications that are submitted by
regular postal and overnight mail, or dropped off in-person. All required
attachments noted on the loan application checklist are necessary for City
staff to fully review and determine program eligibility.
City Review Timelines:
All City loan applications are processed on a first-come, first-served basis. In
general, City staff will complete a file review and determine eligibility within
eight to ten business days from the date a completed application is received.
In the event that a household chooses to change lenders or properties after
the initial submittal, a new application package must be submitted to the City
and the household must allow up to ten business days for City review.
Incomplete applications, including those with any missing attachments, will
not be processed.
If a City loan application is cancelled or denied for any reason, the lender will
be notified of the decision by City staff within 48 hours. A formal notification
letter will be sent to the household within 30 days.
Upon City loan approval, the City may require up to an additional six business
days for preparation of loan documents and funding.
For additional or current information, please refer to the Housing
The availability of the equity-share and BEGIN programs are monitored
by developers’ sales offices and City staff. Developers’ sales offices are
responsible for treating City assisted buyers in the same manner as they
serve other homebuyers.
Within three days of receipt of the City loan documents, the escrow officer
must acknowledge and sign the City instructions and return the signed
identified loan documents back to the City prior to closing.
Upon receipt of the executed City loan documents, staff will review for
completeness and accuracy. If discrepancies are noted, City staff will request
the escrow officer or lender to correct any deficiencies prior to funding and/or
closing.Homebuyer Program Guidelines Page 27 of 27