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Neighborhood Stabilization Program 2 in Wyandotte

NSP2 Housing Information and Application
Do I Qualify?
Available NSP Homes

The City of Wyandotte was awarded a Federal Grant of nearly $8 million to purchase abandoned, vacant and foreclosed properties to demolish or rehabilitate. The City will also build new homes on vacant lots assembled via the Tax Increment Finance Authority (TIFA). The City will then sell these homes with a mortgage write-down to qualifying low and moderate income families.

Background of the program on a National Level:

The Neighborhood Stabilization Program was established by the American Recovery and Reinvestment Act. Through the Act, nearly $2 billion NSP2 grants were given to 56 grantees nationwide.

Overview of Program in Michigan and in Wyandotte:

The State of Michigan was awarded nearly $224 million dollars in NSP2 funds. Of this grant, The City of Wyandotte was awarded a total of $7,719,839 by the Michigan State Housing Development Authority (MSHDA), the direct grantee of HUD.
Other Michigan cities granted NSP2 funds and their award amounts are as follows:

Battle Creek = $7,719,839
Benton Harbor= $13,895,711
Detroit= $40,799,351
Flint= $25,089,478
Grand Rapids= $15,555,476
Hamtramk= $13,895,711
Highland Park= $13,895,711
Kalamazoo= $14,281,703
Lansing= $17,369,638
Pontiac= $13,895,711
Saginaw= $17,369,638

Between October 2010 and February 2013, when the grant expires, Wyandotte plans on completing approximately 25 new constructions and 19 rehabs in the City.

The NSP2 territory in Wyandotte does not include the entire City. The boundaries are Eureka to Northline; and 15th Street to the water front.

Home ownership: Who qualifies for this Program?

To purchase an NSP2 home, the purchaser must be low or moderate income. Income requirements include the total household income for all people living in the home 18 years of age and older.

The definition of low income is “a household income at or below 50% of the Area Median Income.” Moderate income is defined as having “income at or below one 120% of the Area Median Income.”

Please see the Wayne County income chart on the next page to determine if you qualify.
*This chart may change on an annual basis

Upon meeting income requirements, homebuyer should have a credit score of 640 or higher, a debt-to-income ratio of no greater than 40%, the ability to contribute at least 1% of the selling price of the house, and show a reliable source of income.

Discussion of NSP pricing and affordability

After completing at least 8 hours of home counseling from a HUD-certified home counseling agency and being prequalified for a mortgage, qualified homebuyers will be eligible to purchase a home at a price which is LESS THAN either the total development costs OR the appraised fair market value.

The monthly Principal, Interest, Taxes and Insurance (PITI) totaled cannot exceed thirty percent of the monthly household income. This is how the City and the housing counselor will ensure that the family is able to afford the home.

Buyers will be expected to get a mortgage at the highest and best price they can afford. Additionally, not all homebuyers will receive the same amount of assistance. However each homebuyer will receive at least $1,000 in down payment and closing cost assistance.

Example of Down Payment and Closing Cost assistance:

If a family of seven has a total household income of $42,000 per year, they are considered low-income. They are income-eligible to purchase an NSP2 home. They have completed 8 hours of home counseling and qualified for a mortgage because they also have good credit and reliable income.

The next step is for the housing counselor to determine the price per month the family can afford to spend on housing payments. Again, the home buyer’s PITI cannot exceed 30% of the household monthly income. For this particular low-income family, that means that PITI cannot exceed $1,050 per month. Working backwards with estimated taxes and insurance at $291.66 and $66.66 per month respectively, the housing counselor says that $691.68 is the most this family can allocate for principal and interest on a mortgage. On a thirty-year mortgage at 5% they can afford to purchase the home for $120,000 because the monthly principal and interest payment will be $644.19. Monthly PITI will come to $1,002.52 which is under their limit of $1,050.

The particular home this family is purchasing cost $180,000 to build and appraised for $125,000. The listing price was the lower of the two, as per NSP2 requirements. The family can afford to purchase for $120,000 which will give the family $5,000 in homebuyer assistance and a total NSP2 subsidy of $60,000. The family will have a five year no-interest lien on the home in the amount of $5,000 which will dissolve 1/5 or 20% ($1,000) per year over the five years that they live in the home. If the family should move out or sell prior to this, a percentage of the lien is due to MSHDA at the time of closing. Please see chart below regarding the duration of the lien associated with different amounts of homebuyer assistance provided.

Important Items to Note:

The first 25% of NSP2 homes to be completed will be sold to low-income households. This includes approximately the first 11 homes in Wyandotte. Once these homes are sold, the rest of the homes can be sold to any household at or below the moderate-income level.

The NSP2 Program determines the home listing price by subsidizing the difference between the total cost to build the home and the home’s appraisal price, or vice versa by listing the home at whichever amount is lower. The City has a contract with Silverwood Appraisal to determine the appraisal price of the homes.

Each homebuyer will be required to have a minimum credit score of 640 and complete at least 8 hours of home counseling from a HUD-certified home counseling agency before making an offer on and purchasing a home. Wyandotte has procured Lighthouse of Oakland County to perform these services. The housing counselors will screen potential new homeowners for NSP2 homes and provide the tools and skills necessary to maintain mortgages. In addition, they will provide support services to help at-risk families remain stably housed. Specific classroom and one-on-one counseling may include pre-purchase education, credit education, budgeting concepts, mortgage products, real estate closing process, foreclosure prevention, etc.

Upon meeting income requirement, qualifying for a mortgage product and completing the required amount of housing counseling, each homebuyer will submit a proposal with the price that they can afford to purchase the NSP2 home for. This will happen each time a home becomes listed on the real estate market. The City will then select a proposal by drawing randomly. This ensures that the City and all parties involved follow the fair housing opportunity guidelines. Only one proposal per household may be submitted on any prospective property. “Household” includes all persons residing at the current residence or persons living at the current residence during the 12 months prior to filing an application. Any proposal submissions exceeding 1 per household will be disqualified.

The City will randomly select a sealed proposal. If the sealed proposal includes all of the requested information and interested homebuyer can meet all requirements to purchase the home within one month, the real estate agent shall prepare the necessary documents to close. If the first selected proposal cannot meet the requirements then the second sealed proposal and so on will be selected if necessary until documentation is prepared and all purchase requirements are met. If no proposals are received, then the City’s Real Estate Agent will present offers as they are received.

Home Counseling Agency contact information:
Lighthouse of Oakland County
4615 Woodward Avenue
Pontiac, MI 48342
248-920-6000
website: www.lighthouseoakland.org

If you or someone you know would like to be placed on the list to receive the homebuyer application, or if you have additional questions or comments, please contact the City of Wyandotte at:
The Engineering and Building Department
3131 Biddle
734-324-4532
email: sdaly@wyan.org

 
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