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HomeMy WebLinkAboutWork Force Housing FAQs City of Bozeman Page 1 of 16 Workforce Housing Program Frequently Asked Questions (FAQ) City of Bozeman Workforce Housing Ordinance (WFHO) Frequently Asked Questions (FAQs) The purpose of these FAQs is to respond to common questions by developers, builders, participating households, lenders, real estate professionals, City staff, and other stakeholders regarding the City of Bozeman’s Workforce Housing Ordinance (Section 1, Title 16, Chapter 2 of the Unified Development Ordinance). It should be recognized that no set of guidelines can anticipate every conceivable situation in which the ordinance may apply. These FAQs are not a substitute for the WFH ordinance; they are merely a guide to enhance understanding of the ordinance. The FAQs are organized into sections to address questions about developing WFH lots, building and selling WFH units, purchasing and owning a WFH unit, and other questions the community may have about the WFH program. Section 1) Workforce Housing (WFH) Lots  Which developments are required to comply with ordinance?  What is required to be submitted for the WFH Plan?  What is the review process of the WFH Plan?  How do I calculate the WFH lot requirement (number, type, size and maximum price of lots)?  Once I have calculated the WFH lot requirement, what methods can I use to meet that requirement?  What are the requirements of the Active Marketing plan for WFH lots?  What requirements are placed on the developer to promote timely construction of units? What happens if those requirements are not met?  Under what circumstances can an unsold WFH lot exit the program?  What cost offsets are available to the development for compliance?  Is there a waiver process for the requirements of the ordinance? Section 2) Workforce Housing (WFH) Units  What lots require WFH units to be built upon them?  What are the requirements of WFH units in general and each type of WFH unit?  What are the requirements of the Active Marketing Plan for WFH units?  What is process for selling a WFH unit (initial sale)?  What requirements are placed upon the builder to ensure timely construction on a WFH lot? Is there a waiver process?  Can a WFH Unit be rented before it is sold?  What cost offsets are available to a builder of WFH units? Section 3) Buyer Qualification and Selection  Who is qualified to purchase a WFH unit?  What are the income limits for the program?  How do you purchase a WFH unit? City of Bozeman Page 2 of 16 Workforce Housing Program Frequently Asked Questions (FAQ)  How will buyers be selected for individual homes?  What are the mortgage requirements of a WFH unit?  What are the occupancy requirements of a WFH unit?  What are the resale restrictions of a WFH unit?  How do I sell my WFH unit? City of Bozeman Page 3 of 16 Workforce Housing Program Frequently Asked Questions (FAQ) Section 1: WFH Lot Requirements Which developments are required to comply with the WFHO? The WFHO applies to:  All subdivisions including residential lots for which preliminary plat is submitted after July 1, 2007 which will result in the development of ten or more residential lots, and;  Any site plan including residential condominiums on lots created or annexed after July 1, 2007 with a gross project area of more than 5 acres;  Multiple developments, projects, and/or site plans by the same applicant in a 12 month period on contiguous parcels of 10 or more lots or 5 or more acres for a condominium project shall be subject to the ordinance. Subdivisions with fewer than 10 lots or condominium site plans with a gross project area of less than 5 acres are not subject to the workforce housing ordinance. The Planning Department will determine if a development is subject to the WFHO. What is required to be submitted for the WFH Plan? All projects subject to the WFHO must submit with the application for preliminary plat a plan for meeting the WFH requirements. The plan must contain:  Total acreage of the proposed project;  A clear calculation and display of the net area of the project (net area is the area within the development that can be built upon and sold – it is the area remaining after calculation of required parks, open space, roads, etc.);  Calculation of the required number of WFH lots (.04 multiplied by the net area; round up when that number is greater than 1/2);  Selection of a method of complying with the WFHO. The method of compliance should be explained in as much detail as possible. If lots are to be provided on-site describe the location, proposed square footage, type of lot (attached or detached SF), and maximum price for each WFH lot. If lots are to be provided off-site, the location, proposed square footage, type of lot (attached of detached SF), and maximum price for each WFH lot. If cash-in-lieu is selected, the calculation for the required contribution must be included;  Estimated project timeline for both the market rate and WFH lots/units. Describe how the WFH units will be built in a timely manner;  Marketing plan (see active marketing plan section of this document);  Cost offsets requested. What is the review process for the WFH Plan? The plan will be evaluated by the workforce housing administrator (WFHA) within 10 working days of submittal and comments will be provided to the developer within 15 working days. The WFHA will write a synopsis and evaluation of the WFH plan, noting any unresolved deficiencies for review by the CAHAB and City Commission. Evaluation of the plan will consider:  Does the plan meet or exceed the WFHO? City of Bozeman Page 4 of 16 Workforce Housing Program Frequently Asked Questions (FAQ)  Are on-site WFH lots well-dispersed? While small clusters of lots/units are allowed and encouraged, there needs to be an effort to mix these clusters throughout the development as well.  If the developer has chosen to provide off-site lots, the lot location will be evaluated. Off-site lots may not be allowed in an area with a high concentration of WFH lots, and will be approved at the discretion of the WFHA. No previously dedicated (banked) lots may be applied unless they were developed after July 1, 2007 and received previous approval from the WFHA. How do I calculate the WFH lot requirement (number, type, size and maximum price of lots)? Applicable subdivisions shall provide 0.4 dwelling units per net acre (area). Net acreage (area) is that land which can be built upon and sold after roads, parks, and other requirements are considered. When this calculation results in a fraction greater than ½ the developer shall be required to provide the next full lot. Lots shall be in the size and type required by the matrix in Section 16.02.050 and sold for no more than $12/square foot (effective July 1, 2007). The maximum sales price for any lot, regardless of square footage is $36,000 (effective July 1, 2007). This figure, $12/square foot, is subject to annual adjustment by the housing administrator, increasing by either 4% or the annual increase in AMI for the most recent year, whichever is less. AMI updates are generally released each year in February; as such, this figure will be adjusted effective July 1st of each year. EXAMPLE: A one-hundred acre development must comply with the requirements of the WFHO. It is calculated that parks, roads, and other requirements will use 35 acres of the land in the development, leaving 65 acres of net buildable area. Total area – (parks + roads + other) = Net Buildable Area 100 acres – 35 acres = 65 acres Net buildable area x .4 = Required # of WFH lots 65 acres x .4 = 26 lots Using the matrix in Section 16.02.050, the following lots are required to meet the WFHO: Number of Lots Type of lot 3 D, HH4 (Detached lot, minimum 2751 sq. ft.) 3 D, HH3 (Detached lot, minimum 2500 sq. ft.) 2 D, HH2 (Detached lot, minimum 2500 sq. ft.) 5 A, HH4 (Attached lot, minimum 2750 sq. ft.) 8 A, HH3 (Attached lot, minimum 2500 sq. ft.) 5 A, HH2 (Attached lot, minimum 2500 sq. ft.) TOTAL = 26 lots City of Bozeman Page 5 of 16 Workforce Housing Program Frequently Asked Questions (FAQ) Options to meet WFH lot requirements: Once the number of lots required is calculated, the developer has the following options to meet the requirements of the ordinance. The developer may choose one option, or may combine options to meet their WFH requirements. The option(s) selected must be noted in the WFH plan, along with a calculation showing how the requirement is met. Option 1: On-site development Developments choosing this option must create lots where 0.4 dwelling units per net acre can be built. The type of lots to be provided must meet the specifications set forth in the matrix in Section 16.02.050. The lots can be sold for no more than $12/square foot (in 2007 – this figure will be adjusted annually as specified above). Lots can also be sold for less or donated. Lots must be actively marketed and carry a deed restriction. Deed restrictions will be filed on the WFH lots at the expense of the developer. The deed restriction document is available from the City’s WFHA. Option 2: Off-site development (including use of banked lots and existing housing) Developers choosing this option must create the same number, type, and size of lots as in the on-site option, however; they are allowed to create them in a different subdivision(s). Lots must meet the requirements of Section 16.02.040 part E2a. A plan to develop off-site lots will evaluate the location and suitability of the lots, with additional attention paid to excessive aggregation of WFH lots in subdivisions, which is discouraged. Off-site lots in subdivision already containing a high concentration of WFH lots will be disapproved. All lots must be in the existing City limits. Deed restrictions will be filed on the WFH lots at the expense of the developer. The deed restriction document is available from the City’s WFHA. Option 2a: Use of Banked Lots Developers also have the option of using “banked lots” to meet off-site requirements. Banked lots must have been designated as such by the WFHA prior to their use, and cannot have been created before July 1, 2007. The use of banked lots must be pre-approved by the WFHA and must meet the conditions of Section 16.02.040 part E2a. Deed restrictions will be filed on the WFH lots at the expense of the developer. The deed restriction document is available from the City’s WFHA. Note: Cost offsets for banked lots may not be utilized until the banked lot is used to meet WFH requirements in a development. For example, 10,000 sq. ft. in banked lot area created by Development A, Phase I to meet future WFH requirements in Phase II may not be used to receive a parkland reduction in Phase I. The cost offset is not received until the banked lots themselves are utilized in Phase II. Option 2b: Conversion of Existing Market rate housing to WFHU A final way developers may meet off-site requirements is through the use of existing housing units. One unit is equal to one lot. The housing must meet the requirements of Section 16.02.040, part E2c and will be subject to inspection before City of Bozeman Page 6 of 16 Workforce Housing Program Frequently Asked Questions (FAQ) approval. Deed restrictions will be filed on the WFH units at the expense of the developer. The deed restriction document is available from the City’s WFHA. Option 3: Cash-in lieu A developer can directly pay to the city a fee equal to 3 times the WFH prescribed value (as adjusted annually) of the required lot size (for year 2007: 3 x $12/sq ft x lot size). The cash in lieu due must be calculated and submitted as part of the WFH plan. Option 4: Individualized program Developers not meeting the on-site, off-site or cash-in-lieu requirements must submit an individualized plan for the development of workforce housing. This plan must contain at a minimum the number of units to be produced, affordability level of the units, whether the units are for rent or sale, an implementation schedule, and information demonstrating a need for the particular project. This plan must meet or exceed the type, number, and price of units to be provided by the ordinance in order to be considered. Plans meeting this initial benchmark will be subject to review by the City’s Affordable housing board, Commission, and the public according to Section 16.02.040 E3. Note: Regardless of whether the lot is located on-site or off-site, the location of any WFH lot must be identified on the preliminary and final plats. The plat identification should be clear as to what type of WFH Unit can be constructed. Any purchaser of a WFH lot or unit must be informed in writing that the property is part of the Workforce Housing Program and subject to Section 1, Title 16, Chapter 2 of the UDO. What are the requirements of the Active Marketing Plan for WFH lots? The ordinance requires that lots/units be actively marketed. A developer is required to submit a marketing plan that demonstrates how they plan to sell both the market rate and WFH lots and the estimated timeframe for sale. The developer must also inform the WFHA of the date of availability of the lot (at which time the developer must enact their active marketing plan). At a minimum the WFH lots must be marketed concurrently with, and in the same manner as the market rate units. For example, if market rate lots are advertised on the MLS, WFH lots must be as well. The seller shall maintain a marketing log that shows the advertisements, MLS information and any other information disseminated about the project and available lots and keep a list of prospective buyers who have expressed interest in purchasing the lots (or completed units if the developer opts to build on the units themselves). The plan must also include a log of contacts made to local non-profit housing development organizations informing them of the availability of lots, specifying size, location, pricing and other pertinent information. What requirements are placed on the developer to promote timely construction of unit? What happens if those requirements are not met? City of Bozeman Page 7 of 16 Workforce Housing Program Frequently Asked Questions (FAQ) Developers must demonstrate in their WFH plan how timely construction of the WFH units will be achieved. Developers are also required to actively market the WFH lots in accordance with their approved Active Marketing Plan. The “bonus lots” received as a result of parkland dedication may not be built upon until construction on the WFH units begins. Building permits for bonus lots cannot be drawn without approval of the WFHA. In a multiphase development, 80% of the WFH units must be completed before subsequent phases may commence. Multiphase developments must receive approval from the WFHA that this requirement has been met before proceeding. WFH deed restrictions will be removed if an actively marketed WFH lot is not sold within one year of final plat approval of market availability (the date the developer notifies the WFHA the lot is available and begins actively marketing it), whichever occurs latest. The lots must provide the City with a First Right of Refusal to purchase in the event that the lot has not sold at the end of the active marketing period. At that time, the City may elect to purchase the property or release the lot from the program. The release of the lot is subject to approval by the WFHA, who will determine if the property met the active marketing requirements of the ordinance. If active marketing requirements have not been met, the WFHA will notify the developer as such. In the event a developer chooses not to actively market lots and not draw any building permits for those lots within 4 years of commencement of construction of any market rate units in the development, the lots may be purchased by the City at ½ of the WFH lot price set in the year the lots were entered into the program. The City anticipates that this will be a rare occurrence that will only take place when a developer has made the decision to not comply with the requirements of the workforce housing program. Under what circumstances can an unsold WFH lot exit the program? If the WFHA determines that the active marketing requirements have been met and the City opts not to purchase the lot, the developer may sell the lot on the open market. The developer must pay the difference between the lot’s WFH determined price (plus interest accrued by the developer) and the market sales price received. The deed restriction on the lot will be removed upon receipt of payment. What cost offsets are available to the development for compliance? Cost offsets are outlined in detail in Section 16.02.060. Not all offsets will be available in all developments. The offsets that will most typically apply to the developer of the WFH lots are: 1) Reduction of parkland in the amount of the aggregate square footage of WFH lots. For example, if the aggregate square footage of lots designated as WFH lots is equal to 50,000 square feet, the parkland requirement is reduced by 50,000 square feet. Parkland dedication must still meet the state parkland requirement. Parkland reduction may only be received for the number of WFH lots required by the ordinance; additional WFH lots will not result in City of Bozeman Page 8 of 16 Workforce Housing Program Frequently Asked Questions (FAQ) additional park reductions (however, these lots may be banked, upon approval of the WFHA, to meet future WFH lot requirements). 2) Allowance for zero lot line in all residential zoning districts. 3) Smaller minimum lot sizes. Cost offsets must be requested as part of the WFH Plan and approved by the WFHA and other applicable authorities. Is there a waiver process for the requirements of the ordinance? A waiver may be submitted by the developer to the WFHA and CAHAB. With staff assistance from the WFHA, the CAHAB will review the waiver request and make recommendation to the city commission. The request for a waiver should explain why the development cannot conform to the requirements of the Workforce Housing Ordinance and demonstrate that all reasonable avenues of compliance have been exhausted. City of Bozeman Page 9 of 16 Workforce Housing Program Frequently Asked Questions (FAQ) Section 2: Workforce Housing Unit requirements What lots require WFH units to be built upon them? Lots designated as Workforce Housing Lots require a Workforce Housing Unit to be built upon them. WFH lots must be designated on the preliminary and final plat and sellers are required to disclose to buyers that the lot is a WFH lot on which a WFH unit must be built along with the classification of the WFH lot. All WFH lots must be deed restricted. What are the requirements of WFH units in general and each type of WFH unit? All WFH units must meet the standard of being high-quality affordable units. WFH units should not be easily identified from the curb – they should be reasonably compatible in style and have exterior finishes that are consistent with the neighborhood. The units must be “functionally equivalent” to the market rate units. This requirement is met by providing in the WFH units the same basic components provided in the market rate homes, albeit in different materials. For example, a market rate home may have granite countertops; to make the WFH unit more affordable, laminate countertops would be used instead. The substitution of a less costly material to reduce cost is encouraged; nonetheless, all materials used in the unit should be durable, low maintenance, and high quality. The City has released a set of livability standards to be followed when constructing WFH units. Units must be constructed of durable, quality materials that will minimize the need for costly maintenance and repairs (above and beyond those to be reasonably expected). Units should be built as energy efficient as possible to further create long-term affordability. All units to be constructed must meet the standards for Fannie Mae and FHA financing. Plans for units to be constructed must be submitted for approval by the WFHA. Approval must be received before a building permit may be issued. The plans must include: floor plan, list of materials to be used for construction and finishes, landscaping plan, location of the unit, and information regarding common market rate units in the neighborhood. The unit will also be subject to standard inspection by the City’s building department and a final inspection by the WFHA to ensure that quality and safety standards are met. The type of unit, minimum number of bedrooms and bathrooms and price of the WFH units are determined by the lot they are built upon, as noted below. All units require one garage stall. City of Bozeman Page 10 of 16 Workforce Housing Program Frequently Asked Questions (FAQ) Table 2.1: Requirements by lot type Lot type Unit type Bedrooms (minimum) Baths (minimum) Lot size (sq. ft.) D, HH4 Single family detached (SFD) 3 1+.5 2751-3000 D, HH3 Single family detached (SFD) 3 1+.5 2500-2750 D, HH2 Single family detached (SFD) 2 1+.5 2500-2750 A, HH4 Single family attached (SFA) 3 1+.5 2500 A, HH3 Single family attached (SFA) 3 1+.5 2500 A, HH2 Single family attached (SFA) 2 .75+.5 2500 WFH units are priced according to the type of lot they are built upon, as noted below. The maximum price of each type of unit is calculated by the WFHA annually using the assumptions found in Section 16.02.050 and adjusted on January 1st of each year. The maximum price of the WFH unit to be built on an individual lot is provided to the developer at final plat and must be disclosed in writing to each subsequent purchaser. The price will be confirmed when the building permit is applied for. Table 2.2: Maximum price of unit by lot type Lot type 2007 maximum price (adjusted annually) D, HH4 $176,988 D, HH3 $159,414 D, HH2 $141,606 A, HH4 $141,527 A, HH3 $127,406 A, HH2 $113,285 What are the requirements of the Active Marketing Plan for WFH units? The builder of a WFH unit is required to submit a marketing plan for the unit that demonstrates their plan to sell the property to a qualified household. A WFH unit must be marketed, at a minimum, in the same manner that the builder markets their market rate units. The plan must state how the builder typically markets homes and how they will market the WFH unit. The plan must include, at a minimum:  At least one open house (if multiple homes of the same style are available, one open house for all units may be sufficient with written permission of WFHA). If the home is being sold prior to completion the open house requirement may be waived;  Listing on the MLS or at least 2 ads in a during separate weeks in a local newspaper of general circulation;  Provision of information on the unit to the WFHA for publication on the City website; City of Bozeman Page 11 of 16 Workforce Housing Program Frequently Asked Questions (FAQ)  Maintenance of a log showing households interested in purchasing the home (must include names, addresses, and phone numbers).  Estimated start and end dates for the active marketing period. This period may commence any time after the construction plans have been approved. Each WFH unit is required to have an open marketing period of a minimum of 30 days. What is the process for selling a WFH unit (initial sale)? As part of the Active Marketing plan the builder must designate a period of no less than 30 days for the open marketing of the home. This period can take place any time after construction plans have been approved. During this period, households interested in purchasing the home may submit Intent to Purchase forms to either the seller or the WFHA. At the end of the marketing period, all Intent to Purchase forms, along with the log of interested parties must be submitted to the WFHA. If only one household has submitted the Intent to Purchase form, that household may enter a contract for purchase with the seller. If more than one household has submitted Intent to Purchase forms, a lottery will be held to select the purchaser and four alternates. The first purchaser has 48 hours to sign a contract to purchase the property. If the first purchaser does not do so, the next alternate will be allowed to purchase the property. This process continues until a contract is signed. What requirements are placed upon the builder to ensure timely construction on a WFH lot? Is there a waiver process? In addition to the active marketing plan, WFH lots must draw a building permit within 3 years of the initial sale of the lot. WFH lots that have not drawn building permits within that time frame will be subject to purchase by the City at ½ of the WFH lot price for the year the final plat was received. If the owner of a WFH lot is unable to draw a building permit in the prescribed time, they may appeal to the WFHA for a waiver to prevent or postpone this sale and allow for additional time to construct a WFH Unit. The waiver request must include:  Reason for the request  Owner’s proposal to construct the WFH Unit and timeline The request for a waiver is reviewed in accordance with 16.02.070E. Can a WFH Unit be rented before it is sold? WFH units may not be rented at any time. What cost offsets are available to a builder of WFH units? Cost offsets are outlined in detail in Section 16.02.060. Not all offsets will be available in all circumstances. The offset that will most typically apply to the builder of a WFH unit is the deferment of payment of impact fees. Payment of impact fees is determined by the pricing of the WFH unit as noted by the chart below. City of Bozeman Page 12 of 16 Workforce Housing Program Frequently Asked Questions (FAQ) Table 2.3: Impact fee deferment schedule HH/Unit pricing level % impact fee due at certificate of occupancy % impact fee due at exit from program Less than 70% AMI 0% 100% 71-80% AMI 50% 50% 81-90% AMI 75% 25% 91-100% AMI 100% 0 Before requesting the certificate of occupancy the builder must set the price of the unit in order to calculate the impact fee deferment level. The builder must consult with the WFHA to find the current pricing at each AMI level. City of Bozeman Page 13 of 16 Workforce Housing Program Frequently Asked Questions (FAQ) Section 3: Buyer Qualification and Selection Who is qualified to purchase a WFH unit? All applicants to the WFH program must be residents of Gallatin County or employed in Gallatin County or demonstrate that they are moving to Gallatin County for a specific job at the time of application. Applicants must earn less than the current income limits for the program and have the ability to secure a mortgage meeting the WFH program requirements sufficient to purchase a WFH unit. What are the income limits for the program? Households may not earn more than the amounts listed below. Income limits are determined by the U.S. Department of Housing and Urban Development (HUD) and are updated annually. Household Size Maximum Gross Annual Income – 2007 1-4 persons $70,100 5 $75,660 6 $81,240 7 $86,880 How do you purchase a WFH unit? To apply to purchase a WFH unit:  Attend a City affordable housing orientation  Complete a face-to-face, HUD-certified homebuyer’s education course  Meet with a lender to get a prequalification letter  Meet with a housing counselor to determine how much you can afford and complete the application and income certification process Documents you will need to submit for application:  Completed application, signed and dated;  Additional information sheet;  Completed employer verification form;  One month’s most recent pay stubs;  Verification of other income sources;  Copies of previous 2 year’s tax returns, W-2s and all attached schedules;  For self-employment income: submit a year-to-date profit and loss statement, three years federal tax returns and income and expense projections for the next 12 months;  A statement from your financial institution documenting the 6-month balance of your checking account OR 6 months of checking account statements;  3 months savings account statements;  A copy of the most recent statement received for other assets (IRA, 401k, life insurance policies, etc.); City of Bozeman Page 14 of 16 Workforce Housing Program Frequently Asked Questions (FAQ)  A pre-qualification from a lender based on a tri-merged credit report detailing estimated PITI, interest rate, front and back end ratios, type and terms of loan;  A copy of a certificate of completion of a face-to-face, HUD-certified Homebuyer’s Education program;  Copy of divorce decree (if alimony or child support is ordered); You will receive notification of the acceptance of your application and a preliminary certification within 2 weeks of receipt. If items are outstanding you will be notified and required to submit those items within 30 days or you must reapply for the program. Once your application has been accepted, you will be added to our eligible purchaser list. It is your responsibility to visit our website for updates on available properties and to find a home that meets your ability to purchase and household needs. This can be done by checking the website frequently to see homes that are or will be available and visiting WFH open houses and builders. It is also your responsibility to maintain your finances so you continue to be eligible to purchase a home. Keep in mind that excess debt and spending, poor credit or changes in your income may change your ability to purchase a home and participate in the program. Your preliminary certification is valid for 6 months, or until you have a contract to purchase a WFH unit, whichever occurs first. If you experience a material change in income, it is advised that you contact the WFHA to update your file. When you find a home that you are interested in, you must submit an Intent to Purchase form for that unit. Intent to purchase forms will be accepted for the entire open marketing period specified by the seller. At the end of that period, if you are the only interested party you may enter into a contract with the seller. If there are two or more interested purchasers, the WFHA will use a lottery system to determine the first household that can purchase the property. That household has 48 hours to enter a contract to purchase, or the next household on the lottery list may purchase and so on. Once your contract to purchase a home is in place you will receive your final certification, which is valid until your home closes. You will need to coordinate with your lender, realtor, housing counselor, and the seller of the unit to ensure that everything is in order for your closing. At the closing, you will sign the deed restriction document for your WFH unit. You will also sign a resale and maximum appreciation agreement, which you will need when you choose to sell your home. How will buyers be selected for individual homes? When you find a home that you are interested in, you must submit an Intent to Purchase form for that unit. Intent to purchase forms will be accepted during the open marketing period for the unit. At the end of that period, if you are the only interested party you may enter into a contract with the seller. If there are two or more interested purchasers, the WFHA will use a lottery system to determine the first household that can purchase the property. That household has 48 hours to enter a contract to purchase, or the next household on the lottery list may purchase and so on. City of Bozeman Page 15 of 16 Workforce Housing Program Frequently Asked Questions (FAQ) What are the mortgage requirements? The requirements for a WFH mortgage are specified in the WFH Mortgage Policies. Mortgage requirements are in place to help prevent default and assist buyers to receive the best, most affordable mortgages available for their circumstances. The city considers the applicant’s mortgage to be affordable if their debt to income ratio does not exceed 41%. This includes the proposed monthly PITI, HOA dues, Mortgage insurance, flood insurance premiums, and all other monthly debt payments. The City may allow a debt to income ratio of up to 45% in special circumstances outlined in the Mortgage Policies. Other loan requirements include (refer to the Mortgage Policies for more detail):  The loan amount may not exceed 100% of the sales price of the unit (100% LTV maximum)  Interest rate may not be greater than the Montana Board of Housing rate plus 1.5%  The loan must fully amortize over a 360 month period  Interest only loans are not allowed  Fixed rate loans may have terms ranging from 15-30 years  ARMs are allowed if they meet the requirements set forth in the Mortgage Policies  Loans must have full documentation of income and assets  Stated income loans may be approved on a case by case basis in accordance with the Mortgage Policies  Pre-payment penalties, balloon periods, interest only loans, and other negative amortizing loans are not allowed  Non-occupant cosigners are not allowed The WFHA will review the loan application, Good Faith Estimate and Truth in Lending disclosures for reasonableness and consistency with the WFH application. What are the occupancy requirements of a WFH unit? The WFH unit is required to be your primary residence. Section 16.02.080 outlines allowances for absences and renting the property out, however; the requirements are in reference to the city’s program only. It is important that you also are aware of the requirements of your mortgage(s), as they may not allow for these actions under any circumstances. The City will send annual letters to all owners of WFH units to verify that the home is their primary residence. You will be required to sign the letter and return it along with proof of residency, which must be in the form of utility bills or any personal government mailings. If is it determined that the home is no longer your primary residence the WFHA will notify your mortgage holder and the city attorney to take appropriate action. City of Bozeman Page 16 of 16 Workforce Housing Program Frequently Asked Questions (FAQ) What are the resale restrictions of a WFH unit? Appreciation of the WFH units is capped at 4.5% per year. This is the maximum amount of appreciation you may realize from the sale of the property. The actual appreciation on your unit may be more or less than 4.5%. You will receive a maximum appreciation schedule based on your purchase price at closing. If you sell your WFH unit within a 10 year period, you are subject to the maximum appreciation restriction. If the sale of your home results in greater than the maximum allowed appreciation, the difference will be taken out of the closing proceeds and paid to the City’s WFH program. If you sell for less, the entire proceeds from sale (less your costs) belong to you. If you sell after the 10 year period of affordability, the entire proceeds from sale (less your costs) belong to you. The deed restriction is removed after the sale of the property, unless you choose to sell through the WFH program, in which case the deed restriction is renewed for 10 years for the new purchaser. How do I sell my WFH Unit? The first step is to refer to the Maximum Appreciation document that you received when you purchased the home and contact the WFHA, who can discuss your resale options with you in detail. Generally, you will have two options available to sell your home. You may also elect to utilize both options at the same time. Option #1: Open Market sale. Under this option, you may place the home for sale on the open market and sell the home for whatever price you would like. If you sell for less than the Maximum sales price, you keep the remaining proceeds from the sale (after you have paid your transaction costs). If you sell for more than the Maximum sales price, the amount exceeding the maximum sales price must be paid to the city. Note to Appraisers: As the City’s restrictions terminate upon the transfer of the property, the security value of the home is its unrestricted market value. Comparable properties will be market rate without resale restrictions. Option #2: WFH sale. Under this option, you place the home for sale through the WFH program. The home is sold to a WFH participant for no more than the maximum price, and all remaining proceeds (less your transaction costs) are yours.