Hello Novato! - Hello Housing

Hello Novato!
Info + Insights on Affordable Homeownership in Novato
Hello Housing is a non-profit organization working on behalf of the City of Novato to manage their
Below Market Rate Homeownership Program. Our goal of this newsletter is to provide helpful
information and resources that may benefit you and your household and to provide answers to your
most Frequently Asked Questions.
Inside this Issue
— Resources for Financial Hardships
— Perspectives: Buying a BMR vs. Renting
— Frequently Asked Questions
(Includes the latest policy changes approved
by City Council on September 30, 2014)
— Home Maintenance Checklist
— HOA Maintenance Checklist
— Tax Benefit Checklist
Experiencing a Financial Hardship
in your Household?
Life throws curveballs. And in one of the most expensive
regions in the country, it can be hard to cover basic
expenses, much less unexpected ones. Keep Your Home
California (keepyourhomecalifornia.org) offers multiple
resources for people directly hit by the housing and
economic crisis. Low and moderate income homeowners
who have experienced hardships such as unemployment,
disability, illness or death in the household may be able to
benefit from Keep Your Home California.
Let us introduce HERA – Housing &
Economic Rights Advocates
Have legal questions about your home that need to
be answered? Curious if you would qualify for a loan
modification? HERA is a statewide non-profit organization
that provides legal services, advocating that “all people
are protected from discrimination and economic abuses,
especially in the realm of housing.” Focusing on the lowincome, elderly, immigrants, people of color and people
with disabilities, HERA is a great resource for a range of
homeowners. Visit hereaca.org for more info.
Won’t You Join Us?
Upcoming Workshop
January 20 on Refinancing a BMR at 6:30PM in the War
Room at Meadow Park, 500 Palm Drive, Novato.
The City has a New Home
New City of Novato offices are located at 922 Machin Ave,
Novato, CA 94945. The City is closed every other Friday.
Visit cityofnovato.org to hear about top local stories and
upcoming events.
Not sure where to turn?
Hello Housing can help. We are part of a network of service
providers who are trained to assist homeowners facing
various challenges. In virtually all situations, it is better to act
early and fast than to wait until problems get bigger and
harder to solve.
What are your three
favorite things about
owning a home in
Novato?
Send your answer* to [email protected] by January 15,
and be entered into a drawing for a $50 gift certificate to
Cooper’s Public Market.
*ANSWERS MUST BE A MINIMUM OF 25 WORDS TO QUALIFY!
Have questions? We have answers! Please email Andrea at [email protected] or
call (415) 863-3036 x109. We’d love to hear from you.
Perspectives
Do you wonder if buying a Below Market Rate home was a good
financial decision? Your answer will depend on many factors, but
here is an example to help you answer this question for yourself.
An Owner’s Perspective
A Renter’s Perspective
Cash out-of-pocket: $171,058
Cash out-of-pocket: $185,760
The Gonzalez Family bought a 3-bedroom 2-bath
condo at Meadow Park in Novato in 2006. They
purchased it for $300,000, put in a $10,000
down payment, and received a forgivable loan for closing
costs. Their mortgage payment has been
$1647 per month.
Since 2006, they paid out $215,697 in mortgage
payments, private mortgage insurance, HOA dues and
property taxes. However, by taking advantage of the
mortgage interest deduction, property tax deduction and
the homestead deduction, their real housing cost
since 2006 is $171,058.*
Home Equity: $60,859
If the Gonzalez Family decided to sell their home
today, they would have built $60,859 in equity in
their home from paying down their mortgage, their
original down payment and taking advantage of the
City’s allowable home appreciation at resale.
There are transaction costs associated with selling
a home. In a traditional sale, the seller pays 5-6% of
the sales price in broker fees. In the City of Novato
BMR program, sellers typically pay a reduced
3.25% of the sales price in fees.
The Smith Family rented a comparable 3-bedroom
2-bath apartment in Novato in 2006. Their rent was
$1600 a month. Their landlord increased their rent
by $30 each year, so by 2014, the monthly rent
was $1840 a month.**
Since 2006, the Smith Family has paid $185,760 to
their landlord.
Home Equity: $0
By renting instead of owning, the Smith Family has
built no equity since 2006. However, they were less
vulnerable to the challenges facing homeowners
during the foreclosure crisis. The “value” of this
flexibility will be different for each and every person,
and will evolve over time.
So, in the example of the Gonzales Family:
Original Purchase Price Allowable Resale Price Equity in the Home Transaction Costs $300,000
$306,630
$ 60,859
- 9,965
Cash to Seller $ 50,894
Other Reasons to Buy a BMR
— Greater housing stability compared to renting
— Freedom to make your home just how you like it
— Better access to quality school districts
*For the purpose of this example, both the Smith Family and the Gonzales
Family were responsible for their utilities.
— Better access to a safer community
** Median Novato apartment rents from 2006 through 2012 sourced from the
City of Novato Housing Element from 2007-2014.
— A shorter commute
— Homeownership a personal goal
Frequently Asked Questions
How much can I sell my home for?
Depending on the market conditions, your sales price will be limited by either (1) the Eligible Buyer Purchase Price as
defined in the restrictions recorded on your home or (2) be limited by how much an eligible buyer is willing and able to pay
for your home. Please take a few minutes to review the following information so you can understand these limiting factors
and take them into consideration when contemplating the sale of your home.
1
Your sales price is limited by the Eligible Buyer Purchase Price as
defined in the recorded restrictions.
The Affordability Covenant, signed by you when you purchased your home, is the document that governs the BMR program in
the City of Novato. Section 4.5 of this Covenant includes a formula that calculates the “Eligible Buyer Purchase Price” based on
your specific circumstances. You can think about the Eligible Buyer Purchase Price as the maximum amount you can sell your
home for according to a calculation in the program documents. Key variables in this calculation include:
— The original price you paid for your home
— The year you purchased your home
— The year you are selling your home
— The change in the Area Median Income (AMI) as defined by the U.S. Department of Housing and Urban Development (HUD) between your purchase year and your sales year.
— The depreciated value of any City-approved capital improvements, if applicable, at time of sale.
AMI is published annually by HUD, typically in February. In 2014, the AMI in Marin County actually went down compared
to 2013. The following chart shows you the change in AMI between your original purchase year and 2014. For example,
if you purchased your home in 2009, and were selling in 2014, you would use 0.3% as the percentage change in AMI.
Please note that if the change in the AMI is negative, the City will use 0% when calculating the Eligible Buyer Purchase
Price. To calculate your maximum sales price, you would multiply 0.3% by your original purchase price, then add that
amount to your original purchase price along with any depreciated value of approved capital improvements. Please
check the Hello Housing website in February for updated AMI percentages which could result in a higher allowable resale
price in 2015 compared to 2014.
Year of Purchase
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
% change in AMI as of
2014
2.21%
2.21%
2.21%
2.21%
2.21%
0.3%
–2.3%
–4.6%
–6.1%
–4.2%
0%
% change for use in your
resale formula
2.21%
2.21%
2.21%
2.21%
2.21%
0.3%
0%
0%
0%
0%
0%
2
Your sales price may be further limited by how much an eligible buyer
is willing and able to pay for your home.
In a traditional sale of a home, sellers can compare their home to similar homes recently sold to determine a sales price.
Below Market Rate (BMR) homes have unique restrictions, so sellers of BMRs do not have the benefit of looking at
comparable homes recently sold in the area use when determining a sales price. In fact, even similar homes within the
same BMR development (e.g. same number of bedrooms and bathrooms) may not serve as comparable sales because
they are restricted for sale to households with varying income levels. It is this restriction that allows the City to provide
long-term affordable homeownership opportunities to future generations. The City’s preferred lender can provide you with
a sales price range, but ultimately it depends on how much an eligible buyer is willing and able to pay for your home.
January 2015
Frequently Asked Questions
Can I rent out my home?
No. The development of affordable housing requires
significant public investment. These public resources come
with conditions that must be met after the homes are built.
Your home was developed to be lived in by a homeowner. In
contrast, there are affordable developments in Novato that
can only be rentals. Hello Housing is finishing up its second
annual compliance monitoring Please spread the word that
on September 30, 2014, City Council authorized City staff
to take action in cases where homeowners are renting out
their home in violation of the program.
Can I renovate my home?
Yes, however any improvements you make to your home
must meet all local and state building code requirements and
be approved by your Home Owner’s Association (HOA). If
you would like the opportunity to recoup some portion of the
costs of your renovation when you sell your home, you must
get written approval of your proposed improvements from
Hello Housing on behalf of the City of Novato, prior to
performing the work. Hello Housing will provide you with a
depreciation schedule for approved improvements. This
means that as time passes since your renovation is complete,
the dollar value you can add to your resale price declines.
You must provide legible copies of all receipts to Hello
Housing. We always recommend you make your decisions
about improvements based on your enjoyment of the home,
not based on increasing the resale value.
Will refinancing my home save me
money?
Interest rates remain relatively low, so if you are an original
buyer, you may be able to reduce your monthly payments
by refinancing your first mortgage. However, if you have
been making principal and interest payments on your 30
year mortgage for a number of years and you refinance,
you will be starting your 30-year payment term all over
again. While this can reduce your monthly payments, it
will increase the total amount of interest you pay to your
lender(s) during your tenure as the owner of your home.
This is because homeowners pay far more interest than
principal in the earliest years of your mortgage term.
“When you know better, you do better.”
—Maya Angelou
What else should I know about
refinancing?
Until December 31, 2015, you may be eligible for a
refinance through a federal program commonly referred to
as HARP (Home Affordable Refinance Program). HARP is a
useful refinance program, especially for homes that may
still be “underwater” meaning the total dollar value of the
loans on your home exceeds the appraised value. There
are a few conditions which must be met to qualify, one of
which being that your first mortgage was purchased or or
guaranteed by Fannie Mae or Freddie Mac on or before
May 31, 2009. You can check to see your status by
entering your address and last four digits of your social
security number into the Fannie Mae and Freddie Mac loan
look-up websites. knowyouroptions.com/loanlookup and
ww3.freddiemac.com/corporate/. If you have explored a
HARP refinance in the past and been told by a lender or
Hello Housing that you are ineligible, a recent policy
exception approved by the City of Novato City Council on
September 30, 2014 may be able to help. Please contact
Matt Warner with Hello Housing to learn more.
Can I refinance and get cash out?
The program documents prohibit taking cash out. However,
on September 30, 2014, City Council approved a termlimited policy exception allowing limited cash out to eligible
owners. Please contact Matt Warner at
[email protected] to learn more and to learn whether
you may be eligible.
January 2015
Home Maintenance Checklist
MONTHLY
☐ Garbage Disposal: Tighten drain connections
one and know where it is! Then, check that it’s
fully charged; recharge or replace if needed.
☐ Range Hood: Clean fan blades and housing.
☐ Fire Extinguisher: First, make sure you have
☐ Sink/Tub Stoppers and Drain Holes: Clean
out debris. Running warm water helps loosen
debris.
☐ Garbage Disposal: Flush with a mixture of
hot water and baking soda to keep it running
properly.
☐ Forced-Air Heating System: Change filters
monthly if your system uses fiberglass filters.
EVERY 2 MONTHS
☐ Range Hood: Clean the grease filter.
EVERY 3 MONTHS
☐ Faucets: Clean debris and mineral deposits
out of the aerator (a small screen screwed
onto your faucet) to keep water flowing
smoothly.
and fasteners.
ANNUALLY
☐ Water Heaters: You should flush your water
heater out annually to remove and residue
from piling up in the bottom of the tank. Please
follow manufacturer’s instructions for flushing
the system.
☐ Windowsills, Doorsills, Thresholds: Fill
cracks, caulk edges, repaint; replace if needed
☐ Window and Door Screens: Clean screening
and repair or replace if needed; tighten or
repair any loose or damaged frames and
repaint if needed; replace broken, worn, or
missing hardware; tighten and lubricate door
hinges and closers.
Checklist adapted from Sunset Books’ JoAnne Liebeler’s Do It Herself by Hello Housing
☐ Tub Drain: Clean out debris.
☐ Outdoor Drain Grates: Clean out debris to
ensure proper drainage around your home.
EVERY 6 MONTHS
☐ Smoke Detector: Test batteries and replace if
needed. We recommend you do this before
that dreaded beeping sound wakes you up in
the middle of the night.
☐ Toilet: Check for leaks and water run-on. That
running sound means you are wasting water
and money.
☐ Interior Caulking: Inspect caulking around
tubs, showers, and sinks; replace any if
missing or cracking. Caulk helps keeps water
from your relaxing bath from rotting the wood
studs and plywood behind your wall and
floors.
☐ Forced-Air Heating System: Replace the
filter if your system uses high-efficiency pleated
or HEPA-style filters.
Saving up for 2015?
The best way to keep home repair costs low is to
preform preventative maintenance. If you see tasks on
this list that you aren’t sure how to tackle, there are
instructional videos online that describe how to do
just about everything. Check out websites such as
www.wikihow.com of www.ehow.com to learn how to
do basic repairs.
Your HOA Checklist
HOAs are typically responsible for the following
maintenance items, but they can do a better job
with your help.
☐ Roof, Gutters and Downspouts: Notify your
HOA immediately if you notice a roof leak or if
gutters and downspouts are not draining
properly. Our recent rains provide a rare
opportunity to check for such problems!
☐ Trees: It is a good idea to inspect for any
branches that are at risk of falling on your
home or touching your home and then notify
your HOA for trimming. Our drought conditions
followed by recent heavy rains make this
especially important.
☐ Siding, Foundation, Exterior Trim, Exterior
Doors, Decks, Exterior Stairs and
Driveways: Your HOA will maintain and repair
all of these areas. Please notify your HOA with
any request for repairs.
☐ Mold: Exterior mold should be remediated by
your HOA. Please notify your HOA if you notice
any areas that have mold sooner rather than
later.
☐ Common Area Landscaping and
Walkways: Your HOA is responsible for
maintaining all landscaped areas and walkways
in the common areas only. If you notice any
broken sprinkler heads, dead plants, cracked
concrete, or even termites or pests, please
contact your HOA immediately.
☐ Common Area Electrical: All common area
electrical and fixtures are the responsibility of
your HOA. Please notify your HOA if you see
any nonfunctioning lights or exposed wires.
☐ Sanitary Sewer and Storm Drains: Sewer
and storm drains are maintained by your HOA
in all common areas.
☐ Fire Sprinkler System: Your HOA will
maintain the fire sprinkler system in your home.
Please notify them immediately if you see any
problems with the sprinkler heads in your
home.
☐ Exterior Caulking: Inspect caulking and notify
the HOA if you notice any of the caulking is
missing or deteriorating which may allow water
or pests into your home.
☐ Termites: Inspect the perimeter of your
home for evidence of termites, such as mud
tubes around the foundation. Make sure that
there is at least six inches of clearance
between any soil or mulch and the bottom of
your siding. If you see evidence of termites
or other pests, contact your HOA
immediately.
Your Tax Benefit
Checklist
☐ Homeowner’s Property Tax Exemption
Now is a great time to make sure you are
taking advantage of the Homeowner’s Property
Tax Exemption. This program is administered
by the County Assessor in accordance with
State law. Residents of dwelling units owned
and occupied as a principal place of residence
as of January 1, 2013 are eligible for an
exemption of up to $7,000.00 of assessed
valuation, resulting in reductions on your tax bill
ranging from $70.00 to $94.93 depending on
applicable tax rates. For information on how to
obtain the exemption, inquire at the Marin
County Assessor-Recorder’s Office at (415)
473-7215.
☐ Home Mortgage Interest Deduction The
Home Mortgage Interest Deduction is one of
the greatest financial benefits of
homeownership. Home mortgage interest is
any interest you pay on a loan secured by your
home. You can deduct your home mortgage
interest payments from your taxable income
under certain conditions. To learn more, visit
IRS.gov and search for Publication 936 or
consult with a tax professional.
☐ Property Tax Payment Deduction
In addition to your home mortgage interest
deduction, you may be able to deduct what
you pay each year in property taxes.
Deductible real estate taxes are generally any
state, local, or foreign taxes on real property
levied for the general public welfare. They must
be charged uniformly against all real property in
the jurisdiction at a like rate. To learn more, visit
IRS.gov and search for Topic 503 or consult
with a tax professional.