Buying an affordable home

If you are looking to purchase a home that has been made affordable by way of a deed restriction or ground lease, you must demonstrate that your projected household income will not exceed the applicable income limits as well as meeting certain other eligibility criteria.

Income eligibility is determined by assessing all income received by all members of the household, at their gross amount, and forward projecting for the coming 52 week period. Additionally, 1% of the total value of a household’s assets are added to the calculated income to arrive at a total projected annual income.

For the purposes of income certification, the following are some examples of sources that would be considered as income, but is not an exhaustive list:

Part time and full time employment income (base, overtime and bonus pay)
Self-employment income
Unemployment income
Temporary disability payment, Worker’s Comp, and long term disability
Income from government sources (Social Security, SSI, SSDI, Supplemental SSI, VA benefits, RIWorks etc)
Distributions from retirement vehicles (Social Security, pension, 401k, traditional and ROTH IRAs, 403(b) etc)
Investment income from stocks, bonds, brokerage account
Rental income from non-residential real estate
Gambling proceeds
Annuity payments
Child support and alimony
Reoccurring family support or cash gifts

For the purposes of income certification, an asset is considered anything that has cash value with interest earnings or growth potential held by any member of the household. The following are items we typically count as assets, but is not an exhaustive list:

Current value on bank accounts (checking, savings, money markets)
Certificates of Deposits
Retirement accounts from which no distributions are being received, or will be received in the coming 52-week period.
Investment accounts from which no distributions have be made

For purposes of income certification, we do NOT count food stamps or government issued rental subsidy as income, nor do we consider personal property, such as vehicles, recreational equipment, art, jewelry etc. as assets.

You can find the current income limit requirements here to help you make a self-assessment regarding eligibility.

Unlike market rate homeownership opportunities, affordable homes have ongoing compliance requirements and limitations. Prior to deciding to pursue an affordable homeownership opportunity, homebuyers should assess whether those conditions align with how they intended to own and utilize the property in the future.

The home must remain owner occupied twelve months a year.
The home may never be rented out or subleased to others. If the owner can’t or doesn’t want to live there anymore, it must be resold to another low and moderate income homebuyer using the process outlined on the “selling an affordable home” page.
The home may not be placed into any type of trust, revocable or irrevocable, or be held by an entity of any kind.
All transfers of ownership interest (full or partial) of the home must be approved by the CHLT in advance.
Refinances and Home Equity Lines of Credit must be approved by the CHLT in advance, and there are limitations on these types of transactions.
All future resales during the restricted period must be sold to an income-eligible household at a price not in excess of the affordable sales price, as determined by the CHLT.

Disqualifications

The buyer may not be a dependent on another person’s most recently filed tax return.
As the home must remain owner occupied, non-resident co-borrowers are not permissible.
The buyer may not own another residential property at the time they purchase the affordable property.
Private financing is not typically allowed. If financing the home with a mortgage, buyers must use mortgage products that are non-predatory in nature and meet industry standard underwriting criteria and loan terms.

Overview of the Process

Step 1. Once you’ve identified an affordable home that you are interested in, review eligibility and compliance criteria to gauge whether an affordable home is the right opportunity for your household.

Step 2. You must have an executed Purchase and Sales agreement to apply for income certification.

Step 3. Download the Homeownership Application for Income Certification form below.

Step 4. Complete the application and submit it, along with all of the required documentation in HARD COPY format to the CHLT, 1070 Main Street Suite 304, Pawtucket RI 02860. Please make sure that you provide copies of documents (not originals) as we are unable to return your documents to you.

Step 5. After the review is complete, the CHLT will issue a preliminary approval with conditions or written reasons for denial or disqualification.

Step 6. All parties will work towards a timely closing. CHLT is responsible for drafting any legal paperwork related to the deed restriction or ground lease, and coordinates with closing attorney to finalize closing date and complete the steps necessary to close; buyer provides/completes any outstanding items listed in the preliminary approval. First time homebuyers are required to complete an 8 Hour HUD Approved Homebuyer education class, and all homebuyers are required to complete a one on one counseling session with CHLT to review the compliance components of their deed restriction/ ground lease.

Step 7. Upon successful completion of all the conditions outlined in the preliminary approval, CHLT will release its final approval and deliver its closing packet to the closing attorney.

Step 8. Happy Closing and Congratulations on your new home!

Frequently Asked Questions

Can I stay in my home if my income increases?

Yes. For homeownership units, income eligibility is determined only at the point of sale. During the application process, you are required to disclose any income or income increases known at the time of application for the coming 52-week period. On the day you close on the home, a Certificate of Compliance will be issued that details how your eligibility was calculated. Unlike affordable rental units, homeownership units are not required to demonstrate ongoing income eligibility.

Can I pay for my affordable home in cash?

Yes, it is possible to purchase an affordable home with cash so long as the source of the cash can be properly documented and verified.

Can I receive a financial gift from a family member towards the down payment on my affordable home?

Yes, buyers of affordable homes are able to receive a cash gift from a family member to be used towards the purchase of the home. The value of cash gifts received by a buyer will be included in the certification for income eligibility as an asset.

Can I use any lender I wish to obtain financing for my affordable home?

Yes, buyers are not required to use any specific lender to purchase their affordable home but must be a bona fide lender. The lender used must be willing to make a mortgage on a deed restricted or ground leased property. Buyers must use mortgage products that are non-predatory in nature and meet industry standard underwriting criteria and loan terms. Private financing is not typically allowed.

What happens if I default on the mortgage on my affordable housing unit?

As the Monitoring Agent, the CHLT is granted a right of first refusal within the deed restriction or ground lease if the property is ever subject to an effort to foreclose. In other words, this means the CHLT is able to purchase the home in order to prevent the foreclosure. Homeowners are strongly urged to reach out to the CHLT as soon as they have trouble making mortgage payments so they can be directed to a housing counselor and any available resources, with the hopes of resolving the issues in advance of the mortgage holder resorting to foreclosure.

Is there a minimum number of years that I have to remain in my affordable home before I can sell it?

No. There are no minimum number of years that an owner must occupy an affordable home before selling it. Homeowners are able to sell the property at any time but must follow the resale procedures and limitations as outlined on the “Selling an affordable home” page.

Can I leave my affordable home to my heirs in a Will?

Yes. Affordable housing is an asset that you own and therefore can be left to whichever heirs you designate in a Will. Depending on who the heir is, there will be different provisions as to whether they are required to meet income eligibility and occupancy requirements if they wish to reside in the home. Heirs who wish to occupy the home and are eligible to do so, will be required to transfer the property into their own name as well as executing their own deed restriction. Heirs who do not wish to occupy the property or are not eligible to do so, are able to sell the property under the resale provisions outlined in the “Selling an affordable home” section of this website. If you have questions on estate planning as it relates to your affordable home, please call Melina Lodge at 401-721-5680 ext. 104.

Can I add other people to the deed of property after I purchase it?

No. You may not make any changes to the deed of property after purchase. Eligibility was determined based on the household that you presented at the time of application, and the owners on the deed of the property corresponds to the parties named on the deed restriction. If it is discovered that additional parties have been granted an ownership interest in the property, you will be asked to remedy the noncompliance immediately.

Am I able to refinance my home or take out home equity line of credit?

The ability to refinance or take home equity lines of credit (HELOC) on affordable homes is restricted and limited to specific circumstances and conditions and will require CHLT approval prior to undertaking. Since the valuation of an affordable home is so heavily influenced by inputs largely out of the owner’s or Monitoring Agent’s control, policies related to refinances and HELOCs tend to be conservative. Refinances that allow the homeowner to secure a better rate or term on their mortgage are favorable as such transactions make the housing payment more affordable to the owner. Cash out refinances and HELOCs are limited to no more than 25% of the current value, based on what is available to the homeowner assuming no more than 75% loan to value. If you have questions or would like to move forward with a refinance or HELOC, please call Melina Lodge at 401-721-5680 ext. 104.

Can I make upgrades or other improvements to my home?

Absolutely, improvements may increase the functionality or appeal of your house for the time that you occupy it, but under most circumstances will not affect the resale value of your house. Any type of improvements should be viewed as being made for your benefit and your benefit alone, without an expectation that you’ll receive any return on your investment. The resale value of an affordable home follows a prescriptive formula and seeks to preserve affordability for future buyers. There is a detailed example of how maximum resale prices are established on the “Selling an affordable home ” page. It is best to consult with the CHLT before making any decisions about major improvements.