FAQ – Income Limits And AMI For The Down Payment Assistance Programs

This is a very misunderstood subject.  Many agents and lenders do not understand this issue so buyers are told they do not qualify when in fact they did.  Lets take it a step at a time. The table below is for San Diego County (an Area).

• In the term Area Median Income Area usually stands for a county sized area. .
• There are tons of these areas all over the US.
• Median Income stands for the median income for an individual or house hold in that area.  It is important to understand that “household refers to all people who are living in the house.
• Thus, if you and your wife are going to buy a house, you are a household of 2.  and both of your incomes are counted in that household.
• If you have two children then you are a household of 4.  If one of your children are working, their income counts two.
• If your mom lives with you and will be moving to the new house, then you are a household of 5 and her income counts to.  Etc
• We know that there are for the most part, three categories of programs
  • Programs for people making 40-80% AMI
  • Programs for people making 81-100% AMI
  • Programs for people making 101-120% AMI

                                                                                                    Family Of (all occupants)

AMI       Description                            1                2                    3                4                   5                   6                 7                     8

40%  Extremely Low                   16,900       19,300        21,700        24,100        26,050       28,000        29,900          31,850
60%  Very Low Income               28,150       32,150        36,150        40,150        43,400       46,600        49,800          53,000
80%  Lower Income                    45,000       51,400        57,850        64,250        69,400       74,550        79,700          84,850
100%  Median Income                53,150       60,700        68,300       75,900        81,950       88,050        94,100        100,200
120%  Moderate Income            63,750       72,900        82,000        91,100        98,400     105,700      112,950        120,250

So a Family of 4 making 75,900 is considered Average for San Diego (Exactly 100% AMI). Or are they??? The issue is that the state, counties, municipalities and program administrators can’t keep their fingers off of it and have to add in their own set of criteria.  This is important to understand because if you looked at one program (let’s use our example table above) that had a stated AMI of 100% and your income was 76,000 you might thing that not only did you not qualify for this program, but you did not qualify for any of the 100% programs.  This might or might not be true.  You would need to look at all programs with a 100% and 120% AMI and look at the actual income that was shown for the program.

About Income.

Income will be looked at differently for your First Mortgage and your Down Payment Assistance.

• First Mortgage.
  • Full Time Job is counted
  • Commission may or may not be counted
  • Bonuses may or may not be counted
  • Etc.
  • The problem with the First Mortgage is getting them to count enough of your income that you can qualify for the house you want.
• Down Payment Assistance Programs
• Most of the programs will insist you claim all sources of income.
• If it showed as being deposited into your checking account or on your taxes, they will insist you add it in.
• This is extremely important to understand.  Once you enter escrow it will be another 30 to 75 days before the Down Payment Assistance Program administrators look at your application.  This is long after you are supposed to have removed your contingencies and placed your deposit at risk (let alone that you already paid for an appraisal and Home Inspection).  When they look at your application, if your income is over the allowed limit for that program by just 1 penny, you will be declined.  Prior to submitting your offer to purchase, you want to make sure that you lender and real estate agent understand these rules and understand what the DAP administrators will count as income.
• Here is an example:  Your mom helps you out with a gift of 100-150 dollars per month which you deposit into your account.  Some DAPs will consider that income, some will not.  Imagine loosing your transaction because you were not aware of idiosyncrasies like this.
• The problem with DAPs is that they want to count every penny that you get until you make too much to qualify for the program.

It is important to keep the First Mortgage guidelines separate from the Down Payment Assistance Guidelines.  FHA would never allow the lender to use the monthly help from your mom as a qualifying income, but the DAP does.

The Real Estate agent, lender and underwriter must be clear on these things.  Never use an inexperienced lender or real estate agent for these very difficult transactions.  They should have done DOZENS of these types of programs before or you should find someone else.  The only one risking their money and home-ownership dreams is you.  Why would you chose a a lender or agent who is inexperienced with such an important job.  It is easy to tell if this is something that they focus on, just look at their website.  If it is not advertising (and not just a page or two) that this is what they do, find someone who does.
 
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Still Have Questions? Call 877-696-7373 x777 or email Don Gardnier at Don@sd4u.com