Below Market Rate Downpayment Assistance Loan Program (BMR DALP)
BMR DALP Fund Balance
Detailed information for lenders
MOHCD provides need-based downpayment assistance for low and moderate income households who otherwise would not be able to purchase a mixed-income BMR unit. We will only extend loan funds when is necessary for a borrower to qualify for an affordable mortgage, in conjunction with a mixed-income BMR purchase.
Applicants must work with a MOHCD-approved lender to request BMR DALP funds.
Participating lenders must:
- Determine the Borrower’s financial ability to purchase the desired property.
- Make every effort to qualify the Borrower for the maximum financing on the first mortgage.
- Submit the evidence of financing the maximum 1st mortgage loan amount when submitting an application for a BMR DALP loan using the Needs Assessment Worksheet.
- Participating lenders receive this Excel worksheet during their annual training. If you need this worksheetk, email email@example.com
- Use the Downpayment Loan Application to apply for funds on behalf of their buyers.
The BMR DALP is a silent second loan that requires no monthly payments for 30 years, or until the property is sold. The owner pays MOHCD back the principal amount, plus an equitable share of appreciation.
BMR DALP funds can be used:
- To contribute to the need-based down payment for the borrower's household who otherwise would not be able to purchase a mixed-income BMR
- To enable the borrower to meet the maximum debt-to-income ratio established making the mortgage payment affordable to the borrower
BMR DALP funds cannot be used:
- As a cushion factor to make the loan more appealing to the borrower and/or the lender
- To pay for upgrades, improvements and repair costs
- For financing of storage units, additional spaces, and/or second parking spaces
- To pay down the first mortgage principal, debt or liens
Cash disbursed to the borrower cannot exceed $250 at close of escrow. Any excess cash must first be applied towards the reduction of BMR DALP loan amount.
- No fees when applying for BMR DALP funds.
- However, there is a nonrefundable fee if you’re applying with a Mortgage Credit Certificate. See MOHCD program fees »
Maximum Loan Amount
The BMR DALP will extend the maximum loan amount for the lessor of:
- Amount of need based on maximum 1st mortgage financing; or
- Maximum BMR DALP loan amount, up to 15% of the sales price.
Under no circumstances will the City provide funds to a homebuyer in excess of what is needed to close the loan.
- Mixed Income BMR purchaser: Borrower must have a purchase approval letter for a mixed-income BMR unit issued by MOHCD
- First-time homebuyers: No member of a household must have had any ownership interest in a residential unit for the last three years.
- Completed homebuyer education from Homeownershipsf.org
- Maximum Income Limits: household income must not exceed 120% of the Area Median Income (AMI).
- The combined income of all household members 18 years or older, who will be living in the property, must be included in the determination of income. The combined household's income must be projected as an annual income. It should be assumed that the current income would continue for the next 12 months,
- Maximum loan amounts are tied to the household income category.
- Minimum Downpayment: Borrower must contribute a minimum of 5% (3% from borrower's own funds, and remainder from gifts or grants).
- Liquid Assets: Borrower must have no more than $200,000 prior to purchase, and no more than $15,000 after purchase.
- Post-Purchase Reserves: Borrower must have a minimum of 3 months’ reserves after purchase. In addition to Liquid Assets, vested funds from retirement accounts that permit withdrawals may be also used for reserves. This reserve should include 3 months’ of:
- Property taxes
- Hazard insurance
- Homeowner’s association dues
- Occupancy: The property must be owner-occupied during the life of the loan.
- Insurance: Household must have H06 Insurance
- Eligible Household Member: An eligible household member must either be:
- On title and loan of the property. All spouses or domestic partners must be included in the household and must appear on the application, title, and loan for the City Second loan.
- Listed as a dependent on tax returns. All household members who are under 18 years of age must be the legal dependent of an adult household member. An unborn child will be counted as a household member with verifiable medical documentation. Elderly adult household members may be considered as dependent as long as they are listed as a dependent on the most recent tax return. All income from dependent adults and children must be included in the total household income. Spouses and Domestic Partners are not considered dependents.
- Need: Demonstrate need for downpayment assistance to purchase the mixed income BMR unit (determined by MOHCD)
- Primary Financing: Borrowers must already have a mortgage loan approval from an approved lender prior to requesting BMR DALP funds.
- Lien Position: The BMR DALP loan must be in a junior lien position behind the first mortgage and BMR lien.
- First Mortgage Requirements: The first mortgage loan must be a 30-year fixed rate mortgage. The mortgage payment must be fully amortizing.
- Loan Types not allowed: Reverse mortgage, stated income, ARM (adjustable rate mortgage), reverse mortgage, interest-only, negative amortizing, balloon payments
- Impounds: The first mortgage lender must collect and manage impound accounts for property taxes and hazard insurance for the loan term.
- Loan-to-Value Requirements (LTV and CLTV): The minimum Loan-to-Value (LTV) is 50%, and the maximum Combined Loan-to-Value (CLTV) is 95%.
- Front-End (Housing) Ratio: No less than 33%
- Back-End (Total Debt) Ratio: No more than 43%
- Co-Signing: Co-signing for a BMR DALP loan by a non-household member is not allowed.
- Loan Signing: No power of attorney is allowed. All applicants must be physically present to sign loan documents.
- Loan Terms: The term of the BMR DALP is 30 years. The BMR DALP is a no-interest, no-monthly-payment, deferred loan due upon sale, rent, or title transfer of the property. The BMR DALP is also required to be repaid when BMR borrowers prepay their first mortgage loans while their BMR DALP loans are still outstanding. The principal balance amount plus a share of the appreciation should become due at the end of term or when the borrower sells, rents, or transfers title on the property.
- The appreciation is calculated by subtracting the original sales price from the current sales price or the current appraised market value. The share of appreciation is computed as a ratio of the City loan amount to the purchase price.
- For example, if the borrower receives the BMR DALP loan in the amount of $52,500 with the purchase price of $350,000, the loan amount is 15% of the purchase price. Therefore, the share of appreciation would also be 15%.
- Prepayment Penalty: There is no prepayment penalty associated with payment of these loans prior to the due date. However, prepayment must be in full; the loan cannot be partially repaid. If there is a prepayment, the amount due and owing will be determined by an appraisal, at the homeowners own cost, to determine the amount of appreciation.
- Assumable/Transferable: The BMR DALP loan is not assumable or transferable. The loan must be paid in full upon sale or title transfer of the property.
- Payoff Requests: Borrowers must submit a written request for payoff. If the borrower wishes to have a third party submit a request for payoff on their behalf, they must submit a signed authorization allowing MOHCD to provide information to the third party. In addition, borrowers must submit at their own cost, a current fair market appraisal report dated within 90 days of the payoff request submission.
- Refinance/Subordination: The loan can be subordinated to the refinancing of the existing first mortgage for a lower interest rate and/or better loan term. More details about refinancing and subordination »
- Home Equity Lines of Credit and Home Equity Loans: MOHCD does not allow borrowers to open Home Equity Line of Credit and Home Equity Loans. Borrowers who use such programs are in violation of their Program restrictions and will not be allowed by MOHCD to refinance their loans. The loan will be due and payable with share of appreciation if the Borrower is deemed out of compliance with this policy and all other applicable program policies.
- Closing appointment: The buyer must sign the Commitment Letter and Affidavit at MOHCD’s offices at 1 South Van Ness, within 5 business days of request.
Training for Participating Lenders
Instructions for completing the Needs Assessment Worksheet are in the BMR DALP Announcement.
Mortgage Loan Officers (MLO) or mortgage brokers who would like to become participating lenders for MOHCD's homeownership programs, including BMR DALP, City Second, DALP, MCC and TND must complete the required training and pay the required fee. Each individual MLO or mortgage broker must complete the training every year.
All participating loan agents must provide their NMLS ID# to MOHCD and sign the Homeownership Programs Lender Agreement.