COUNTY WIDE LEASE TO PURCHASE PROGRAM

Participants must be first time home buyers. (A first time home buyer is defined as someone who has not owned a home in the last three years, or has lost their home due to a divorce.)

The program is limited to households earning less than 80% of the county median income by family size. Gross income from all sources is used to calculate the gross income. After the family is admitted to the program, the income limit no longer applies.

Houses are leased for up to three years. (A one year lease, renewed twice) Participants may purchase the house before the end of the three-year period if they are financially able to do so.

Rent is based on an estimate of the monthly mortgage payment.

A portion of the rent is set aside in a savings account for the down payment and closing cost. By the end of the three-year period, the participant should have enough funds for a 5% down payment and additional funds to cover the closing costs.

At the end of the lease period, the participant must obtain permanent financing and purchase the property.

Participants must earn enough income to qualify for a mortgage for the property in three years without additional subsidy.

Purchase price will be the appraised value after the rehab. A credit of 10% will be given to the buyer at settlement. (50% will be a forgiveness loan and 50% will be a deferred loan)

Total household monthly debt at the signing of the lease to purchase agreement can not exceed 15% of the household's gross annual income.

Participants must commit to reducing total non-housing debt to no more than 7% of the gross monthly income during the lease period.

Tenants will participate in homeownership counseling. Participants will provide income and debt information to the homeownership counselor on a quarterly basis and will meet with the counselor when necessary.

The homeownership counselor will obtain credit reports on a quarterly basis, and share this information with the participant.

Participants must maintain a good credit history.

Participants must maintain stabile employment.

Participants must attend a three session (eight hour) free Homeownership Workshop.

Participants must attend a three session (nine hour) free Homeownership Maintenance Training Workshop.

The tenant shall make necessary repairs to the property that do not exceed $50.00.

The homeownership counselor will monitor the participant's financial progess and advise the participant on when to make a loan application to purchase the house. In order to be eligible for a loan, the participant's monthly loan payment cannot exceed more than 33% of the gross monthly income. Additionally, the monthly loan payment plus other monthly debt can not be more than 38% of the gross monthly income.

Deed restriction: The deed of conveyance will set forth a restriction of the property shall remain owner occupied of a period of twenty-five years.

Right of First Refusal: The Housing Authority retains the right of first refusal to purchase the property back if the participant wishes to sell the house within the first five years of ownership. The purchase price shall be the purchase price paid by Tenant to Landlord for the premises allowing for improvements made by the tenant.

Subordination of debt: For a period of no less than five years and as long as there is still a balance due and owing to the Housing Authority on the mortgage, the participant may not incur any subordinate debt which would become a lien against the premises without first obtaining the written approval of the Housing Authority.

2005 Income Limits by Family Size:

Family (persons)

Size 1 2 3 4 5 6 7 8

Mod 80% 33,950 38,800 43,650 48,500 52,350 56,250 60,100 64,000

PRICE: After a property is rehabilitated, an appraisal will be ordered in order to establish the home's baseline value. The property will be sold for the original acquisition price or 90% of appraised value, whichever is higher.

RENT STRUCTURE: Rents will be payable to the Authority. Each rent will consist of three components: 1. A portion of the rent will be saved in an escrow account for down payment and closing costs. (Calculated by projected down payment and closing costs and dividing by 36 months; typically 8-10%). 2. Taxes and insurance will be escrowed for payment during the lease period. 3. The balance will be paid into the Housing Authority's Program Operations Account. These funds will cover repairs, which are a condition of settlement, and other eligible costs incurred while operating the program. These funds may be used to cover overages in acquisition of the properties or shortfalls in rehabilitation funds.

Using the base price of each property, the rent for each property shall be calculated by projecting the future PITI payment, which the tenants will eventually have to assume. This involves projecting a conservative interest rate (about one point higher than current market) to help assure the specific property's affordability to the prospective tenant, as well as slightly higher tax and insurance costs to allow for inflation. Rents may be adjusted at lease renewal if taxes and insurance increase.

If the tenant does not follow through with the purchase of the house, or if the tenant is evicted or does not receive a lease renewal due to non-compliance with the program, then the escrowed savings shall be retained by the Authority. Certain exceptions may be made. For example, in the event that the tenant's decision not to buy is due to job relocation, the funds shall be provided to the tenant for the acquisition of a house in their new location. The relocation must be at least 50 miles from the original property to qualify under this exception.

SECOND MORTGAGE: In order to prevent misuse of the program, the difference between the sales price and appraised value will be secured through a second mortgage which will be filed at the County Courthouse. After the 5^th anniversary of ownership, the amount of the mortgage shall be reduced by 50%. If the buyer opts to sell or transfer the ownership interest in their house prior to five years, the entire amount will be payable to the Authority. After five years, one-half of the amount will be payable to the Authority regardless of when the property is sold. This mortgage will be subordinate only to the primary mortgage lender.

DEED RESTRICTION: The deed of each property will contain a restriction that requires that the house remain owner-occupied for twenty-five years. The buyer is free to sell the property before the 25 year period expires; the property will have to be sold as an owner-occupied residence.