Throughout the history of the United States, people with disabilities have been segregated and isolated from ordinary life. During the establishment of the original thirteen colonies, people with disabilities were not allowed to settle. Later, immigration policies prohibited people with disabilities from entering the country.

Beginning in the 1700s, many people with mental, physical, and emotional disabilities lived the majority of their lives in large institutions. Parents of newborn children with disabilities were strongly advised to send their children to institutions. Indeed, even if families wished to care for their children with disabilities at home, there were no resources or assistance available to them.

In the 1920s and 1930s, changes such as the Social Security Act and the Fair Labor Standards Act allowed people with disabilities to work in sheltered workshops and to receive income. Over the next forty years, the living conditions for people with disabilities improved slightly, but were still far below the standards most Americans would consider acceptable. Institutions began to change their names from "asylums" to "schools," "training centers," and "developmental centers." These changes indicated an evolution in the way society thought about people with disabilities. The assumption that people with disabilities were "broken" or "deviant" persisted, but now it was believed that some people, with enough rehabilitation, programming, and training could be "repaired."

In the 1970s, Independent Living programs were developed throughout the United States. These programs advocated the inclusion of people with disabilities in society. Terms such as "mainstreaming" and "normalization" were coined to describe a change in the attitudes and practices of the United States toward people with disabilities. Despite this powerful movement, most people with disabilities still lived in congregate settings such as institutions, group homes, or nursing homes. People had little control over their own lives, and were not considered capable of making decisions for themselves.

In recent years, tremendous changes have impacted the lives of people with disabilities in positive ways. There has been a shift from placing people with disabilities in large institutions to providing assistance for people to live in their own homes in communities. Individuals with even the most intensive assistance needs are moving out on their own, holding down jobs, developing relationships, having children, and making the decisions which impact their lives. In many situations, assistance is tailored to meet the person’s needs and is delivered in people’s homes, at their jobs, and in the community.

In 1990, the Americans with Disabilities Act (ADA) was signed into law. The ADA states that people with disabilities will receive fair and equal treatment under the law. The signing of the ADA was a tremendous milestone for individuals with disabilities. However, nearly a decade later, most individuals with disabilities do not have control over, or even a voice in, the most basic decisions regarding their homes and their lives. Too often, where people live, with whom they live, and how they spend their time are decisions made by someone else. Despite major accomplishments in community housing and personal assistant services for persons with disabilities, most individuals remain guests, or perhaps worse, boarders in their own homes, subject to the rules, schedules, dictates, tastes, and prejudices of others.

People with disabilities, their families, the service system, and others working on their behalf have overcome innumerable legal, attitudinal, and societal barriers. Despite these achievements, there is still a great deal of work to be done before we can say that people with disabilities are afforded the same opportunities, rights, privileges, and responsibilities that all citizens enjoy.

Until very recently, many people with disabilities were not able to achieve the American dream of owning a home. Of the forty-three million Americans with disabilities, only a small fraction are homeowners. However, a growing number of individuals are purchasing homes of their own, and gaining greater control over their lives.

Homeownership for people with disabilities clearly is new territory that is often overwhelming and laden with obstacles. However, the journey is a worthwhile one for people who successfully navigate the process and purchase a home of their own. This guide may be a helpful tool, since it has been designed to:

• present new information on the topic of homeownership that is not available elsewhere;
• help the reader learn what it takes to purchase a home;
• discuss the responsibilities and rewards of homeownership;
• provide resources for funding and other types of assistance;
• educate home-buying counselors, lenders, and realtors; and
• answer questions about issues and barriers that specifically affect people with disabilities.

Purchasing a home is a complicated undertaking for anyone. Most people only buy one or two houses in a lifetime! Working successfully with lenders, realtors, and other important people in the process requires a basic understanding of information ranging from simply describing the kind of house you want, to providing technical information, to prequalifying for a loan. Therefore, for some users, this manual may seem oversimplified. For others, it may seem too difficult to understand. Still others may find some chapters easy and others more difficult. Whether you are a person with a disability, a family member, someone who provides assistance to an individual with a disability, or a professional involved in the process of homeownership, you will probably find some sections of the manual more helpful than others.

Regardless of your role (home buyer, friend, personal assistant, etc.), it may be necessary to obtain assistance to comprehend the information presented. Some people might find it helpful to start by reading the guide from beginning to end. Then, each chapter may be read again as the process moves forward.

If you are interested in purchasing a home, you could ask friends, family members, neighbors, or paid assistants to help read through the guide with, or for you. Review it with them until you are comfortable with the material. If you are working with a planning team, ask the members to read the guide. Discuss each chapter as a group, exploring the areas you would like to learn more about or adapt to your situation. If you do not have an established planning team, you may want to create one. Chapters One and Two will give you specific information about how to do this.

Given the wide range of readers of this manual, it is assumed that some will need assistance to understand and negotiate the homeownership process. Many people with disabilities receive the assistance they need from independent living centers and supported living agencies. Others receive informal or unpaid assistance from family, friends, neighbors, and co-workers, either in place of, or in addition to, paid assistance from agencies. Regardless of the source, assistance that is tailored to individual needs and desires is a key ingredient in the success of people with disabilities in buying a home of their own. The material in this guide may therefore be useful to supported and independent living agencies that are committed to assisting people to own and control their homes.

Recognizing that people want and need different amounts and types of assistance, we realize that the process we describe is just one approach and may not be necessary or helpful to you. Even if this is the case, you may want to read through the section on planning, as there will be certain pieces of information that may be useful to you.

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As you prepare to embark on this exciting new expedition, remember that you are among the first to travel this road. There are precious few markers and signs to guide you along the way, but as more and more people venture into homeownership, the path will become a well-worn and familiar one. Good luck on your journey.

All over America, many people with disabilities are currently living in, or are in various stages of buying, their own homes. The first step to begin the process is to decide whether they truly want to own a place of their own. This chapter may help you to make that decision for yourself. It will present both the positive aspects and some of the difficulties associated with owning a home. It will introduce you to what owning a home means in practical terms, and explain the meaning of terms such as: mortgage, budget, credit record, and pre-qualification. The roles of people who may help you buy a home will be described, along with ways to increase your buying power. Most importantly, this chapter will spell out what things you will need to consider as you try to determine whether purchasing a home is something you want to do.

As part of the process, you may want to locate and ask for assistance from individuals who have been trained to help reduce some of the confusion and uncertainty of the home-buying process. Depending on where you live, these individuals could be affiliated with a homeownership counseling agency, lender, real estate agent, or coalition of agencies. Chapter Two offers a more in-depth description of the process of choosing individuals to help you buy a home.

There are many good reasons to decide to purchase a home. Some of the benefits you may expect if you make that decision are:

Many people with disabilities have lived their entire lives in spaces that belonged to, and were controlled by, others. Most of us find our greatest comfort and security in surroundings we call "a place of our own." But, for people with disabilities, "home" often means "my room in the group home," or, "my room in my parent’s house," or, "my bed in the room I share with my roommates," or, "my room in the nursing home, adult foster care, or, the institution." Making the decision to purchase your own home is one way you can gain a greater degree of freedom and control over your life. For example, when you buy your own home, you choose the location. You decide which neighborhood is right for you. You choose the type of home in which you prefer to live. You may choose a house, condominium, manufactured home, large or small, wood or brick.

Owning your home means you decide who gets a copy of your keys. It means that you decide whether to invite another person to live with you. You may be able to rent a room in your house. Having a place of your own may give you your first chance to decide where the furniture is placed, what pictures and decorations you hang on your walls, who is allowed through your front door, and who shares your space and your life. Having your own place means that you can have greater opportunities for privacy. In your own home, you make the rules about which areas are off limits. These rules, or boundaries, put you in charge of deciding who may enter specific rooms or areas in your home.

If you need to modify your house so that it is accessible to you, these changes can be suited to your specific needs and can be made permanent. When you rent, the landlord can limit the types of changes you make, and can require you to return the house or apartment to the original condition or remove the modifications that were made.

In addition to these benefits, homeownership offers stability. When you own your home, the chance of someone else deciding that you must move disappears. As long as you meet all your obligations as a homeowner, you cannot be evicted or made to move unless you choose to do so.

Homeownership brings with it new and valued roles, such as community member, taxpayer, and neighbor. Your community status is enhanced when you are viewed as a responsible adult who owns a piece of a neighborhood. As a homeowner and property tax payer, you contribute to the local economy and have a voice in local government. Much of a person’s standing and perceived membership in his or her community comes from property ownership. Because approximately 65 percent of all Americans own their own homes, achieving the goal of homeownership is often something envied and respected. Owning a piece of property in a neighborhood brings a feeling of dignity and belonging.

One positive outcome of budgeting for and paying your mortgage (house payment) and other housing costs each month is that you will need to develop the habit of setting money aside to meet those expenses. This means that with practice, planning, and hard work, you have a better chance to save money to buy or do things you may need or want.

Moving often means an increase in housing expenses. There may be a security deposit, moving expenses, set-up costs, or a rent increase. In your own home, you can have a "fixed-rate mortgage," which means that your mortgage principal and interest payment remains the same each month for as long as you own your home. If property taxes are included in your monthly mortgage payment, the payment may change slightly if the taxes increase or decrease. You can stay in your home as long as it meets your needs and you pay your bills.

A tax is money paid to local, state, and federal governments to cover the cost of services they provide. Depending on the area in which you live, your taxes may pay for schools, local government administration, road maintenance, police, fire, and numerous other services. While owning a home may mean you pay more in taxes (property tax), it also means you could receive a tax deduction from the federal government. You may pay less in federal income tax. The federal government encourages homeownership by providing homeowners significant tax benefits that are not available to renters. You should consult a tax advisor for more information.

When you begin to develop a strategy to purchase a home, you will also need to develop a plan for getting the personal assistance you need. If you live in an agency-owned or controlled home, the assistance that is available must meet the needs of all of the people who live in the home. In your own home, assistance can be tailored to suit your unique preferences and needs. Assistance is personalized so that there is the right amount and type for you.

Owning a home is an investment. Not only are you putting money into property which may become more valuable with time, you are buying something that you can pass on to your children or other family members when you are gone.

If you decide that you want to own your own house, you must be prepared for hard work. The process can be very complicated, taking a great deal of planning, many meetings, and working together with people. There may be some disappointments, delays, and setbacks along the way. There is a lot of paperwork involved in any home purchase, and much of it is hard to read and nearly impossible to understand without legal assistance.

From the time you decide to purchase a home until the moment you finally unlock your own front door, the process can be very long. Most homeowners will tell you that it seemed to take forever. It is not unusual for timelines to change and delays to occur during the process. The least amount of time the process will take is about thirty days, but it can take several months.

This issue must be considered by anyone who receives public benefits. If you choose to own your own home, it is important to know if and how your benefits will be affected. Depending on your personal situation, you may run the risk of losing your benefits. Many people receiving public assistance have purchased their own homes without losing their benefits, but understanding all the rules is critical if you are to continue to receive all of your income. In following chapters, there is discussion on how to avoid losing your public benefits.

Some public benefits have certain restrictions that could affect homeownership. For example, if you have a HUD Section 8 voucher or certificate to assist you in paying your rent, you will not be permitted to use it for a mortgage payment. These vouchers and certificates may only be applied toward rental costs.

People who receive SSI benefits may not have more than $2,000 in cash resources in their possession at any time. Individuals who receive Medicaid funds have resource limitations ranging from $1,000 to $2,000, depending on the laws of the state in which they live. Because of these resource restrictions, people who receive public benefits do not have the ability to save enough money for typical down payment and closing costs. Later in the manual, we will discuss how you can overcome this obstacle. Each state has different regulations, so it is important that you find out about the rules that apply within your own state.

Part of being a homeowner means that you are responsible for maintaining a house and keeping it in good repair. This includes paying for repair materials and labor. It isn't always possible to plan in advance for repairs. For this reason, you will need to have money set aside for emergencies. Many people shy away from buying a house because they do not want the responsibility of maintaining a home (mowing the lawn, shoveling snow, taking care of needed repairs, etc.). One reason that condominiums are so popular is that there are minimal repair and maintenance responsibilities. Condo owners pay a monthly fee that covers these costs. They can enjoy the positive aspects of owning a home without having to worry about the details of exterior upkeep.

Owning a home can have a positive impact on living costs over the long-term. Homeownership usually means an initial increase in how much you pay for housing. Such things as maintenance, taxes, saving for repairs, and having funds reserved for mortgage payments and emergencies often mean the cost may be more, at first, to live in your home. Depending on your specific situation, upkeep of a home may mean a higher cost than you are prepared for. It is for this reason we recommend that you look carefully at your financial situation and fully understand the potential costs associated with homeownership.

If a borrower fails to pay monthly mortgage payments on time, the bank or other lender can take back the property. This action is called a foreclosure. The bank will sell the house to try to recover the money it loaned. A foreclosure will have a serious, long-term impact on your credit rating. It also means losing your home and all the money you have paid on the mortgage to date. To avoid this, you need to be fully prepared and be certain that homeownership is right for you.

Unlike a renter, a homeowner cannot move after simply giving the required notice to the landlord. If you are unsure about whether you want to live in the same place for more than a year or two, this might not be the ideal time to buy a house. You may wish to explore a number of neighborhoods, towns, or even areas of the country before making a decision to purchase a home and put down roots in one location.

Many people with disabilities do not have a guardian, but some do. Guardians may have a lot of questions and concerns about homeownership. If you do have a guardian, you will need to have that person involved from the beginning. You may even need to obtain approval from a probate court before you complete the process of buying a house.

Moving from a home controlled by others, whether it is your family’s home, an institution, a group home, or another living arrangement, means that you take on more responsibilities for your own life. Before you purchase a home, make sure that you have the level of assistance you need to live in your own home. You may need to spend some time investigating assistive technology, adaptive equipment, personal assistant services, and support provided by services in the community. For example, you can request that your bank or credit union pay your bills for you with money from your account. If you take medication, your local pharmacy may be willing to pre-package your medication in daily doses.

Living in your own home may present a few more complexities if you have trouble moving about. Adaptive equipment may help you to carry out a variety of activities, such as eating, dressing, and bathing. A voice-activated emergency call device may eliminate some health and safety concerns. Designing and securing this assistance in your new home is critical, but may be difficult to obtain and manage.

The following chart shows a summary of advantages and disadvantages of owning a home.

Advantages	Disadvantages
A home of your own	Complexity of process
Community status	Time commitment
A chance to save money	Possibility of loss of benefits
Stable housing costs	Restrictions with use of benefits
Tax benefits	Repairs and maintenance
Assistance is personalized	High cost of homeownership
Investment	Possibility of foreclosure
	Decreased mobility
	Guardianship issues
	Issues of assistance

What Will it Take For You to Buy a House?

Initial planning

Recognizing that people want and need different amounts and types of assistance, we realize that the process we describe is just one approach and may not be necessary or helpful to you. Even if this is the case, you may want to read through the section on planning. There will be certain pieces of information that may be useful to you.

You have decided to purchase a home! Next, you may wish to choose two key people to assist you in this undertaking. One is a housing counselor, or education provider, and the other is a facilitator. A housing counselor/education provider is a person who is trained and certified to assist prospective home buyers throughout the purchase process. This person is knowledgeable about such issues as obtaining credit, how to choose a real estate sales professional, and the different types of loans that are available. Housing counselors typically work for non-profit organizations. For a list of housing counselors/education providers in your area, contact Fannie Mae HomePath^® Services at 1-800-7FANNIE (or 1-800-732-6643).

A facilitator is a person who knows you well, believes in your dream of owning a home, and is willing and able to assist you through all of the steps to reaching your goal. In Chapter Two, we will talk about how to choose a facilitator and what his/her role might be. The next step will be to assemble a planning team. You will want to make a list of friends, family members, people who provide assistance to you, and anyone else who may be helpful or supportive of you becoming a homeowner. Together, all of these people will assist you with the home-buying process.

Once you have chosen these individuals, you will gather everyone together, perhaps at your home or the home of a friend or family member. During the first get-together, it is a good idea to discuss and develop a ways you will implement your action plan. The action plan details the major steps that must be completed to purchase a house. Every time the group gets together, each person will be given a specific task(s). At the following gathering, everyone will report on their progress.

Chapter Two, "Planning," is dedicated to the actual planning process and will walk you step-by-step through the process described above. To illustrate the steps involved in using an action plan to achieve homeownership, an example of a homeowner named Joe is given. His experiences will emphasize the importance of the planning process in assisting someone to purchase their first home.

Looking at current and future income and expenses

You may not have thought it possible to own your own home. By looking at all of your resources and carefully reviewing your income and expenses, you will have a good idea of what is feasible. It is also important for you to keep track of your spending and begin to develop a budget, that will document where your money is spent each month.

All of the money that comes to you, or is received into a account on your behalf, makes up your income. When a bank, housing finance agency, or other lender reviews your financial situation, your total income is used as one part of a formula to decide if you can afford a particular home. For many people with disabilities, a portion of their regular income is money from sources such as SSI and Medicaid. In another section of this chapter, you will find more detailed information on how it may be possible to use this income to buy your own home. For now, it is important that you know that receiving public benefits does not prevent you from purchasing a home. People with disabilities have used their benefits as income to qualify for a mortgage.

Blending of resources

Blending of resources means accessing, combining, and using a person’s assets, such as employment income, public benefits, grant moneys, loans, and personal funds to make sure that there is sufficient money for an individual to purchase a home and receive the needed assistance. This strategy of blending resources is being used by people with disabilities, the housing industry, and others working in the service system, to make homeownership a possibility for people who have limited personal resources. Specific examples of how resources may be blended will be given later in this chapter.

Changes in income

As resources are blended in order to purchase a home, your income may look different. There may be less money from one source, but a larger amount from a different or new source. As mentioned earlier, you may no longer use your Section 8 voucher or certificate, but you may receive other funds that will help make your monthly mortgage payment affordable. These different funding sources will be described in greater detail later in this chapter.

Changes in expenses

As a property owner, you will have different living expenses. You may recall that initially you might pay more to own a home than you had paid in rent or in payments to a provider. There may be expenses such as city water and sewer charges, trash collection, or yard maintenance that you did not have as a renter. Your expenses for assistance will probably change also. For example, you may pay the people who provide you with assistance directly, versus having an agency pay them. The good news is that if there is thoughtful planning and a creative use of resources, your purchase of a home can sometimes lower your overall expenses. This may be possible by tapping into new income streams and devising new ways of receiving assistance.

The cost of purchasing a home

The costs involved in purchasing a house include both upfront expenses and ongoing expenses.

Upfront costs

This term refers to the money you will spend before you move into the home you are purchasing. Your upfront costs will include the down payment, various closing (or "settlement") costs, and the cost of moving your belongings into your new home.

Down payment. Nearly everyone who purchases a house must rely on a loan from a bank or other lender. Most lenders require that you contribute a portion of the purchase price from your own funds. Lenders feel more comfortable knowing that you have a personal investment in the property.

Traditionally, the buyer has been expected to make a down payment of 20 percent of the purchase price. This would amount to $12,000 on a $60,000 house. Today, under some conditions, a buyer can pay as little as three to five percent in down payment. A five percent down payment on that same $60,000 home would be $3,000.

Two low down payment products offered by Fannie Mae are Fannie 97^®, which requires only three percent down, and the 3/2 Option^®, which requires a five percent down payment. Both of these options will be discussed later on in greater detail.

Closing costs.There are a number of additional upfront expenses that must be paid at the time of purchase. These "closing costs" generally range from three to six percent of the total mortgage amount. If you were to buy a $60,000 house with a five percent down payment, your closing costs would total between $1,710 and $3,420. In some situations, other individuals or organizations may pay the closing costs on your behalf.

Settling-in costs/Repairs. You will want to consider how much money you will need to move and settle in. There may be some immediate costs, such as a rental truck to move your furniture. You may need to purchase a major appliance such as a refrigerator or stove prior to moving in. There may also be necessary repairs that must be completed in order to make the house safe. There will be fees for hooking up or changing the billing for your utilities, such as telephone, cable, electricity, gas, and oil. It is important to plan ahead so that you do not spend all of your available cash resources on closing costs.

Accessibility. For a person who uses a wheelchair or has other mobility considerations, the house may need modifications in order to make it accessible. Some changes that are commonly needed include the following:

• Installing ramps
• Widening doorways
• Lowering countertops
• Installing grab bars or handrails
• Modifying or replacing bathroom fixtures
• Flashing door light
• Textured flooring

Renovations of this sort can be costly and must be a critical consideration in the planning process. Depending on where you live, there are certain rules intended to meet safety and other requirements. In some neighborhoods, there are limitations on the type of materials that may be used to construct a ramp or other structure. You will want to find experienced and qualified architects and contractors. The first step is to contact the local housing inspector to determine how to satisfy both the lender and local building codes.

Ongoing costs

If you have been a renter, your main housing costs have been your monthly rent payment and utility expenses. As a homeowner, your housing costs will now include your mortgage payment, utility bills, property taxes, maintenance, property insurance, and mortgage insurance. In addition, condominium and townhouse owners also pay a monthly maintenance fee.

Your monthly mortgage payment. The amount of your monthly mortgage payment will depend on how much you borrow, the term (repayment period) of the loan, and the interest rate. Since most new home buyers are accustomed to paying rent on a monthly basis, they are usually prepared to make monthly mortgage payments.

Principal and interest (P&I). Each mortgage payment includes both the repayment of a portion of the principal (the amount you actually borrowed) and the interest (a fee for borrowing the lender's funds). Lenders refer to payments of principal and interest as "P&I." If you know how much you need to borrow (the purchase price minus your down payment) and what the interest rate will be, you can use the principal and interest chart that follows to determine what your monthly principal and interest payment will be on a standard 30-year fixed-rate mortgage. Note that this chart includes only principal and interest payments, not property taxes, property insurance, and private mortgage insurance.

Mortgage insurance. Mortgage insurance helps protect the lender if you fail to repay the mortgage loan. Loans that are insured, either by the government or by a private mortgage insurer, enable the home buyer to purchase a home with a lower down payment than would otherwise be acceptable to the lender.

Private mortgage insurance (PMI). Private mortgage insurance is paid for by the borrower and protects the lender against loss if a borrower fails to repay the mortgage. With PMI, lenders may reduce the down payment requirement from 20 percent of the purchase price to as low as 3 percent of the purchase price. On a $60,000 home, instead of putting down $12,000, you may be able to make a down payment as low as $1,800! The cost of PMI is approximately $25-$50 per month.

Taxes and insurance (T&I). In many situations, a home buyer's monthly mortgage payments include not only the amount required to repay a portion of the principal and accrued interest (P&I), but also an added amount for property taxes, homeowner's insurance, and PMI. The lender holds these additional amounts in a separate "escrow" account and pays the tax and insurance bills when they come due. In this way, the lender ensures that these important annual expenses are paid on time. If taxes and insurance are not put into an escrow account each month, the homeowner must be prepared to pay these bills when they come due.

Because taxes and insurance are an essential part of a homeowner's housing costs, lenders often refer to the components of a mortgage payment as "PITI" (an abbreviation for principal, interest, taxes, and insurance). Lenders also view condominium and cooperative fees as belonging in this category of basic housing costs.

Calculate your principal, interest, taxes, and insurance (PITI). You can determine the approximate cost of your PITI, or total monthly mortgage payment. Divide the amount for annual property taxes by 12 and add this figure to the amount of your estimated principle and interest from the P & I chart below. Now add $25 to $50 per month for property insurance, and about $25 to $50 per month for PMI. These four figures should approximately total what your monthly mortgage payment will be.

Annual Property Taxes

divided by 12 = ______________

+ Monthly Principal and Interest = ______________

(see principal and interest chart)

+ Monthly Property Insurance = ______________

($25 to $50)

+ Monthly PMI = ______________

($25 to $50)

= Estimated Monthly Mortgage Payment ______________

Some people also choose to put money aside for a maintenance fund. This money would be used to pay for unexpected repairs, like a broken water heater or a leaking roof. If you decide to set up such an account, add this to your monthly expense figures.

Principle and interest chart

Other costs of homeownership. Ongoing costs of owning a home include utilities (oil, gas, electricity, and water) and maintenance costs. First-time home buyers often are surprised by how costly basic upkeep is, both in terms of time and money. The cost of utilities may vary greatly (increasing during the heating season, for example). As we mentioned earlier, repairs often represent an unexpected expense. If you don't already have money set aside for emergencies (in a separate account) you will need to begin saving now. Financial advisers suggest saving 5 percent of your monthly income, for example, $50 per month if your monthly income is $1,000. Your goal should be to build up a reserve equal to three to six months' worth of housing expenses.

There are a number of ways to obtain help in financing your home. By taking advantage of all of the financial assistance that you qualify for, you may be eligible for a mortgage that is higher than typical guidelines dictate. Examples of resources that others have used for down payments, closing costs, renovations, and repairs are mentioned below.

Once you have decided to buy a home, you will probably work with a private lender (a bank or mortgage company) or housing finance agency to obtain your primary loan. Down payment and closing costs may be secured through loans and grants from a variety of funding sources. In Chapter Two, you will learn that researching and applying for mortgage assistance is part of the team effort. You may wish to consult with a home-buying counselor, available in most areas, and you may request other people help you access the necessary funds to purchase your home and obtain the personal assistance you need. Examples of funds people have used for down payment and closing costs are listed below.

Depending on your situation, you may need to secure additional funds for structure and property changes so that you can live safely and comfortably in your new house. Homeowners have obtained low interest loans from state housing finance agencies, private lenders, and through FHA 203K and FHA Title 1 funds. Borrowers have worked with Community Action Agencies (CAPs) to obtain grant moneys for renovations. In addition, state vocational rehabilitation programs sometimes offer grants, and construction apprentices have donated labor for repairs and renovations.

The Center for Universal Design is a national center which evaluates, designs, and promotes accessible design in buildings. The Center makes a number of publications and educational materials available, and provides information and technical assistance to people with disabilities nationwide. For more information, contact the Center for Universal Design at 1-800-647-6777.

The following is a list of possible resources for assistance in purchasing a home. This list may not include all available options. You may wish to explore various avenues in your community, as well as look at all available state and federal programs.

Three ways that down payments, closing costs, repairs, and renovations can be financed through subsidies include:

Subsidized second mortgages offer several features that can help make a home affordable. Payment on this type of loan is often deferred (delayed). These loans may carry no or very low interest rates, and part of the debt may be forgiven for each year that you remain in the home. Also, you may use a portion of the loan to pay for closing or rehabilitation costs that are not included in the sale price of the home.

These loans can sometimes be obtained through state housing finance agencies, HUD, and Federal Home Loan banks. They are called second mortgages because they are secured by a subordinate lien on your home.

Grants generally do not need to be repaid and may come from sources such as: state housing finance agencies; state and local affordable housing programs; state developmental disabilities agencies; endowments for first-time home buyers; community block grant funds; state and local social service agencies; private foundations; and contributions from the seller.

Parents or other family members who wish to be helpful may give the home buyer a gift. The gift may be in the form of cash or a trust, which will be discussed later. Some employers offer programs which pay a portion of their employees’ down payment or closing costs.

How Large a Mortgage Will You Qualify For?

Your income

With the help of the people who provide you with assistance, you will need to list all the income that you receive every month. Using the Budget Worksheet below, you can determine the exact amount of your income. This may include wages from work and/or public benefits such as Social Security and Medicaid Waiver funds, or any other income that you may have. If an agency receives and spends money for housing or other expenses on your behalf, an agreement can be drawn up that states that some of this money will be allocated to pay your mortgage payment. The agreement should satisfy the lenders that there are sufficient funds to make timely monthly mortgage payments.

As you did for income, you may want to make a list of your living expenses. This list will include all of your current costs for food, clothing, medical, transportation, entertainment, and utilities. You will need to estimate what your expenses will be after you move into your home. Having good documentation of your monthly expenses will assist you to prepare your monthly budget and to provide information to your lender.

The following budget worksheet is a good example of how to list your income and your expenses. The results will show you what amount of money you have for a mortgage payment after meeting all your other living expenses. This is the official budget worksheet used for a Fannie Mae HomeChoice^SM mortgage by borrowers whose incomes are at or below 50 percent of the median income for their area (as defined by HUD).

Verified By [(name and title of lender representative)(Date Verified)]

Whether you are applying for a HomeChoice^SM loan or another type of mortgage loan, you should complete this page and page two during your personal planning process, BEFORE you go to a lender to apply for a mortgage loan. If you are applying for a HomeChoice loan and have an income that is less than 50 percent of the area median income, you will be required to submit this budget worksheet with your loan application, and the lender will be required to verify your figures for income and expenses. Be sure to give as much information as possible to help the lender understand all of your sources of income and support and all of your expenses.

The categories and boxes are lettered and numbered to help you keep track of the figures and transfer amounts from one page to another as needed to see how much mortgage you qualify for. Following is a line by line description for the two-page budget worksheet.

Page One: Income Analysis

A. Wage/Salary Income -- This includes all income you earn at a job(s). Put down your gross income, meaning your income before taxes or other deductions.

B. Benefit Income -- Non-taxable: this category is for all government benefits that are not taxable such as Social Security, Supplemental Security Income (SSI), Social Security Disability Income (SSDI), Food Stamps, Veterans Benefits, Aid to Families with Dependent Children (AFDC or ADC), and any state or local supplements to federal benefits.

C. Other Funds Designated Specifically for Mortgage -- Includes any funds that can be used only to make a mortgage or other housing payment. Examples of such funds are the housing portion of room and board payments for a live-in personal assistant made through a state Medicaid Home and Community Based Services (HCBS) Waiver program, or housing payments designated from a special needs trust.

D. Total Monthly Income -- Adds the first three categories together.

E. Other Sources of Support -- You record any resources that cannot be counted by a lender as true income for purposes of calculating how much mortgage you qualify for. List cash support or non-cash support that has a dollar value and helps you with daily living expenses such as food, transportation, or home maintenance. Such items might include regular monthly financial support from a parent or family member, funds from a government or private source for personal assistance, food club or food voucher assistance, transportation vouchers, and other sources of support you might receive through a housing or support service organization. All items must be verifiable with documentation from the source of the support.

F. Total Effective Income -- While lenders cannot count all of the above sources as true income, it is your "effective" income, meaning it includes all the resources you have to maintain your personal needs and a housing payment.

Page Two -- Monthly Expense Analysis

G. Living Expenses -- The best way to develop an accurate monthly expense budget is to track what you actually do spend on these items for at least six months to a year. Remember to make changes to any expenses that may increase or decrease when you are living in your own home. The list of items shown may not include everything on your personal budget, so be sure to add any other items that are important to you. If you have included a specific resource for a specific expense on page one, such as $60 for a bus voucher, you should also include that $60 as an expense under "Transportation" in your monthly expense list. If your transportation expense is actually more than your voucher provides, then list the total or actual cost of transportation.

H. Monthly Bills (Debt) -- This category is for credit card payments, student loans, car payment, or other consumer loans, and any other monthly payment(s) you are currently making that is not for a living expense. Your credit history should also reflect that you are making payments in this category.

I. Total Non-Housing Expenses -- Add your living expenses to your bills.

J. Amount Spent for Housing -- In the first column, enter what you currently pay for rent. In the second column, put what you think you will pay for a mortgage payment.

K. Total Monthly Expenses -- This figure includes all your housing, living expenses, and bills. Your monthly expenses cannot exceed your total effective income (F) from Page One.

Page Three: Income and Qualifying Analysis

This page will be completed by a lender in most cases, although you might work on it on a preliminary basis with a home-buyer education provider or someone from your planning team.

L. Residual Income -- Simply,this means any money you have left over at the end of the month after meeting all of your living expenses, bills, and housing payments. This amount must be greater than zero, and if there is not enough money here to give you a cushion for unexpected expenses, you could find yourself having trouble making your mortgage payment. Be sure that your monthly expense analysis covers every possible expense and gives you enough money for your needs so there will be as few "surprises" as possible that will affect your budget.

M. Housing Debt-to-Income Ratio -- This is explained later in this chapter under the description of the HomeChoice mortgage. For conventional mortgage loans, lenders can make mortgage loans resulting in a monthly payment that is up to 28 percent of the borrower's income. Fannie Mae's Community Home Buyer Programs^SM, including HomeChoice for borrowers with incomes between 50 and 100 percent of area median income (known as Group One borrowers), allow mortgage payments to take up to 33 percent of borrower income. With HomeChoice, borrowers with incomes at or below 50 percent of area median income (known as Group Two borrowers) may be allowed mortgages that take up to 50 percent of their incomes, as long as this budget worksheet is completed and approved by the lender.

N. Total Debt-to-Income Ratio -- Lenders making conventional mortgage loans will allow the mortgage and monthly bills of a borrower to total up to 36 percent of their income. Fannie Mae's Community Home Buyer Programs^SM, including HomeChoice for Group One borrowers, allows up to 38 percent. Group Two borrowers may have a total mortgage payment and debt ratio of up to 50 percent.

With other mortgage programs, various qualifying rules may apply. Please check with your lender for specific qualifying and underwriting requirements for different mortgage loans.

Examples of Joe’s budget worksheets

Prepared By[JOE JOHNSON and MARY JOHNSON (mother)] 3/20/97

(name and relationship to borrower) (Date Prepared)