Downpayment Plus® Consumer Center
Welcome to Downpayment Plus® Consumer Center, your information source for the Chicago's Federal Home Loan Bank (FHLBank) Affordable Housing Set-Aside Program (AHP) for 2004. The Wisconsin Partnership for Housing Development (WPHD) is working with the Chicago FHLB to administer the program for members based in the state of Wisconsin.
Basic Borrower Responsibilities
- Earn household income at or below 80% of area median income. [See if you qualify]
- Contribute $750 toward purchase of home.
- Participate in homebuyer counseling.
- Sign 5-year retention agreement.
- Notify lender of refinance or sale of property, and repay pro rata portion of AHP subsidy as necessary.
- Use the home as their primary residence.
Downpayment Plus® Consumer FAQ
- What is the Downpayment Plus® Program?
- Who is eligible to receive a Downpayment Plus grant?
- What Wisconsin lending institutions are participating?
- What is the maximum grant amount that may be awarded to eligible borrowers?
- How does a borrower obtain a grant?
- What are the eligible uses and ineligible uses of grant funds?
- What types of properties are eligible?
- Are there limitations on the type of first mortgage?
- How is the household's income determined?
- How is household size determined?
- What are the lender requirements for home buyer counseling?
- Under what circumstances can counseling costs be paid by the Downpayment Plus grant?
- Can a mortgage securing the promissory note/repayment agreement for a Downpayment Plus-funded grant be subordinated to a home equity loan at a later date?
- What is the applicable retention period for the grant?
- Under what circumstances must the grant be repaid?
- How is the grant amount to be repaid calculated?
- What happens to the junior mortgage if the borrower refinances the first mortgage?
- Where can I get more information?
1. What is the Downpayment Plus® program?
Downpayment Plus is a down payment and closing cost assistance program for low and moderate income home buyers, funded as a set-aside through the Affordable Housing Program (AHP) of the Chicago Federal Home Loan Bank (FHLB).
In 2004, Downpayment Plus will provide $9.5 million in funds to benefit approximately 1,900 households. Funds are available to all Chicago FHLB member financial institutions in Illinois and Wisconsin. The assistance provided is in the form of a grant paid on behalf of the borrower at the time the borrower closes on mortgage financing with a participating member financial institution.
2. Who is eligible to receive a Downpayment Plus grant?
Use the form below to find the program qualification income limits for your state, county, and the number of members in your household. [Terms of Service]
The program is available to home buyers with a combined annual household income at or below 80% of the median household income of the area where the property is located, adjusted for family size. The borrower must contribute $750 toward the purchase of the home. The purchaser(s) must complete a home buyer or homeowner counseling program prior to receiving grant funds, and sign a certificate of eligibility that certifies their income. The borrower is not eligible to receive AHP funds within 30 months of receiving a Downpayment Plus subsidy for the same home.
3. Which Wisconsin lending institutions are participating?
For a list of Wisconsin institutions that have already signed on, go to the List of Wisconsin Downpayment Plus® Lenders.
4. What is the maximum grant amount that may be awarded to eligible borrowers?
The maximum grant is $5,000 per property. Downpayment Plus may not be used with other AHP subsidies for downpayment, closing cost assistance or homeownership counseling costs for the same borrower in the same transaction.
5. How does a borrower obtain a grant?
The Borrower:
- contacts a participating member financial institution
- applies for first mortgage financing with a participating member financial institution
- provides an executed purchase contract for the property, evidence of income eligibility and home buyer counseling, and makes the required $750 equity contribution.
The Member Lender:
- determines that the borrower is income-qualified (see above) for a grant
- makes a grant reservation with WPHD
- ensures that the borrower successfully completes an approved home buyer counseling program
- disburses the grant funds at closing when the first mortgage funds are disbursed
- forwards required documentation to WPHD
- ensures the home is subject to a legally enforceable deed restriction
meeting Downpayment Plus requirements.
6. What are the eligible uses and ineligible uses of grant funds?
Eligible Uses
- Down payment assistance
- Closing costs
- Costs required by lender to be paid in advance; items must be detailed on the Settlement Statement
- Escrow reserves deposited with the lender
- Rehabilitation costs directly associated with acquisition
- Home ownership counseling costs if they meet eligibility requirements (see Question 12)
Ineligible Uses
- Reimbursement of earnest money or deposits
- Cash back at closing. The grant amount will be reduced by any ineligible cash to the borrower at closing.
- Pre-paid life insurance
- Using with any other AHP subsidy for the same borrower in the same transaction
- Payment of member-required $150 loan closing fee
7. What types of properties are eligible?
Owner-occupied one- or two-unit properties are eligible for grants. The property must be the borrower/grant recipient's primary residence. If a property is not located in Illinois or Wisconsin, it must be in the primary service area of the participating member. The property can be attached, detached or condominium. Mobile homes and property sold on land contract are also eligible.
A mortgage lender who offers mortgage financing for the purchase of a mobile home may include a Downpayment Plus grant provided the mobile home is located on property that is either owned by the household, or for which the household has a lease or rental agreement for a minimum of one year. Grant funds may also be used to assist borrowers who convert a land contract for deed to a regular mortgage loan.
8. Are there limitations on the type of first mortgage?
- FHLBank Mortgage Partnership Finance®(MPF®), FNMA and FHLMC have agreed in the past to purchase mortgages made under this program provided the loans meet their requirements.
- The grant can be combined with other federal, state and local grants or loans, such as CDBG funds.
- Lenders may only charge their normal fees to borrowers receiving the grant.
- Lenders may use a wide range of mortgage programs, including conventional fixed or adjustable rate, FHA, VA, or IHDA and WHEDA, provided the loan term is a minimum of 5 years. Homes with FHA mortgages require a special retention agreement; Chicago FHLB must hold the lien, and the member must service the lien.
9. How is the household's income determined?
A participating member financial institution shall use its own home mortgage lending and credit guidelines in determining what items are included or excluded in calculating income for purposes of Downpayment Plus. The same criteria should be used to calculate the income of those household members who are not borrowers.
10. How is household size determined?
Household size is based upon the number of people who will reside in the home being purchased. Divorced or separated borrowers who have joint custody of their children should include the children in their household count, even though the children may only live in the household on a part-time basis. Borrowers who do not have custody should not include the children in their household count. Full-time students who are not considered dependents and are not living at home while attending school should be included in the borrower's household count.
11. What are the lender requirements for home buyer counseling?
The lender is required to certify that the borrower has completed a home buyer counseling program provided by, or based on one provided by, an organization recognized as experienced in home buyer or homeowner counseling and as approved by the administrator of the program. For a list of counseling agencies in your area go to List of Counseling Agencies.
12. Under what circumstances can counseling costs be paid by the Downpayment Plus grant?
Counseling costs may be paid with the Downpayment Plus grant if:
- The costs are incurred in connection with counseling of home buyers who actually purchase an AHP-assisted unit; and
- The cost has not been covered by another funding source, including the member; and
- The cost to be covered by the DPP subsidy does not exceed $500 per household; and
- The cost is identified on the Settlement Statement (HUD-1).
13. Can a mortgage securing the promissory note/repayment agreement for a Downpayment Plus-funded grant be subordinated to a home equity loan at a later date?
A mortgage used to secure the promissory note/repayment agreement for a Downpayment Plus-funded grant can be subordinated to a home equity loan.
14. What is the applicable retention period for the grant?
Grants are subject to a 60-month retention agreement to ensure that the property is retained as affordable housing. The retention period commences on the date the loan is closed. If the grant recipient owns and occupies the home as their primary residence for the full term, the grant is totally forgiven at the conclusion of the retention period.
15. Under what circumstances must the grant be repaid?
The borrower must repay a pro-rata portion of the grant to the lender in any of the following circumstances:
- The borrower sells the property prior to the end of the retention period to a non income-eligible purchaser, and realizes a net gain on the sale. Repayment is waived if the borrower realizes no net gain on the sale, or if the residence is sold to another income-eligible borrower (income less than or equal to 80% of the area median), who agrees to assume the Downpayment Plus lien for the remainder of the retention period.
- The mortgage is refinanced with a net gain and the retention agreement no longer applies to the property.
- The borrower is no longer using the property as a primary residence.
The Chicago FHLB must be given notice of any sale, refinancing, foreclosure
or change in owner-occupied
status occurring prior to the end of the retention period. In the case
of a foreclosure, the obligation to repay
any subsidy is terminated after foreclosure.
16. How is the grant amount to be repaid calculated?
- In the case of a sale, a pro rata share of the DPP subsidy shall be repaid to the Bank from any net gain realized upon the sale of the unit after deduction for sales expenses, unless the purchaser is a low or moderate income household, i.e. at time of execution of sales contract having an income of 80% or less of area median income based on household size, and agrees to assume the Downpayment Plus lien for the remainder of the retention period.
- In the case of a refinancing, a pro
rata share of the subsidy shall be repaid to the Bank from any net gain
realized upon refinancing unless the unit continues to be subject to a
legally enforceable retention agreement.
Net gain on sale is calculated as the difference between the original purchase price and the new sales price, less seller costs incurred in the new transaction. The seller costs should be detailed on the Settlement Statement. The amount of the grant to be repaid shall not exceed the net gain on sale. For examples see the 2004 DPP Questions and Answers PDF or Repayment Worksheet located on Bank's website at FHLBC.com.
17. What happens to the junior mortgage if the borrower refinances the first mortgage?
The lender has a number of options and can choose one of the following:
- Agree to subordinate the junior mortgage that secures the AHP direct subsidy to the refinanced first mortgage. No subsidy would have to be repaid.
- Transfer the retention agreements to the new lender on the same terms
and timetable. The new lender
must be a member of the Chicago FHLB and execute a Direct Subsidy Agreement with the Chicago FHLB to ensure repayment. No subsidy would have to be repaid. - Collect the unforgiven portion of the subsidy when the new loan is closed if neither of the first two options is chosen.
18. Where can I get more information?
For more information follow this link to FHLBC's Frequently Asked Questions. For all FHLBC member banks go to the list of all member banks.
Downpayment Plus® is a registered trademark of the Chicago Federal Home Loan Bank (CFHLB). The Wisconsin Partnership for Housing Development |
| Madison Office 121 South Pinckney Street Suite 200 Madison WI 53703 608/258-5560 FAX 608/258-5565 |
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If you need an interpreter, materials in alternate formats, or other accommodations to access any of the Wisconsin Partnership's services, activities or programs, please contact us at 608-258-5560. Please contact us at least 48 hours before the services are needed so that proper arrangements can be made.
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