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You are here: Home Become A Homeowner Frequently Asked Questions

Frequently Asked Questions

Frequently Asked Questions. Affordable housing Seattle. Affordable homes. Community land trust.

 

 

 

How is Homestead different from other affordable homeownership programs?

Homestead has operated by the "pay-it-forward" model since our founding in 1992. In exchange for the significant down payment assistance that Homestead provides, you agree to pass on the good deal to the next eligible buyer. Homestead’s resources reduce your home price by $50,000 to $100,000 compared to houses on the same block, and the “investment” just keeps giving when or if you choose to sell your home. The assistance is not a loan that you are responsible for repaying (as long as you sell your home to another income-qualified household). You earn a reasonable amount of equity during the time you own your home – an incremental increase in value, plus paying off the principle of your mortgage – without pricing the next modest-income household out of the market.

Who buys with Homestead?

greenhouse condo interior

Homestead homeowners include all types of people - families, grandparents, couples and single folks. They are grocery store clerks, mail carriers, school teachers, electricians, small business owners, restaurant workers, police officers and more.

The people who purchase homes through Homestead’s program are done renting, ready to be homeowners but cannot afford to buy a home on their own. Homestead can help you buy a home in good condition near jobs and services, transportation options and quality schools.

What is my home loan like?

No private mortgage insurance, no balloon payments, no short terms, no fluctuating interest rates – only 30 year fixed rate conventional mortgages.

We are very firm on serving people well and honestly. We steer homebuyers away from predatory lending practices and educate you on affordable options, providing educational support before and after you buy. Your options are clearly explained; and you will feel confident and supported as you take your next big step.

What if my credit is not the greatest; or I have a lot of debt?

We work with some stellar non-profit partners, that provide counseling to get you confidently on the path towards homeownership. Interested homebuyers walk through our doors and may get into their new home anywhere from two months to 2 years later. Preparing to own a home is a process, and we are here to make it possible and understandable.

What are my down payment options?

Typically our program requires that you put down a minimum cash contribution of $2,500 or 1% of your purchase price, whichever is greater.

What is a community land trust?

open door 2

Community Land Trusts (CLTs) are non-profit organizations that help make homes and other land (such as community gardens, commercial space, housing) affordable and accessible. For most CLTs, affordable housing is the highest priority. There are over 250 CLT programs across the country, serving communities from small towns to large cities. Read more in About Community Land Trusts.

Do I own the land?

No. Homestead retains ownership of the land in order to ensure that the house remains affordable.

Let us clarify this point:

The ground lease agreement is the key document that ties the land and the house together and is the legally enforceable way to ensure the program requirements are met. This document articulates the "pay-it-forward" approach, allowing the affordability of the home to be kept for the community and future buyers, securing you modest equity when you sell and requiring the home remain your primary residence while you own it.

Most importantly, you are responsible for the land and have the right to landscape and engage in all typical homeowner activities. This is your home—you get to enjoy all the security, control, tax advantages, and equity building opportunities of homeownership. See our Online Orientation for More.

Can I leave my home to my children?

Of course! The ground lease that secures your use of the land is for 99-years and is renewable and inheritable. This means that you could stay in your home for as long as you live, bequeath the home and the right to use the land to your children and they could do the same – on and on across generations.

What is the ground lease fee?

Homeowners pay a nominal $35-$40 monthly ground lease fee to support us organizationally and continue our non-profit’s work. We include the ground lease fee in affordability calculations.

Does Homestead share the equity I gain?

No, it is all yours.

In exchange for the $50,000 to $100,000 subsidy reducing the price of the home, you agree to sell your home at an affordable price (should you decide to sell), which allows another household to achieve their dream of homeownership.

Homeowners build equity on their homes in two ways. Your home appreciates in value by the resale formula amount, as laid out in the ground lease, and your mortgage principle is paid down.

Together, these two factors enable you to build equity throughout your period of homeownership.

  • The Homestead home appreciation rate is 1.5% interest compounded annually, for every year you own your home.
  • You can receive capital improvement credits to the resale formula price for making specific property improvements.
  • You can also receive capital replacement credits to the resale formula price for replacing specific significant home systems.

What about selling my home?

You can sell your home to any income-qualified homebuyer. Homestead helps households  in selling their home; but you are welcome to find a buyer (a friend or relative even) for your home.

When I want to sell, how is the price determined?

Your selling price starts at your investment in the home (mortgage + down payment – closing costs) and grows by 1.5% annually.  If your base price was $200,000 it would grow as follows:

  • After 1 year.......... $203,000       After 25 years............ $290,189
  • After 5 years......... $215,456      After 30 years............ $312,616
  • After 10 years...... $232,108       After 35 years............ $336,776
  • After 15 years...... $250,046       After 40 years............ $362,803
  • After 20 year........ $269,371       . . . and so on . . .

 

What if my income or household size change after I move into my new home?

No problem. As long as you pay your mortgage, your taxes, insurance and ground lease fee, your home is yours. Even if you make more or less money, add or lose household members, your home is yours. We understand that life is full of change.

What do you consider a household?

Homestead views your household as anyone residing in your home. This could be a single individual, roommates, spouse, boyfriend, girlfriend, friend, grandparent, children/dependents or other relatives. You do not have to be related or married. It is the people you choose to reside with and we welcome all configurations of households.

When we count your household size for program eligibility, we use HUD's definition. This does not include foster children, live-in aides, children of live-in aides, un-born children, children being pursued for legal custody who are not currently living in the household, and children who are subject to a shared-custody agreement in which a child resides in the household less than 50% of the time.

Do you work with real estate agents?

In order to keep the prices on our homes low, we do not include a real estate agent commission on our listings during the pre-sale marketing window (before construction is complete).

When Homestead has a home available, we will notify our interest list of buyers and also advertise the home on our website. Clients on our interest list have priority on our pre-sale homes at a reduced price, until the construction on the home is complete. You must complete an application to join the interest list.

Buyers should work with Homestead directly on pre-sale properties. If a buyer has not been found for the property once the home is complete, we will increase price to include real estate agent commissions and list the home on the MLS (multiple listing service).

How do you choose which household gets which house?

  • Available properties will be sent to our interest list of buyers as they become available. Get on our interest list here.
  • 3 bedroom homes are reserved for 3 person households and larger, 4 bedroom homes are reserved for 4 person households and larger through the initial pre-sale marketing period. (Homestead will make reasonable accommodations to this policy for persons with disabilities. Please contact Homestead directly with individual circumstances.)
  • Once the home’s construction is complete, household size restrictions go away, and the home is listed in the MLS.
  • All eligible households which notify Homestead Homeownership Department staff of the household’s serious interest in a particular property within seven calendar (7) days (day one is counted as the date of launch) of such property’s marketing release are considered “tied.” Such “tied” household shall be granted two weeks (10 business days) from the release of marketing to submit a complete, current application to Homestead and show proof of pre-approval for the property from a participating lender. After said two week period (10 business days) Homestead Homeownership Department staff shall evaluate all “tied” households with completed Homestead Applications and participating lender pre-approvals in accordance with Homestead Buyer Selection Scoring Criteria.
  • A minimum of two Homestead Homeownership Department staff members shall perform the client selection in order to ensure accuracy and fairness. A spreadsheet is created using the Buyer Selection Scoring Criteria Template. Homestead staff shall award points based on the selection criteria and determine the household with the greatest number of points. The household with the greatest number of points will have the first option to purchase the property. If there is a tie, the household with the lowest percent of AMI will have priority.
  • If that household declines to purchase the property, the household with the second greatest number of points will have the next option to purchase the property.
  • NOTE:  In the event there are no interested buyers during the initial 7-day period then the above described procedure shall start over with day one counted as the date a first household expresses serious interest. In the event that the property is re-launched by listing it on the MLS then the above described procedure shall start over with day one counted as the date of re-launch.


Do I need to be living in the Seattle area to qualify?

With Homestead, you can be moving into the City from anywhere! You do not have to be living within Seattle to qualify. We also sometimes have homes available in the close-in suburbs like Shoreline or Burien. Check out the homes we have available here.

How do property taxes work with Homestead homes?

One of the benefits of Homestead is that we have an arrangement with King County that they will reflect your resale restricted value in your tax assessed value and that value will increase slowly and predictably at 1.5% a year, in accordance with the resale price of your home. For example, if you buy a Homestead home at a subsidized price of $200,000 with a market value of $275,000, you only pay property taxes on the $200,000 resale restricted value. Just like any homeowner, you pay 100% of the taxes on the home and land.

How and when are my property taxes paid?

Like with any home, your property taxes will be paid to your lender each month when you make your mortgage payment. The lender collects and deposits your property taxes in a special escrow account, and pays the property taxes directly to the County on your behalf in April and October of each year.

The only instances where you will pay the property taxes directly to the County yourself are after you pay off your mortgage in full.

Learn more....

Homeowner Success Story:

The Baynes Family

Growing up in Caracas, Venezuela, Yen Baynes and her family moved frequently. Her parents worked hard to make a better life for their children, and the family rarely stayed in one place for more than a year. Before purchasing their home with Homestead, Yen and her young son, Alek, were living in a crowded two bedroom apartment in Seattle. The apartment, shared with three friends, was the only housing Yen could afford after her recent divorce. Yen was ecstatic to learn she would be able to purchase her own home through Homestead. She and her son now live in their lovely White Center home with manageable mortgage payments, able to plan for the future in a stable home.

baynes