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 family). 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?
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, easier 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.
Alternatively, we are working in partnership with Habitat for Humanity Seattle-King County as the construction manager for some of our renovated homes. This means that if you are willing to contribute 50-100 hours of sweat equity (home renovation work), this would bring your cash contribution as low as $0.
What is a community land trust?
Community Land Trusts (CLTs) are non-profit organizations that help make homes and other things (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?
Yes and No. Homestead retains ownership of the land in order to ensure that the house remains affordable; but you become part of Homestead, so you, as part of Homestead, own the land.
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 live 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 to reduce the price of the home, you agree to sell your home at an affordable price (should you decide to sell), allowing another individual or family to achieve their dream of homeownership, as well.
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 also 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.
- If you damage the home or damage is caused by deferred maintenance you may not be able to receive the full formula price when you are ready to sell.
What about selling my home?
You can sell your home to any income-qualified homebuyer. Homestead helps families most of the time 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 + downpayment – 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 changes 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. Changes to income or household size will not affect your eligibility for your Homestead home or affect your house payment once you have purchased your home.
What do you consider a family or a household?
Homestead views your family 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 familes.
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 with 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 will need to submit an application to join the interest list.
Buyers should work with Homestead directly on presale 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 presale marketing period. (Homestead will make reasonable accommodations to this policy for people 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.
- Homestead will sign a Purchase & Sale contract with the first household that turns in all paperwork for their qualification, is approved by the lender, and is also fully approved by Homestead's funders.
- If two or more households are approved on the same day Homestead will use the following criteria as a tiebreaker:
- Length of time on Homestead's interest list
- Household size
- Area Median Income
- Ties to the neighborhood
- Ability to qualify for other Homestead properties
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 subsidized purchase price in your tax assessed value and that value will increase slowly and predictably at 1.5% a year, just like the resale price of your home. This helps keep Homestead homes affordable over time. For example, if you buy a Homestead home for $200,000 that would have cost $250,000 otherwise, you 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 almost always 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. Our program requires that you pay your property taxes through your lender via an escrow account in most cases.
The only instances where you will pay the property taxes directly to the county yourself areafter you pay off your mortgage in full.