All You Need to Know About Low Income Housing in Orange County

Many families are turning to seek out low-income housing in Orange County due to skyrocketing home prices in Southern California. The challenges of limited housing are causing many families to seek out affordable housing and low-income alternatives. Unfortunately, the inventory on the market is few and far between. These days, affordable housing is hard to find. That goes for both rentals and units for purchase.

Should you find an affordable housing unit for purchase, here are several things to note before you proceed too far into the transaction.

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Eligibility

Each city will outline specific criteria to determine if a buyer is eligible to purchase the home. This will include income restrictions, mandatory minimums for a down payment, specific instructions on how to handle gift funds, specifications for the mortgage and more. The criteria will be very in-depth. 

It’s incredibly beneficial to work with a coach to ensure that you understand all of the terms and requirements of the property. It is also beneficial to work with one of our coaches when you apply for the unit. The required list of documents is substantial.

Another great way to become eligible for a home is to go and apply to first time home buyer classes. These classes typically take nine months to complete but they provide tremendous value. Furthermore, once you complete the classes you may be eligible for a grant that can help you with the down payment of a home.

Resale Restrictions 

There are several restrictions related to purchasing an affordable housing unit. The most notable limitation is the inability to resale at a price higher than what the current owner purchased the property for. This eliminates the ability to gain equity in the home. Inevitably, the property value will rise. In this event, the city will take out a second mortgage to cover the difference.

If the owner chooses to resale, they will need to notify the city for approval. The sale will be limited to a family who qualifies for affordable housing, which the city will most likely have a database of applicants to pull from.

First time home buyers in orange county

If you’re a first-time home-buyer then there are many options you can utilize. One of the best parts of being a first-time home buyer is that you can be eligible for a 3.5% down payment. If a house costs $500,000 then your down payment would only be $17,500.

With the proper home-buying classes, they will provide assistance on improving your savings as well as the opportunity to qualify for a grant. Let’s say you saved $10,000, you could probably qualify for a grant for the other $7,500 which would qualify you for the first home.

Financing

Financing will differ slightly from your traditional financing. First, the lender will want to know the restrictions on the property. Some lenders will not want to underwrite the loan given the limitations.

Should you default on the payments and they end up owning the home, the same restrictions will be applied when they turn around to sell it. Other times the terms state that the city has the first right of refusal, creating a situation where the lender doesn’t get to dictate what happens to the home they now own. Depending on the restrictions, it may be challenging to find a lender.

Is Low-Income housing in Orange County the Right Option for you?

If the owner chooses to resale, they will need to notify the city for approval. The sale will be limited to a family who qualifies for affordable housing, which the city will most likely have a database of applicants to pull from.

If you’re a first time home-buyer looking to build equity through property then affordable housing may not be the best option for you.

Benefits

Even with the restrictions, for some individuals it is still beneficial to invest in a low-income house. Homeowners still enjoy the tax write-off on the interest and will recoup the equity they put into the home. The flexibility that comes with owning your home also creates a more advantageous quality of life. 

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The Journey Toward Purchasing

If you currently find yourself looking toward affordable housing or low-income units, it may be worth broadening your scope. At NeighborWorks Orange County, we work with countless individuals and families every year to achieve homeownership. While this may come as a surprise, we actually rarely help with the transactions of affordable housing purchases. The reason is that our clients primarily leverage grants and first time homeowner programs to bypass low-income housing options and purchase their home outright. This means that they are able to gain equity in the home and have more options when it comes to financing. 

How Neighborworks bypasses low-income housing

While the path to purchasing may seem daunting, know that it is possible. We partner with families and individuals just like you every day. Over time, countless clients make that incredible finale into homeownership. 

If you’re ready to start planning out your future, connect with one of our free coaches today. They will help you assess your current situation and create a specific game plan to help you achieve your homeownership goals. As one of the most trusted housing nonprofits in the county, our coaches offer unbiased assistance.

It doesn’t matter where you are today. All that matters is you are committed to believing owning a home is possible.