New 2014 HOME Program

The HOME program was created by the National Affordable Housing Act of 1990 (NAHA) and its' main objective is to provide decent affordable housing for low to moderate income households. The City of Paducah recently finished the 2010 HOME program in the Fountain Avenue neighborhood that helped fund the construction of six new houses and the rehabilitation of three others.  All of these houses have been sold to moderate income families in the Fountain Avenue neighborhood.  Based on the success of the 2010 HOME program, the City has committed to build seven new HOME houses in the Fountain Avenue Neighborhood for families making below 80 of the Area Median Income (AMI).  The Planning Department is currently selecting the site and hose plans for these new constructions.

   

        One of the six 2010 HOME program houses built in Fountain Avenue

Applicants must meet the income eligibility requirement of making less than 80% of Area Median Income per year.  Listed below are the 2012 Income Limits for 80% of the Area Median Income.  If you make less than the numbers shown, you may qualify for this program.


FY 2014 Income Limit Category:

1 Person-$32,000

2 Person-$36,600

3 Person-$41,150

4 Person-$45,700

5 Person-$49,400

6 Person-$53,050

Potential homeowners must be creditworthy in order to obtain a mortgage through a local lender.  Recent bankruptcies or other credit history problems may disqualify potential homebuyers depending on the severity of the problems and the length of time that has expired since the financial problems arose.

To find out if you qualify, the first step is to fill out an application and apply for the program by downloading an application here.  Make sure to remember to include a check for ten dollars made out to the Purchase Area Housing Corporation to cover the cost of the credit check.  The mailing address is on the application.

How it Works

The HOME funds are used to reduce the homebuyer's primary mortgage by as much as $40,000 depending on your income.  Basically, the closer your income is to the higher end of the 80% AMI, the less assistance you recieve.  The lower your family income is, the more assistance you would qualify for provided you meet certain other affordability criteria and stay within the acceptable debt to income ratios as set by the Kentucky Housing Corporation. 

So, if a new HOME house appraises for $110,000 after construction, then the primary mortgage could be reduced by as much as $40,000 leaving a first position mortgage of $70,000 that the homebuyer secures with a Bank or mortgage lender.  The HOME funds are placed in a second position mortgage that takes the form of a "forgivable loan". This loan is forgiven by 10% a year over a ten year term as long as the homebuyers maintain the property, keep it as their primary residence, pay their taxes, and meet other deed restrictions that are spelled out in the mortgage agreement.  As long as the homebuyer does not default on the conditions of the loan, they are not required to pay the HOME funds back because they are "forgiven" over a ten year period.  For example: If the homebuyer defaults after three years, then they would be responsible for paying back 70% of the loan before they could obtain a clear title to the property.  If they maintain their agreement for the full ten years, then the entire loan is forgiven.

City Incentive  

In addition to the HOME fund mortgage reduction, qualified applicants may also be eligible for the 10% City Incentive.  On July 8th, 2008, the City Commission approved what is officially referred to as Ordinance Number 2008-7-7435 titled the Fountain Avenue Construction Financial Assistance Program and more commonly referred to as "the City Incentive".  An income eligible homebuyer can receive 10% off of the final appraised value of the HOME structure.  This 10% incentive for residences in the HOME program has averaged between $10,000 to $11,000 per homebuyer and is often used as a down payment to reduce the principal mortgage.  This incentive is also secured by a Promissory Note and a Mortgage in the interest of the City of Paducah and is another forgivable loan.  It usually takes a third position and is forgiven 20% per year for a term of five years.  As with the HOME funds, as long as the homebuyer does not default on the conditions of the loan, they are not required to pay this loan back but must pay federal and state income tax on 20% of the loan value per year over the five year term.

Using the senario of a HOME structure appraising at $110,000 after construction, a homebuyer could qualify for an $11,000 City Incentive and further reduce their primary mortgage to somewhere around  $59,000 if they received the full HOME funding assistance of $40,000.