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First Time Home Buyers

There are programs available to help qualified people purchase their first home. Below is information about the City of Chico's Mortgage Subsidy Program. Other sources include the Community Housing Improvement Program (CHIP). Contact (530) 891-6931 for further information.

The Department of Housing and Urban Development (HUD) also has information on buying a home available on the web.

Mortgage Subsidy Program

The City of Chico and the Chico Redevelopment Agency are pleased to announce the availability of the Mortgage Subsidy Program (MSP). The Mortgage Subsidy Program is designed to help first-time homebuyers purchase a home and qualify for long term financing from the lender of their choice. Home ownership is often out of reach for low and moderate income families because of the large amount of cash required for the down payment or because the monthly payments would be too large. The Mortgage Subsidy Program addresses these problems by loaning eligible first time homebuyers money to be used as part of the down payment on a home.

Sound like the answer to your problem? The City of Chico has put together the following information to help familiarize you with the MSP loan program:

Checklist for First Time Home Buyers

• Request an application for the Mortgage Subsidy Program and return it with all required information
• Prepare a very realistic household budget to determine how much you can afford each month for housing expenses, which includes payment on the home loan, property taxes, hazard insurance, and monthly savings for home repairs.
• Make an appointment with two or three residential lenders to request a "prequalifying interview". The lender will review your employment and credit history, your current financial situation, and your household budget. The lender will determine the amount of the home loan you may be able to qualify for.
• After the lender's prequalification determination and the City's determination of your eligibility for a MSP loan, you are then ready to start looking for a home.

Qualifying

• To determine whether you are eligible for the MSP and what level of assistance for which you qualify, contact the Housing Division at (530) 879-6300. The income guidelines are established by the City based on Federal and State regulations on an annual basis.
• The amount of the loan is based upon the gross income level of the family, family size, and the sale price of the home. The maximum loan amounts are:
• Lower Income - $70,000
• Lower to Median Income - $50,000
• Median to Moderate Income - $30,000

The actual MSP loan amount will be based on the financial need of the borrowers, as demonstrated by the housing expense ratio for the primary lender. The MSP requirement that the primary lender's housing expense ratio be at least 28% sets the maximum amount for the MSP loan.

Special Conditions

• Applicant must be a "first-time homebuyer", which is defined as not having owned a home in the last three years.
• The maximum sale price of the home will be determined by your lender.
• Families must contribute a minimum of $5,000 toward the purchase of the home as down payment and closing costs. Not more than $10,000 in liquid assets may be retained after the close of escrow.
• The home must be located in a residentially zoned area within the City of Chico.
• The home must meet the requirements of the "Housing Code" and be considered safe, sound, decent, and sanitary by the City.

Loan Terms and Conditions

• The MSP loan is a "deferred payment loan" and does not require monthly payments. The loan is secured by a Deed of Trust.
• Repayment of the loan will be required if the house is sold, title is transferred, or if the home is rented.
• The interest rate on the loan is fixed for the term of the loan. The specific rate is based on the income level of the borrower and the market rate at the time of the loan.
• Interest accrues during the first ten years of the loan. Twenty percent of the accrued interest is forgiven for each year the loan remains outstanding between year 11 and the end of year 15.
• To demonstrate the need for a MSP loan, the "Housing Expense Ratio" (the combination of the payments on the first mortgage, property insurance and property taxes), must be at least 28% of the borrower's monthly gross income.
• The Housing Expenses Ratio may not exceed 35% of gross income when the first mortgage has a fixed interest rate or 33% if it is variable.