Education and advice from prominent real estate professionals are key to navigating New York’s complex housing market, and both merged seamlessly in our conversation with Ryan Walsh, Esq., a partner at Walsh & Gilad, PLLC. Walsh is also a member of the board of the Neighborhood Housing Services of Queens (NHS of Queens). Here, he explains how non-profits help potential first-time homebuyers with education, loans and grants.
New York State and Borough Resources
According to Walsh, non-profit institutions in New York work with vetted lenders and first-time homebuyers to provide education and affordable loans at both the state and borough levels. One such borough-level non-profit is the NHS of Queens, which also provides resources and information to potential homebuyers as they navigate toward homeownership. Specifically, one noteworthy financing option that Walsh focuses on is the New York Housing Preservation & Development Home First Down Payment Assistance Program (NYCHPD). Clients benefit by learning about the availability of financing and with the assistance of specialists like Walsh.
Q: How does your role on the board fit in with your work with the New York Housing Preservation & Development Home First Down Payment Assistance Program?
The program helps those with an 80% AMI [area median income] or less secure up to $40,000 toward the down payment and closing costs on a 1-4 family home, condominium or a cooperative in one the five boroughs. The actual amount approved ranges between $25,000 to $40,000. The NHS [NHS of Queens] and HPD work closely with first-time homeowners to provide counseling and resources to first-time homebuyers throughout the five boroughs. We all work together to provide homeownership to low- to moderate-income individuals and families.
Q: Can you describe the eligibility requirements for prospective borrowers?
One requirement is completing a homebuyer course taught by an HPD-approved counseling agency. This ties in well with the NHS of Queens, which is all about education, with the ultimate goal of converting renters into homeowners. Another requirement is that buyers contribute some of their own money toward closing costs or the down payment, which, in New York, is usually 10% of the total cost of the home. This is where NHS of Queens is particularly helpful for low- to middle-income individuals. Other requirements include being a first-time homebuyer and buying a 1-4 family home, condominium or a cooperative in one of the five boroughs of New York City. Also mandatory is passing a Housing Quality Standards (HQS) inspection before purchase, having a household income up to 80% AMI and living in the home for at least 10 years.
Q: If one of the criteria for eligibility is that potential homebuyers must have their own savings to contribute to the down payment, and your clients have 80% AMI or less, what is the average amount clients usually contribute?
Buyers will put in as little as $5,000 toward the down payment. In fact, this is one of the only two caveats of the loan: the buyer must contribute some of his own funds and the loan money comes only after closing. Another eligibility requirement offers a distinct advantage over repayable loans: the loan becomes 100% forgivable if the recipient lives in the home for 10 years. (It is partially forgivable if the recipient lives in the home for five years and so on, on a sliding scale). The NHS of Queens works with the potential recipients to ensure that they will reside in the home 10 years.
Q: Can you describe the process and your role?
The process is: offer, acceptance, home inspection, contract negotiations, title review and clearance, buyer receiving a commitment letter from the lender and the property appraising for value, bank clearance, seller ready to vacate, schedule the closing, buyer does a walk-through of the premises, and closing. My role as the buyer’s counsel is to protect the buyer’s down payment. I do this by making as many changes to the contract as possible. With both guidance and financing, it is a winning proposition for low- to middle-income, prospective, first-time homebuyers. And, as far as I know, there are currently no laws in place working against the program.
Q: If a condition for receipt of the loan is to live in the house for 10 years, what safeguards are in place to minimize the chances of default?
The not-for-profit counsels the buyers to prepare the buyers for homeownership. The default rate is low because the buyers go through the not-for-profit program and receive financial education so that they do not go into foreclosure. In fact, foreclosure is one thing that we are determined to help clients avoid.
Q: What would you recommend to people who want to apply for this program?
I would recommend they work with NHS to receive the necessary counseling to become a first-time homeowner who is financially educated to not go into foreclosure. Together with the NHS, we help clients with [their] lenders’ hesitation [regarding] the duration of the loan process.
Q: Describe some of the challenges your clients face when applying for this loan.
Meeting the income requirements can be a challenge and the pushback from Realtors who believe the process takes too long. However, hesitation due to duration is not the only challenge lenders pose. Many loan officers are unaware of the diverse types of loans or grants available across institutions. For example, many don’t know about forgivable loans from non-profits or the seller’s concession. Currently, most lenders know about the four types of loans available to New Yorkers: conventional loans, FHA loans, SONMYA and VA loans. However, there are also forgivable loans and grants. These are: a) the NHS Pure $10,000 grant; b) the HPD loan of up to $40,000; c) the DPAL down payment loan from SONYMA at $15,000; d) the NHS closing grant for closing costs at $10,000; and, e) the NHS repair grant at $15,000. We advise first-time homebuyers about these options and encourage them to talk to their loan officer about which loan is best for them, which increases their chances to be approved.
Q: Who are some of the main lenders you work with and what is the success rate?
Lenders such as Wells Fargo, Bank of America and M&T Bank participate in the HPD program. The success rate is very high. My part is not limited to advice about financing options, but also includes practical details, such as what part different professionals play in the homebuying process (e.g. using a qualified inspector and passing a Housing Quality Standards [HQS] inspection before purchase). Essentially, I act as a guide and assistant through the process on all levels.
Q: What legislative changes implemented by the State of New York have affected this program and/or your clients this year?
I am not sure of any. I am hopeful that this program will flourish now that New York real estate is in a buyer’s market.
Q: Can you provide some predictions for 2020 regarding this loan program?
I believe more New Yorkers will use the HPD program to purchase starter homes and co-ops. It is becoming a buyer’s market, and the availability of the forgivable loans will turn renters into first-time homeowners.
Q: What effect do you think COVID-19 will have on non-profits and the loan programs?
COVID-19 has had a chilling effect on real estate in NY. There are still contracts that are being signed and closing that are occurring, but the vast majority of the population is in self isolation. Realtors are not allowed by law to show properties and lenders have been changing their lending guidelines due to this pandemic. Real Estate is still moving forward but just at a much slower pace.