affordable housing

what is "affordable" housing?
A home is considered “affordable” when monthly mortgage, property tax, and homeowners’ insurance expenses are no more than 30% of a household’s monthly income. “Affordable” homes are bought at the home’s full appraised value and subsidies are used to reduce monthly first mortgage payments. Many of the homes that the Center builds or rehabilitates are made affordable to eligible buyers using grants and forgivable loans. Eligible buyers receive these grants and loans based upon their annual household income.

A family is considered "low-income" when their household income is 80% or less than the median for their family size. The 2009 income limits per household for the Covington area, set by US Department of Housing and Urban Development (HUD), are as follows:

1 person: $38,750
2 people: $44,300
3 people: $49,800
4 people: $55,350
5 people: $59,800
6 people: $64,200
7 people: $68,650
8 people: $73,100

The 2009 numbers will be posted as soon as they are released. In addition to the income limits, the buyers must meet a minimum credit score set by the City of Covington or other lenders.

how does affordable housing work?
Homebuyers who qualify under the program guidelines (annual income and a minimum credit score) would take a loan out from a bank for a portion of the home's purchase price. The amount that the buyer will have to borrow is determined by what the familes monthly income is. The monthly costs for housing will be between 28% and 31% of the family's average monthly income. The City of Covington or another lender would make a grant or forgivable loan to the homebuyer for the remaining portion of the home's purchase price.

For example:

  • Home Sales Price: $100,00
  • Buyer can afford a mortgage of: $75,000
  • "Forgivable loan" soft second mortgage of: $25,00
A "forgivable loan" is a 0% interest loan that the homebuyer makes no payment towards as long at they live in the home. Every year that the homebuyer lives in the home, a percentage of the "forgivable" loan is written off and becomes equity.

For general information on affordable housing, the HUD website can be accessed here.

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