About the Below Market Rate Downpayment Assistance Loan Program (BMR DALP)

November 2, 2022

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Information for lenders

MOHCD provides need-based downpayment assistance for low and moderate income households who otherwise would not be able to buy a BMR unit. MOHCD will only extend loan funds when it is necessary for a borrower to qualify for an affordable mortgage.

Applicants must work with a MOHCD-approved lender to request BMR DALP funds.

Participating lenders must:

  • Determine the borrower’s financial ability to purchase the desired home.
  • Make every effort to qualify the borrower for the maximum financing on the first mortgage.
  • Send in evidence of financing the maximum first mortgage loan amount. Use the Needs Assessment Worksheet when requesting BMR DALP funds.
    • ​Participating lenders receive this Excel worksheet during their annual training. If you need this worksheet, email sfhousinginfo@sfgov.org
    • Participating lenders submit supporting documents listed on the Needs Assessment Worksheet.
  • The BMR DALP is a silent second loan that requires no monthly payments for 30 years, or until the property is sold. The owner pays MOHCD back the principal amount, plus an equitable share of appreciation.
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Eligible uses

BMR DALP funds can be used:

  • To contribute to the need-based down payment for the borrower's household who otherwise would not be able to purchase a BMR
  • To enable the borrower to meet the maximum debt-to-income ratio established making the mortgage payment affordable to the borrower
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Ineligible uses

BMR DALP funds cannot be used:

  • as a cushion factor to make the first mortgage loan more appealing to the borrower and/or the lender
  • to pay for upgrades, improvements and repair costs
  • for financing of storage units, additional spaces, and/or second parking spaces
  • to pay down the first mortgage principal, debt or liens
  • to avoid use of gift funds that are available to the borrower
  • on BMR resales in which the seller's resale price exceeds the price that is affordable to BMR buyers at the unit designated Area Median Income (AMI)
  • when the Borrower chooses to buy a more expensive BMR unit while they can afford a less expensive BMR unit in the same development, assuming the two units are of the same bedroom size but at different AMI limits. For example, a BMR buyer of 85% AMI chooses to buy a one-bedroom BMR unit at 100% or 120% instead of a one-bedroom BMR unit at 90% AMI will be ineligible for BMR DALP funds.

Please note that the above list of ineligible uses may not be all-inclusive and shall be used as the general guidelines. Additional prohibitions may apply to satisfy the purposes of the BMR DALP Program. The amount of assistance granted is determined on a case-by-case basis, and always subject to funding availability. Cash disbursed to the borrower cannot exceed $250 at close of escrow. Any excess cash must first be applied towards the reduction of BMR DALP loan amount.

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There are no fees when applying for BMR DALP funds.

There is, however, a nonrefundable fee if you’re applying with a Mortgage Credit Certificate. See MOHCD program fees.

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Maximum loan amount

The BMR DALP will extend the maximum loan amount for the lessor of:

  • Amount of need based on maximum 1st mortgage financing; or
  • Maximum BMR DALP loan amount, up to 20% of the sales price.

Under no circumstances will the City provide funds to a homebuyer in excess of what is needed to close the loan.

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Borrower eligibility

  • BMR purchaser: Borrower must have a conditional approval letter issued by MOHCD to purchase the BMR unit.
  • Maximum Income Limits: household income must not exceed 120% of the Area Median Income (AMI).
    • The combined income of all household members 18 years or older, who will be living in the property, must be included in the determination of income.
  • Minimum Downpayment: Borrower must contribute a minimum of 3% of the sales price toward the down payment of the BMR unit. The entire 3% may come from gifts if necessary. Borrower must have sufficient funds to meet the down payment, closing costs plus necessary reserve funds.
  • Liquid Assets: Borrower must have no more than $200,000 prior to purchase, and no more than $15,000 after purchase.
  • Post-Purchase Reserves: Borrower must have a minimum of 3 months’ reserves after purchase. In addition to Liquid Assets, vested funds from retirement accounts that permit withdrawals may be also used for reserves. This reserve should include 3 months’ of:
    • Principal
    • Interest
    • Property taxes
    • Hazard insurance
    • Homeowner’s association dues
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Financing requirements

  • Need: Demonstrate need for downpayment assistance to purchase the BMR unit (determined by MOHCD)
  • Primary Financing: Borrowers must already have a mortgage loan approval from an approved lender prior to requesting BMR DALP funds.
  • Lien Position: The BMR DALP loan must be in a junior lien position behind the first mortgage and BMR lien.
  • First Mortgage Requirements: The first mortgage loan must be a 30-year fixed rate mortgage. The mortgage payment must be fully amortizing.
    • Loan Types not allowed: Reverse mortgage, stated income, ARM (adjustable rate mortgage), reverse mortgage, interest-only, negative amortizing, balloon payments
  • Impounds: The first mortgage lender must collect and manage impound accounts for property taxes and hazard insurance for the loan term.
  • Loan-to-Value Requirements (LTV and CLTV): The minimum Loan-to-Value (LTV) is 50%, and the maximum Combined Loan-to-Value (CLTV) is 97%.
  • Front-End (Housing) Ratio: No less than 33%, and no more than 40%. MOHCD may consider a maximum front-end ratio up to 43% if two or more of the following indicators are present:
    • (i) proven ability to devote a larger amount of income to housing expenses. The applicant has successfully demonstrated an ability to make rental payments for 12 consecutive months that are equal to or greater than the proposed monthly payments for the housing being purchased;
    • (ii) at least 6 months of housing expenses in reserves through liquid assets, or at least 12 months of housing expenses in reserves through non-liquid assets and retirement accounts;
    • (iii) a large down payment (20 percent or more) toward the purchase of the property;
    • (iv) FICO score greater than 700; and
    • (v) the proposed housing expenses will not increase more than 5% over previous housing expenses.
  • Back-End (Total Debt) Ratio: No more than 43%
  • Co-Signing: Co-signing for a BMR DALP loan by a non-household member is not allowed.
  • Loan Signing: No power of attorney is allowed. All applicants must be physically present to sign loan documents.
  • Layered Financing: When downpayment assistance loan programs are used in connection with the purchase of a BMR unit, the borrower must meet all of the other eligibility requirements for the BMR program. In the case of any conflicting requirements, the more restrictive will apply.
  • Lien Position: Unless pre-approved by MOHCD, the BMR DALP loan must be in a junior lien position behind the first mortgage and BMR lien.
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Loan terms

  • BMR DALP Loan Terms: The term of the BMR DALP is 30 years. The BMR DALP is a  no-interest, no-monthly-payment, deferred loan due upon sale, rent, or title transfer of the property. The BMR DALP is also required to be repaid when BMR borrowers prepay their first mortgage loans while their BMR DALP loans are still outstanding. The principal balance amount plus a share of the appreciation should become due at the end of term or when the borrower sells, rents, or transfers title on the property.
    • The appreciation is calculated by subtracting the original sales price from the current sales price or the current appraised market value. The share of appreciation is computed as a ratio of the City loan amount to the purchase price.
    • For example, if the borrower receives the BMR DALP loan in the amount of $52,500 with the purchase price of $350,000, the loan amount is 15% of the purchase price. Therefore, the share of appreciation would also be 15%.
  • Loan Prepayment: BMR owners may prepay their first mortgage loans but owners who also have a BMR DALP loan from the City will be required to repay the BMR DALP loan at that point. BMR restrictions still remain after the BMR DALP loan is paid off.

See all MOHCD loan terms.

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Sample closing documents

BMR DALP - Sample Closing Documents (PDF)
DALP Manual (PDF)

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Training for participating lenders

Mortgage Loan Officers (MLO) or mortgage brokers who would like to become participating lenders for MOHCD's homeownership programs, including BMR DALP, City Second, DALP, MCC and TND must complete the required training and pay the required fee. Each individual MLO or mortgage broker must complete the training every year.

See annual lender training information.

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