Home Buyer Selection Policies
I. OVERVIEW
This policy is intended to guide both general and project-specific homebuyer selection procedures administered by the Kansas City Community Land Trust (KCCLT). This policy shall be reviewed at least annually by the KCCLT Board of Directors for effectiveness in guiding the KCCLT in the pursuit of its mission.
II. GOALS
The goals of the KCCLT that these policies are intended to support are:
a). To provide access for low and moderate income people to secure housing that is decent, safe and affordable;
b) . To preserve quality and affordable housing for future low and moderate income
residents of the community
c). To stabilize and improve the larger Kansas City area which is a vital component to the success of the KCCLT so that all residents can thrive in place and;
d). To allow low and moderate income people who have been strategically denied access to homeownership to build generational wealth through property ownership.
III. SELECTION CRITERIA
A. THRESHOLD SELECTION CRITERIA: The following criteria reflect the KCCLT’s goal to reasonably match household size to unit size and household income to housing costs. [Note: some funding sources upon which the KCCLT may rely to develop its housing opportunities may establish more stringent requirements that those listed below. KCCLT will update its threshold criteria for each project receiving those funds in order to meet the requirements set forth by the funding entity]
1. Income Eligibility
Maximum Income: To be considered for selection, a household must have an annual income which does not exceed 120% of the median income of households of equal size residing in the Kansas City and Jackson County statistical areas (as defined by the U.S. Department of Housing and Urban Development or its successor agency) within which the housing unit is located.
There are, however, three exceptions that will be considered:
(1) Households at any income level who wish to place land which they own in the KCCLT, or;
(2) who wish to undertake a sale-leaseback arrangement with the KCCLT, or
(3) who agree to be bound by the KCCLT’s resale restrictions.
2. Creditworthiness
In all cases, a household must be able to demonstrate a sense of ownership of its financial obligations, and a history of responsible effort to meet them. The household, must be preapproved for mortgage financing and provide a letter of preapproval to the KCCLT board for review, comment and approval.
(a) Minimum Income - To be considered for KCCLT’s homeownership opportunities, a household’s monthly income, when multiplied by the appropriate debt-to-income ratio, must be sufficient to support the housing costs for the housing opportunity in question. In general, households that require a cosigner in order to obtain a mortgage will not be considered.
(b) Affordability - (i.e. matching household income to housing cost). In general, affordable means that the monthly cost of occupying a particular housing unit does not exceed 31% of monthly household income, and monthly housing costs and total debt payments do not exceed 41% of monthly household income.
(c) Assets - To be considered for KCCLT’s homeownership opportunities, a review of a household's financial resources and circumstances should clearly indicate a limited ability to compete successfully in the conventional housing market, however applicants with more than 35% of the home value of liquid assets available for the purchase of a home are ineligible. The applicant is also required to provide a maximum of $200.00 into the repair reserve fund.
3. KCCLT Application
Applicant shall fill out and return to KCCLT a homeownership application. After KCCLT board review of the application, the KCCLT will notify the applicant of KCCLT pre-approval. Applications can be found on the website, can be emailed to the applicant upon request, and are available in hard copy upon request.
4. KCCLT Orientation
Applicants shall attend a KCCLT Orientation session. Please see the events page under “Get Involved” or contact Meghan@kcclt.org for upcoming Orientation sessions.
5. Funder-Specific Guidelines
While the above-listed criteria are KCCLT’s base criteria, KCCLT acknowledges that specific funders may impose different criteria. Any additional selection criteria will be included here on a case by case basis.
B. SECONDARY SELECTION CRITERIA The following circumstances, not necessarily in order of priority or importance, will be considered in those instances when there are two or more households expressing interest in a particular unit and who meet the Threshold Eligibility Criteria outlined above.
1. First-come first served
First applicants submitting a complete application and demonstrating the ability to qualify for a mortgage in a manner that satisfies requirements stated in Section “A. Threshold Selection Criteria.”
2. Application on File
Length of time which a household's application for home ownership has been on file.
3. Marlborough Experiences
Applicants who are currently living in the Marlborough Community Coalition (“MCC”) boundaries, or who have lived in MCC boundaries are Gregory-89th Street (North-South) and Troost to Bruce Watkins/Highway 71 (West-East).
IV. APPLICATION PROCESS
This process is not necessarily sequential in nature, however each component of the process is essential to ensure that each of the KCCLT's prospective home buyers is fully informed as to the fundamental details and atypical nature of the KCCLT's real estate transaction (i.e. involving a leasehold interest in the land and restrictions embedded in the ground lease agreement on the resale of the improvements located on the leased premises.)
A. OUTREACH & MARKETING. Applicant responds to project-specific marketing or general community outreach by contacting Marlborough Community Land Trust at ED@kcclt.org for project specific, or general (as the case may be), information, attending community meeting, or getting information from our office at 1809 E 80th Street Kansas City, Missouri 64131.
B. INFORMATION/ORIENTATION SESSION. Applicant is advised of the next periodically scheduled KCCLT information/orientation session. Attendance at one or more of these sessions is required.
C. APPLICATION REVIEW. Applicant is provided with a KCCLT application form to complete and return to KCCLT staff. Assistance with filling out application will be provided by staff on an as-needed basis. Application is reviewed by staff in comparison to established threshold and secondary criteria. Staff determines whether applicant is likely to qualify for currently available housing units (or for the general waiting list, as the case may be).
D. PRELIMINARY APPROVAL / DENIAL. Following KCCLT application, applicant shall apply for and receive loan preapproval from a preferred bank. KCCLT Board of Directors may preliminarily approve or deny an application based on the preapproval terms. Qualified individuals/households will be so notified and placed on a waiting list to participate in the selection process for particular housing opportunities, as they become available. Applicants that do not meet application criteria will be so notified in writing. Staff or Selection Committee may provide tips or advice on how the applicant may improve financial or other obstacles to a successful application.
E. SELECTION PROCESS. The selection process for each housing opportunity may vary depending on the number of eligible and qualified persons on the waiting list relative to the number of housing opportunities available at a particular time. In general the selection process will be conducted according to the steps outlined in Section V below.
F. HOME BUYER TRAINING. Applicant is directed to periodically scheduled sessions conducted by various home-buyer training programs throughout Kansas City. Applicant is advised to meet with local lender for a mortgage "pre-qualification" session to determine whether applicant is likely to obtain mortgage financing approval.
G. PURCHASE AND SALES CONTRACT / FORMAL MORTGAGE APPLICATION / ADVANCED ORIENTATION SESSION. The applicant and the KCCLT Board President sign a purchase and sale agreement. Applicant applies for mortgage financing. A detailed review of the KCCLT Lease and other legal documents associated with a particular transaction is scheduled with applicant.
H. MORTGAGE APPLICATION PROCESSING AND CLOSING Applicant moves through the mortgage application and approval process.
I. INDEPENDENT LEGAL REVIEW. Applicant must retain, at applicants expense, an attorney who reviews all the KCCLT legal documents on behalf of applicant and who provides independent advise and counsel regarding the transaction.
V. SELECTION PROCESS
A. WHO MAKES THE DECISION
1. Regarding Threshold and Secondary Eligibly Criteria -
a) KCCLT Executive Director shall make a recommendation to the Board of Directors in a form acceptable to the Board regarding whether an application will be placed in the qualified applicant pool.
b) Board of Directors - The Board of Directors will have final say as to whether an applicant meets the threshold and/or secondary criteria discussed herein.
2. Regarding Credit Risk and Overall Creditworthiness -
a) The mortgage underwriting guidelines of the lending programs available to the KCCLT's qualified home buyers shall be the deciding factors regarding credit risk and the overall creditworthiness of a particular applicant
B. HOW IS DECISION MADE
1. Regarding Threshold and Secondary Eligibility Criteria -
a) Using the definitions found in Appendix 1 and considering the resource allocation policy in Appendix 3, the Board will review both project-specific applications and general interest applications to determine whether the Threshold Criteria outlined above have been met. Applicants to be selected will come from among those who meet all of the Threshold Eligibility Criteria.
b) Once this pool of applicants is used up, or if there are more eligible and qualified applicants than housing opportunities available, applications will be considered based on a review of the Secondary Selection Considerations.
2. Regarding Secondary Selection Considerations - Staff will provide to the KCCLT Board of Directors a summary of its findings along with each applicant's application.
APPENDIX 1 - DEFINITIONS
The Kansas City Community Land Trust (KCCLT) has adopted the following definitions for the purposes of assessing affordability and monitoring its ability to achieve its goals.
"Affordable" means that the monthly Occupancy Cost of a particular housing unit generally does not exceed 30% of household income. (See discussion of Housing Costs, defined below, for exceptions regarding single-family ownership housing.)
“Debt-to-Income Ratio” (DTI) means the maximum percentage of income which a particular lender will allow a household to spend on Housing Costs.
"Household" means a person, or group of persons who occupy the same housing unit as their primary residence.
"Median Income" shall be as set forth in regulations promulgated from time to time by the United States Department of Housing and Urban Development (HUD) pursuant to 42 U.S.C. Sec. 1437 et seq.
"Moderate Income" shall mean a household whose combined gross annual income, adjusted for Household Size (defined below), does not exceed 80% of the Median Income for the Statistical Area within which the housing is located as defined by HUD or a successor agency.
"Low Income" shall mean a household whose combined gross annual income, Adjusted for Household Size, does not exceed 50% of the Median Income for households of that size residing in the Statistical Area within which the housing is located. "
“Very Low Income" shall mean a household whose combined gross annual income, Adjusted for Household Size, does not exceed 30% of the Median Income for households of that size residing in the Statistical Area within which the housing is located
"Statistical Area(s)" shall be as set forth in regulations promulgated from time to time by the United States Department of Housing and Urban Development (HUD) pursuant to 42 U.S.C. Sec. 1437 et seq.
"Housing Cost" shall mean:
1. When measuring the affordability to a known household of a known unit size:
A. for "Single-Family" Ownership: the sum of the monthly payments due on the mortgage (principal & interest); plus the property taxes due on the property; plus the hazard insurance policy; plus the Ground Lease Fee, if applicable; plus the repair and maintenance serve fund fee. [NOTE: The debt-to-income ratios dictated by the underwriting guidelines for a particular mortgage program shall be controlling for the purpose of determining the maximum percentage of income allocable to these monthly Housing Costs.]
2. When calculating the affordability of projected occupancy costs for a particular unit, (for example to determine or establish a purchase price or rent level), the CLT will make the following calculations:
A. The controlling Debt-to-Income Ratio for households of the appropriate size will be determined (Housing Debt to Income Ratio is 35% and Total Debt to Income Ratio is 45%).
B. Prevailing property tax assessments, insurance rates and condominium association fees (as applicable) for comparable properties will be examined and deducted from the controlling percentage of income allowable to occupancy costs in order to determine the amount of household income remaining to make a mortgage payment.
C. Prevailing loan terms and interest rates of the State's Mortgage Revenues Bonding Authority (usually the state housing finance agency) will be used to calculate the maximum mortgage amount which could be amortized by a payment of this size. The amount resulting from these calculations will be the maximum purchase price considered to be affordable to the desired household income level.
APPENDIX 2 - HOME BUYER / LEASEHOLDER APPLICATION
See wearemarlborough.org>Marlborough Community Land Trust>Forms and Documents or click here.
APPENDIX 3- RESOURCE ALLOCATION POLICY 100% of the KCCLT’s resources will be dedicated to benefit households earning at or below 80%-120%of the median income (adjusted for household size in census tract 90– see attached chart) to the extent such allocation is not inconsistent with conditions or restrictions placed on the use of such financing by those providing the financing.
APPENDIX 4 - Current AREA MEDIAN INCOMES BY HOUSEHOLD SIZE (U.S. Department of Housing and Urban Development) U.S. Dept. of HUD: 2022 estimated median income $50,025
Highest income threshold per family size: 80% (preference)-120%(max) AMI of census tract 90 statistical area. Applicants must have an income under the below-listed limits
1 Person $18,200-$48,550
2 Person $20,800-$55,450
3 Person $23,400-$,62,400
4 Person $26,500-$69,300
5 Person $31,040-$74,850
6 Person $35,580-$80,400
7 Person $40,120-$85,950
8 Person $44,660- $91,500
Once the final 4-Person income limit has been established, calculation of income limits for other family sizes is straight-forward. The 1-Person family Income Limit is 70% of the 4-Person Income Limit. The 2-Person family Income Limit is 80% of the 4-Person Income Limit, the 3-Person family Income Limit is 90% of the 4-Person Income Limit, the 5-Person Income Limit is 108% of the 4-Person Income Limit, the 6-Person Family Income Limit is 116% of the 4- Person Income Limit, the 7-Person family Income limit is 124% of the 4-Person Income Limit, and the 8-Person Family Income Limit is 132% of the 4-Person Income Limit. For family sizes larger than 8 persons, the income limit can be calculated by adding an additional eight (8) percent per person to the next lower limit. For example a 9-Person Family Income Limit is 140% (132% + 8%), and so on.