What is a silent second mortgage?
For new homes sold in a HAPI subdivision to income-qualified households, the silent second mortgage is a method HAPI uses to lower the final cost of the home to the homebuyer. It is, essentially, a no-interest, no-payment loan from HAPI to the homebuyer in the amount of up to $20,000 depending on the subdivision. The funds only become payable when a homeowner sells their home, cash out refinances or pays off their first mortgage. What it does for the homebuyer is lower the amount they need to borrow and pay interest on. This only applies to newly constructed homes, built by HAPI or another contractor, in a HAPI subdivision. Income qualifications for the silent second are based on the current First-time Homebuyer income limits. You only need to be at or below the income levels and do not have to use the first time homebuyers program.
Why do I need to attend Homebuyer Education classes?
Even if you have previously owned a home, there are many things about credit, types of loans, finances and home maintenance that you can still benefit from. We are proud to say that we have a 100% satisfaction rate based on comments from attendees! Please see the EDUCATION PROGRAMS section of our website for more information.
Are the income limits based on gross or net income?
The limits are based on annualized gross income from any and all income sources of the entire household.
Are overtime, bonus, and commission pay included when determining income?
Yes, an average of past year and year to date is used for these types of incomes.
What areas of the state does HAPI cover?
The HAPI Rehabilitation grant and Homebuyer Education classes are available throughout the 21-county area that HAPI serves. These counties are Beadle, Brown, Campbell, Clark, Codington, Day, Deuel, Edmunds, Faulk, Grant, Hand, Hughes, Hyde, Marshall, McPherson, Potter, Roberts, Spink, Stanley, Sully, and Walworth counties. The Silent Second Mortgage only applies to houses in a HAPI subdivision or development.
What steps should I take to purchase a home?
- Attend Homebuyer Education
- Contact: HAPI at (605)225-4274 or 1-888-224-4274
- Homebuyer Education is a requirement for all of the HAPI grants and programs.
2. Go to any lender
- Obtain a pre-qualification letter
- Discuss monthly payments with your lender
3. Become aware of opportunities
- Affordable Housing Program (AHP)
- $10,000 or $20,000 Silent 2nd Mortgage (HAPI-Aberdeen development only)
4. Meet the HAPI requirements (See website or contact HAPI for more details)
- Coverage Area Requirements
- Income Requirements – (All household members income must be included)
5. Find the home you desire
6. Make an offer and provide HAPI with the lender approval letter
7. Sign a purchase agreement with $500 Earnest money
8. Provide your lender the purchase agreement
9. Close on house
10. Move into your new home!
What are the advantages of Home Ownership?
• A home is a place you can call your own. You have the advantage of making your living space to suit your individual taste and needs, not that of a landlord
• Owning your own home can be a first-rate investment. Homeowners also get significant tax breaks that are not available to renters. Interest paid on a home mortgage is usually deductible
Can I afford to buy a house?
In some cases, the cost of a mortgage, insurance, and taxes is actually less than what you pay in rent.
I’ve had bad credit, and I don’t have much for a down payment, can I become a homebuyer?
You may be a good candidate for one of the federal mortgage programs that are available. HAPI can help you sort through the options and see if there are any local homeownership programs that might work for you.
How expensive of a home can I buy?
The rule of thumb states that you can afford a house that costs up to two and one-half times your annual gross income (the amount you make before taxes are deducted). It also depends on a number of factors, including the cost of the house and the type of mortgage you get. In general you need to come up with enough money to cover three costs: the deposit you make on the home when you submit an offer, to prove to the seller that you are serious about wanting the house; the down payment, a percentage of the cost of the house that you must pay when you go to settlement; and closing cost, which are the cost associated with processing the paperwork to buy the home.
How can I increase my borrowing power?
• Reduce existing long-term debt
• Wait to apply for a mortgage until your income increases
• Find a financing option that results in a lower down payment and lower monthly mortgage payments
I’m a single mother. How would I go about buying a home? Although you won’t have the benefit of two incomes in which to qualify for a loan, there’s no reason that you can’t become a homeowner. HAPI partners with USDA Rural Development and South Dakota Housing Development Authority, which have great home buying opportunities for low-income families.
Should I use a real estate broker?
Using a real estate broker is a very good idea. A good real estate professional can guide you through the entire process and make the experience much easier and will be well-acquainted with all the important things you’ll want to know about a neighborhood you might be considering… the quality of schools, the number of children in the area, the safety of the neighborhood, traffic volume, and help you figure the price range you can afford. A broker can help save you hours of wasted driving time and has access to homes as they come on the market.
What will my mortgage cover?
Most loans have 4 parts: principal: the repayment amount you actually borrowed; interest: payment to the lender for the money you’ve borrowed; homeowners insurance: a monthly amount to insure the property against loss from fire, smoke, and other hazards required by most lenders; and property taxes: annual city/county taxes assessed on your property, divided by the number of mortgage payments you make in a year.
Most loans are made for 30 years, although 15-year loans are also available. During the life of the loan, you’ll pay far more in interest than you will in principle, sometimes two and three times more! Because of the way loans are structured, in the first years, you’ll be paying mostly interest on your monthly payments. In the final years, you’ll be paying mostly principal.
So, what will happen at closing?
Basically, you’ll sit at a table with your broker, the broker for the seller, probably the seller, and a closing agent. The closing agent will have a stack of papers for you and the seller to sign and he or she will give you a basic explanation of each paper, you will want to take the time to read each one and/or consult with your agent to make sure you know exactly what you are signing. Before you go to closing, your lender is required to provide a booklet explaining the closing costs, a “good faith estimate” on how much cash you will have to supply at closing, and a list of documents you’ll need at closing. If you don’t get those items, be sure you go to your lender BEFORE you go to the closing.
OK, now I own a Home, what about routine home maintenance?
So you’ve just moved into your brand new home. You shopped around and did a lot of research to find the home that was just right for you. You signed a big pile of documents at closing, the moving trucks have left, all the boxes are unpacked, and all your belongings are in their proper places. What should you do now?
One of the most important things to remember is that you are responsible for certain routine maintenance items to keep your house functioning properly. These tasks tend to be relatively simple. For instance, many types of heating and air conditioning systems contain filters to remove dirt and dust from the air. A homeowner should change these filters at least once every three months.
Cleanliness is a factor that will make your home last longer and work better. Dust and dirt, if allowed to accumulate, can harm the finishes on blinds, cabinets, countertops, floors, sinks, tubs, toilets, walls, tiles and other items. If dirt does accumulate, make sure to clean it with a substance that does not scratch or damage the finishes.
On the outside of your home, make sure that gutters and downspouts do not get clogged with leaves or other objects. The exterior of your house is built to withstand exposure to the elements, but a periodic cleaning will improve the appearance and, in many instances, prolong the life of siding and other exterior products.
When you bought your home, you probably received a warranty from the builder on workmanship and materials. This warranty applies to problems related to the construction of the home, but it does not apply to problems that arise because of failure to perform routine maintenance. For example, if your roof begins to leak after six months because of faulty workmanship, your warranty would cover that. If you develop a problem because water backed up in clogged gutters that you should have cleaned, the builder is not responsible for repairs. Also, some items, such as appliances, may be covered by manufacturers’ warranties and are not the responsibility of the builder.
You should fully familiarize yourself with the terms of your warranty soon after you move into your home. With all the excitement surrounding a move into a new home, most people have little desire to curl up in front of the fireplace and read a legal document. Nonetheless, you should not wait to read your warranty until a problem arises. Set aside an hour to learn what your rights and responsibilities are from the outset.
How can I determine the level of moisture in my home?
Weather forecasters talk about the relative humidity outdoors. Likewise, the inside of your home has a relative humidity, which is a measure of the moisture content in the air. Hardware stores sell instruments to measure the humidity inside your home.
Humidity is an important factor affecting the comfort level in your home. Have you ever awakened in the middle of a winter night to discover that your throat and nose feel very dry? That could mean the humidity in your home is too low. To remedy the problem, some people use humidifiers, which are designed to raise the humidity in a home. Your goal should be to have enough humidity in the air so the members of your household can stay healthy and comfortable.
Too much humidity can cause droplets of water to form on your walls, floors and windows, which can lead to mold growth. This formation of water droplets is called condensation. It occurs when warm moisture comes in contact with a cool surface. If you pour a glass of ice water and leave it on your kitchen table, the glass soon will begin to sweat. The sweating does not come from inside the glass. It is created when moisture from the air condenses when it comes in contact with the cold outer surface of the glass.
A sign of excessive humidity in a home can be condensation on the inside of windows, especially if you have double- or triple-pane windows. If condensation is present for prolonged periods, take steps to reduce the level of moisture or increase ventilation in your home. Condensation also can result from the use of unvented fuel-burning appliances, such as kerosene heaters or wood-burning stoves. If you use such appliances, have them inspected by a professional contractor or a utility company representative.
Another sign of excess moisture could be the warping of floors or difficulty in opening wood windows and doors. In such cases, the moisture from the air is absorbed into the wood, causing it to expand.
How can I control the humidity in my home during the winter?
Mold growth on inside walls can occur during the heating season, especially on the surfaces nearest the outside of your home. Moisture traveling through the air from the bathroom, basement, kitchen or other sources may condense when it comes into contact with a cold wall. By having well-insulated walls, you not only can save energy, but you also can reduce the likelihood of condensation and mold. You can raise the temperature of your walls by increasing the circulation of warm air from your heating system.
During the heating season, an indoor humidity level below 40 percent will prevent condensation in homes in most parts of the country. A lower level of humidity or extra insulation may be needed to prevent condensation in homes in very cold climates.
How can I control the humidity in my home during the summer?
Humidity has an important effect on comfort during the summer. Some weather forecasters in the summer talk about the comfort index, which attempts to show how much hotter the air temperature is likely to feel to you because of the humidity. The higher the humidity, the hotter you will feel. One of the ways air conditioners operate is to remove humidity from the air, which makes you feel cooler.
If you live in an area with high humidity, be careful about leaving windows and doors open during the summer. This will allow moisture from the outside air to enter your home. A way to control indoor moisture during humid summer months is to run an air conditioner and/or a dehumidifier. If you use a dehumidifier, clean it often. Also, empty it daily or have it drip directly into a drain.
Warm air can hold more moisture than cold air. Therefore, when your home is warm in the summer, more moisture is likely to stay in the air rather than condensing on the surfaces of walls and windows. In most climates, keeping an indoor humidity level below 60 percent in the summer probably will prevent condensation and mold growth.
Even though your air conditioner removes moisture from the air, the areas around your air conditioning system can be a source of water build-up. Make sure the drip pan on your air conditioner has not overflowed, and check near your air conditioning system for traces of dampness where mold can grow.
