Lender Guidelines: 4.3 Purchase Price Limitation
Lender Guidelines: 4.3 Purchase Price Limitation
The purchase price of the residence cannot exceed the applicable maximum purchase price limit. The applicable maximum purchase price limits are set forth on TSAHC’s website at https:// www.tsahc.org/lenders/resources-for-lenders#Income_and_Guidelines and the Lender Portal atwww.bayviewtpo.com.
For Non-Bond DPA (no MCC), there are no purchase price limits when using the Non-Bond DPA by itself.
For Bond DPA and MCCs, “purchase price” may be the sales price on the sales contract, but under the applicable federal tax regulations, the purchase price calculation must consider specific federal tax rules.
Under these rules, purchase price includes the following amounts:
- all amounts paid, either in cash or in kind, by the mortgagor (or a related party or for the benefit of the mortgagor) to the seller (or a related party or for the benefit of the seller) as consideration for the residence. A residence includes property such as light fixtures or wall-to-wall carpeting, so long as such property is considered to be a fixture under state law. If the mortgagor separately purchases such fixtures, the cost of those fixtures must be included in the purchase price. Property such as furniture or appliances is not considered part of a residence so long as such property is not considered to be a fixture under State of Texas law and the cost of acquiring such items is not included in the purchase price (unless the cost of acquiring such items is in excess of fair market value, in which case the amount of the excess must be included in the purchase price). Thus, if the mortgagor agrees to purchase the refrigerator, washer, and dryer from the Seller for $1,000 more than the fair market value of such items, the additional $1,000 must be included in the purchase price.
- If in connection with the purchase of a Residence the Mortgagor agrees to pay or assume liability for a debt of the seller, the amount of such debt must be included as part of the purchase price;
- If a residence is incomplete or in need of rehabilitation, the reasonable cost of completing or rehabilitating the residence, whether or not such cost is financed with the proceeds of the mortgage loan, must be included in the purchase price.
- If the Residence is purchased subject to a ground lease, the capitalized value of the ground rent using a discount rate equal to the Bond Yield must be included in the purchase price. The Lender must contact TSAHC for the applicable Bond Yield.
Under these rules, “purchase price” does not include (i) usual and reasonable settlement costs or financing costs; (ii) the value of services performed by the mortgagor or members of the mortgagor’s family in completing the residence; (iii) the cost of land that has been owned by the mortgagor for at least two years prior to the date on which construction of the residence begins; (iv) amounts paid by the mortgagor (or a related party for the benefit of the mortgagor) for non-fixtured personal property; (v) amounts paid for painting, minor repairs, floor refinishing or other fix-up expenses; and (vi) the amount of financing provided under a “qualified program” under section 143(k)(10) of the Internal Revenue Code (Code), but only if the residence is located in a high housing cost area, as defined in section 143(f)(5) of the Code.
“Settlement costs” include titling and transfer costs, title insurance, survey fees, or other similar costs. Financing costs include credit reference fees, legal fees, appraisal expenses, “points” that are paid by the mortgagor (but not the seller, even though borne by the mortgagor through a higher purchase price) or other costs of financing the residence. However, such amounts will be excluded in determining purchase price only to the extent that the amounts do not exceed the usual and reasonable costs which would be paid by a buyer where financing is not provided through a qualified mortgage bond program. For example, if the Mortgagor agrees to pay to the seller more than a pro rata share of property taxes, such excess shall be treated as part of the purchase price.
For purposes of determining the value of services performed by the mortgagor’s family in completing the residence, the family of an individual shall include only the individual’s brothers and sisters (whether by the whole or half-blood), spouse, ancestors, and lineal descendants. For example, where the mortgagor builds a residence alone or with the help of family members, the purchase price includes the cost of materials provided and work performed by subcontractors (whether or not related to the mortgagor) but does not include the imputed cost of any labor actually performed by the mortgagor or a member of the mortgagor’s family in constructing the residence. Similarly, where the mortgagor purchases an incomplete residence the purchase price includes the cost of material and labor paid by the mortgagor to complete the residence but does not include the imputed value of the mortgagor’s labor or the labor of the mortgagor’s family in completing the residence.