An Essential Guide to Deciphering BMR Home Eligibility
Below-market rate (BMR) homes offer unrivaled opportunities for Bay Area families that wouldn’t have been able to afford a home otherwise. The requirements are set to support equitable distribution of the units and prevent investor fraud.
While BMR home eligibility may initially seem overwhelming, we recommend taking it step by step. We promise that accurate information and support by your BMR sales team make the process very manageable.
This guide will help you learn whether or not you qualify and what will be needed to purchase your home.
Navigating BMR Eligibility: Your Essential Guide
We’ve assembled this guide to help a prospective homebuyer become more comfortable with what's required and to proactively prepare the documents and proof needed to qualify for a BMR home. Wherever possible, we also provide explanations about why certain restrictions exist to help the multi-faceted process make more sense.
While the list of buyer requirements and eligibility is long, know you have support 100% of the way. All of our 400 China Basin buyers will be guided by a highly experienced team of housing counselors, buyers advocates, and sales agents - all with substantial BMR program experience.
Also, pay attention to the comments uttered by anyone going through a traditional sales process, and you'll know you're not alone. Whether you're purchasing a BMR or a "traditional" home unit, there is always a mountain of paperwork to provide and complete. In many ways, your process is eased by the abundant support you have along the way.
Buyer eligibility
The first step is to prove you and those who occupy the prospective residence must be:
First-time homebuyers.
This means you and the other adult occupants (other than adult children or dependents 24 and under) haven't owned a residential property in the past three or more years.
You've completed the BMR education process.
We want every BMR residential owner to feel fully informed, educated, and empowered throughout the process. To ensure everyone has access to the same content, our staff offers homebuyer education from a MOHCD-approved housing counseling agency. You can begin this process by watching an information workshop (available in multiple languages).
You can read more about the full homebuyer education process here.
Total household income does not exceed maximum income limits.
BMR home programs are exclusively available to those who meet low, moderate, and middle-income requirement limits. These limits include the income of the applicants as well as any person living in the unit who's 18 years old or older (and that includes adult children).
These income limits are set annually in relation to the local housing market, economy, inflation, etc. Households cannot exceed the Area Median Income (AMI) for the unit.
Passing the "asset test"
The city also looks at the total sum of the purchasers' and adult occupants' total assets, which includes things like retirement savings, investments, or other liquid assets (an asset that can easily be converted into cash in a short amount of time).
That said, we exclude all or a portion of those assets from the asset test formulas if they're being used to contribute to the down payment.
Occupancy & household size
Eligibility guidelines also include occupancy and household size. For example:
The unit must be your primary place of residence and cannot be used as an investment, second home, vacation home, rental unit, vacation rental, etc.
There must be one person per bedroom, so single applicants cannot purchase a two+ bedroom condominium.
Families with children, step-children, or legal guardianship must have legal documentation proving they have custody of the child(ren) for at least 30% of the time for them to count toward the total occupancy.
Title requirements
Any adult residing in the unit must be listed on the title and be a co-applicant for the mortgage. There are some exceptions, including adult children between the ages of 18 and 24, anyone listed as a dependent on your tax returns, and non-owner occupants who only plan to live in the residence temporarily.
Financing qualifications
As with any loan application process, lenders look for buyers who have the best chance of paying the mortgage on time each month. The great news for most Bay Area applicants is that the total loan amount after the close of escrow, divided by the total months of the loan term, typically divides into mortgage payments that are less than market rent prices!
Even so, eligibility requirements for a BMR loan include reviews of documentation and verification of the purchasing party or parties:
Employment history.
Credit score.
Loan to value ratios.
Total debt to income ratio, including the mortgage payment.
Total reserves after purchase price (once you've made the down payment and purchased the unit, lenders want to see that you still have at least 3-months' worth of financial reserves available).
The ability to make the homeowner's association (HOA) fees each month, which typically increase over time.
Lenders will only fund loans for the base unit price, including the standard interior design options. Any design/finish upgrades for the unit or additional amenities (for example, additional parking space(s), storage space, etc.) must be paid for by the owners, separate from the loan.
Financing protection
There are also certain lender protections in place for affordable housing programs like these. For example:
Applications for BMR loans may only be submitted to MOHCD-approved lenders, which protects the buyer's best interests.
There are down payment assistance options to ensure you meet the 3% downpayment minimum guidelines, such as the ones offered through the CalHFA.
Interest rates and fees must be reasonable and in alignment with current market practices for traditional home lender financing and applications.
There is no minimum credit score set for BMR homeowners; lenders determine that criteria according to their own loan product guidelines.
Loans are offered in 30-year financing terms to keep payments as affordable as possible.
There are no upfront fees or money required to begin the lender review and financing process.
The entire downpayment and closing costs can come from gift funds (you'll learn more about how to make those funds count during the process).
The San Francisco government, city council members, and other BMR program administrators design the BMR homebuyer program to help, not to hinder, so you'll have the support you need every step of the way.
Additional Restrictions for BMR Housing Units
There are also additional restrictions or program requirements associated with purchasing, living in, and selling your BMR housing unit.
Resale price is governed by the BMR program
Below-market rate programs are intentionally designed to remain at below market sales prices "forever." The spirit of the program is such that the same benefit offered to you is then passed on to future buyers - in perpetuity. As a result, the resale restriction governs the process.
So, if and when you or your heirs sell the unit, they'll work closely with MOHCD to set the sales price for the home. And, just as you were part of an application and lottery program - without any special priority or status preference, the future buyers will be, too.
Capital improvements must comply with the CC&Rs
Owners cannot make any capital improvements ( permanent structural changes to a property that enhance its value, increase its useful life, or allow for a new use) until 10 years after taking residency. At that point, any capital improvements must go through an application and approval process.
However, that is the same for almost anyone who owns a condominium or a residence in a multi-family building. All HOAs have covenants, codes, and restrictions (CC&Rs) that dictate what types of improvements can and cannot be built/installed/changed to protect the integrity of the building and its overall market value.
Occupancy & title requirements
As we mentioned before, BMR homes are owner-occupied primary residences. They cannot become rentals at any time. Also, any title changes (like those made to add or subtract a spouse, partner, or other family member) must be approved via an application/approval process.
BMR loan refinancing
We highly recommend refinancing a loan when interest rates dip notably below your original loan rate. By doing so, you lower monthly mortgage payments, which puts extra money in your bank account.
Refinancing is an opportunity, more than a restriction. However, BMR loans must be refinanced by MOHCD lenders just like the original loan.
Estate planning
One of the many benefits of homeownership is the ability to build wealth for yourself and future generations. The same holds true for BMR owners. Typically, when one person on the title dies, the home remains in possession of anyone else listed on the title.
However, if everyone listed on the title passes away, the home can be passed to stated heirs as long as those heirs also meet BMR homebuyer guidelines. If they don't meet existing criteria, the unit is sold using the same resale guidelines referenced above, and any profits made after the sale are distributed to legal heirs/beneficiaries instead.
Interested in Learning More About the Eligibility Criteria for BMR Homes?
We're selling BMR residences in one of the most desirable waterfront properties in the Bay Area, and we'd love to add your name to our waiting list.
The team at 400 China Basin, located in San Francisco's vibrant Mission Bay, is here to help you learn more about the eligibility criteria for purchasing a BMR home, answer your questions, and walk you through the process - step by step.
Contact us to learn more about how to prepare for the next steps, request information on how you can be one of our first homeowner residents, or schedule an appointment with one of our BMR sales team representatives.
