Net Worth limits on qualification to purchase affordable homes

Our program, as is typical, utilizes maximum income limits as one of the criteria to qualify to purchase an affordable home. Another restriction is a limitation on net worth. Do other programs utilize a net worth cap and if so, how do you calculate it?

Thanks!

Replies to This Discussion

Permalink Reply by Rick Keller, AICP on June 22, 2011 at 4:27pm

I would be very interested in how to incorporate net worth into program eligibility--it is at least as important as income, if not more so.

Permalink Reply by Rick Jacobus on June 24, 2011 at 11:15am

Kathy,

We have collected a number of examples of local program selection criteria in the Cornerstone Partnership Document Library at www.affordableownership.org - under 'marketing and selection.' Some of the examples include asset limits and some do not. It is a surprisingly tricky thing to do appropriately. One issue is what the cap should be - ie. how much money a person 'should' have and still be eligible. People closer to retirement really might have much more in savings and still be truly in need of assistance where someone younger with the same level of savings might not. Another issue is determining the value of someone's assets which may not all have obvious cash value.

There is document on that site called 'sample eligibility criteria' that includes some detailed language about how to count and document assets for eligibility. HUD also has some detailed policies on this topic - they generally don't require fixed asset caps but instead require that you include income earned from assets in the income calculations - and that you impute the income that could be earned from assets that are not currently paying the owner any income.