Purchase Assistance Loan (PAL)
for first-time home buyers
The City of Menlo Park’s Purchase Assistance
Loan (PAL) is an affordable second mortgage loan program and is
designed to help low to moderate-income first time homebuyers
purchase homes in Menlo Park. PAL can also eliminate or substantially
reduce the first mortgage lender’s requirement for Private Mortgage
Insurance (PMI).
PAL Terms
- Maximum loan amount is $75,000 or up
to 20% of a home's purchase price, whichever amount is less.
- Loan term is 35 years.
The first 5 years of the loan is at 0% interest with no payments
required. The following 30 years are fully amortized (monthly
payments required) at 5% fixed interest.
- PAL applicants
pay a nonrefundable $300 processing fee at the time of application.
PAL
Benefits
- PAL makes it easier to qualify for
home purchase by allowing low to moderate-income homebuyers
to apply for smaller market-rate first mortgages.
- PAL helps
homebuyers to qualify for lower monthly mortgage payments overall.
- PAL can
help avoid the requirement for PMI (Private Mortgage Insurance)
by the first lender.
- PAL applications
are easily processed along with the first mortgage application.
- PAL applicants
can work with the first-mortgage lender of their choice*.
*Borrower must qualify for
a first mortgage secured by a deed of trust from a lender who
will use Fannie Mae “Community Homebuyers” Program qualifying
criteria or other prudent and appropriate qualifying criteria
commonly used in the lending industry.
PAL Requirements
- Applicant (or a member of applicant’s
household) must have lived or worked in Menlo Park for at least
one year.
- Applicant
must be a first-time homebuyer (has not owned a home in the
last three years).
- The home
to be purchased must be located within incorporated City of
Menlo Park.
- Applicant’s
gross annual household income may not exceed 110% of Area Median
Income (please see chart).
- Applicant
must be creditworthy and able to qualify for a market-rate,
first mortgage loan. Applicant must be able to provide
a down payment in the amount specified by the first mortgage
lender (typically 0%-20% of the purchase price).
For a complete detailed description of
the PAL Program, please request a copy of the Purchase Assistance
Loan (PAL) Guidelines & Application at: (650) 330-6728
How to Apply for PAL
While PAL loans are funded by the City
of Menlo Park, the County of San Mateo administers the application
process. To receive an application packet, call the County
of San Mateo Department of Housing at (650) 802-5033.
Mortgage Credit Certificate Program (MCC)
San Mateo County’s Mortgage Credit Certificate
Program (MCC), a federal tax credit program, may be used to complement
PAL. The MCC Program helps to increase the first mortgage
loan amount for which a homebuyer may qualify. Funding for
MCC’s is not always available, however, and MCC's will be made
available to qualified PAL applicants as long as there is sufficient
funding available to do so.
PAL applicants can apply for the MCC Program
at the same time that they apply for PAL. Unlike the PAL
Program, however, the Mortgage Credit Certificate Program requires
that applicants work with participating MCC mortgage lenders (also
there are differences in qualifying criteria between the PAL and
MCC Programs). Information about MCC’s, including a list
of participating MCC lenders, is included in the PAL application
packet. For further information or to find out about funding
availability, call the County of San Mateo Housing Department
at (650) 802-5033.