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Homebuyer Assistance Program Policy Statement


I. Program Description
This program is designed to assist low and moderate income households in Fargo with down payment and closing costs to purchase a home. The assistance from the Fargo Home Buyer Assistance Program is in the form of a zero interest loan due payable upon sale of the home. Funds for the program are from the Department of Housing and Urban Development (HUD).

II. Program Eligibility
Persons that wish to receive assistance must attend a homebuyer education course that is approved by the City of Fargo prior to making an offer to purchase a home.
The combined gross annual income of all household members must be below the HUD limits outlined below. Income is based on projected income. "Household size" includes all members living in the household and does not include anticipated births or adoptions. The income limits are subject to change on approximately an annual basis.
1 person household  =  $36,400
2 person household  =  $41,600
3 person household  =  $46,800
4 person household  =  $52,000
5 person household  =  $56,150
6 person household  =  $60,300
7 person household  =  $64,500
8 person household  =  $68,650

The applicant's projected cash assets, at the time of application, cannot exceed 20 percent of the purchase price of the property. Cash assets include, but are not limited to: checking and savings accounts, certificates of deposits, earnest money deposit, gift funds, residential property assets, and cash on hand of all adult household members. Cash assets do not include Individual Retirement Accounts or other similar retirement investments to which access is limited or restricted.

III. Eligibile Property

  • The property must be located in the City of Fargo.
  • Eligible properties are existing or newly constructed, one-unit, single family residences, including condominiums and manufactured homes permanently attached to real property.
  • Properties located within a 100-year flood plain are not eligible for this program.
  • The property must conform and comply with all current zoning ordinances, or an agreement must be reached as to when and how conformance and compliance will be achieved.
  • HUD requires the Mortgagor (buyer) will have to sign a Land Use Restriction Agreement that will restrict the use of the property to residential.
  • The purchase price for the property cannot exceed $135,000 for existing or newly constructed homes. This limit is subject to change by HUD.
  • Due to tenant displacement costs, properties that were occupied, by someone other than the seller or proposed buyer, at any time during the 3-month period immediately preceding the date of the purchase agreement are not eligible for the Fargo Home Buyer Assistance Program. The 3-month period is determined by using the date of the earnest money agreement. An exception to this limitation is when the tenant gives notice of their intent to vacate the property prior to an offer to purchase the property. This exception must be approved by the City of Fargo before proceeding with an application for assistance.
  • The property must meet the Housing Quality Standards and Environmental Review Requirements (HQS/ER) of the Department of Housing and Urban Development. If the inspection reveals repairs that are needed, a re-inspection of the property must be conducted to verify the completion of the repairs. Repairs that cannot be completed due to weather conditions will follow the guidelines for completion used by FHA. Any identified lead paint hazards will cause an HQS to fail and will trigger the need for re-inspection, once the appropriate repairs have been made.  (Reference additional lead paint guidelines that follow.)  The inspection must be done by a qualified appraiser or other person approved by the City of Fargo. Newly constructed homes will meet HQS requirements if they have a Certificate of Occupancy for the City of Fargo.
  • On all applications for assistance, the seller must make additional recitals (disclosure of property rental history) that are contained in the Affidavit of Seller.

IV. Use of Funds
The funds can only be used to assist with the Mortgagor's down payment, closing costs, and prepaid items and to enhance the mortgagor's equity position (i.e., pay down the mortgage principle prior to loan origination). Costs that are normally associated with the seller are ineligible.  These funds cannot be used to curtail principal after loan origination (i.e., buyer cannot receive cash at closing but excess funds should be used to reduce loan principle prior to closing). If the mortgagor has prepaid certain closing cost items such as the appraisal fee, credit report fee, or first year hazard insurance premium, the HUD Settlement Statement can show the Mortgagor receiving cash reimbursement for such prepaid items, as long as it does not exceed the amount prepaid.

V. Level of Assistance
The assistance is $5,000, which includes a $50 lender processing fee that is paid by the borrower. Closing costs include the lender processing fee and document recording fees that are associated with the assistance. The assistance from the Fargo Home Buyer Assistance Program is in the form of a zero interest loan due payable upon sale of the home. The Note and Mortgage will be taken in favor of the City of Fargo for the amount of the assistance.

VI. Repayment
At the time of sale, the repayment of the City of Fargo downpayment assistance loan will be calculated from the Net Proceeds of the sale. "Net Proceeds" is defined as the sales price minus the original purchase price, plus allowable closing costs. The amount due under the promissory note and second mortgage will be determined by the City of Fargo at the time a release of mortgage and Land Use Restriction Agreement (LURA) is requested.


VII. Subordination Policy
The City of Fargo will consider subordinating its homebuyer assistance mortgage to a position lower than a second in the following circumstances:

  • If the homeowner is refinancing the original mortgage in order to obtain a lower interest rate and/or overall mortgage cost.  To be eligible for subordination, a refinancing cannot result in any cash out to the homeowner.  
  • If the homeowner is borrowing money to make additional improvements to the property. 
    Documentation must be provided to identify the type and cost of the improvements to be made.
  • If the homeowner is securing a loan that includes funds for home improvements and for reasons other than home improvement (ex. debt consolidation, medical expenses, vehicle purchase, etc.), the City will only consider subordination if the city assessor's valuation of the property shows that the equity in the home is sufficient to cover the value of all mortgages against the property, and if the homeowner has been in the home for at least three years.
  • The City will not subordinate if the loan only covers non-home improvement related items.

VIII. Reservation of Funds
Loans will be offered through participating lenders and will be available on a first-come, first-serve basis. To request that funds be set aside for a particular applicant, a lender must submit a Request for Reservation of Funds.  A Reservation Request must include:

  • The reservation Request and Disclosure Form, 
  • A copy of the Certificate of Completion from the Home Buyer Education Program, 
  • A copy of the purchase agreement, and
  • A copy of the loan application.

This process will only reserve Fargo Home Buyer Assistance funds; it does not mean that the applicant has been approved to receive funds.

IX. Program Implementation Issues

Buyer Affidavit.  There are additional recitals that the buyer must make in addition to those on the Program Affidavit of the Buyer. These recitals are specified in the Addendum to the Affidavit of Buyer; they include statements that acknowledge the buyer's awareness of the nature of the assistance (i.e. second mortgage), and that there will be a land use restriction agreement on the property, while also outlining the terms of repayment (ex. sale of property, rental, etc.).  It must be executed by the buyer and attached to the Program Affidavit of Buyer.

Fees.  An HQS/ER inspection fee of $40 and a Lender processing fee of $50 will be allowed as part of the Mortgagor's closing costs and can be paid with Fargo Home Buyer Assistance Program funds. The inspection fee will also cover the cost of any follow-up inspections needed on the property. The inspection fee should be charged to the Mortgagor as an up-front cost similar to the appraisal fee and credit report fees.

Documents required for Loan Approval.  Approval of the loan requires submission of the following material with a copy of the approved Reservation of Funds.

Responsibility for Preparation of Documents. The Note, Mortgage, and LURA documents will be prepared by the City of Fargo and will be available to be picked up with the check in the Planning Office.  The City of Fargo will rely on the Lender for notification of the date of closing. The lender should allow 9 working days for the Note, Mortgage, LURA and funds to be prepared.
The Fargo Home Buyer Assistance program loan should be recorded so as to assure it is inferior only to the lender's first mortgage. The recording fees for this mortgage, as well as the LURA, can be paid from the Fargo Home Buyer Assistance Program funds.

Loan Completion Requirements.  The following documents are to be submitted to the City no later than two weeks after closing. Note that the Right of Rescission requirements do not apply to the City of Fargo Mortgage.

  • Original Promissory Note
  • Mortgage (Copy at Closing, Original After Recording)
  • Original Land Use Restrictive Covenants (Copy at Closing, Original After Recording)
  • Original Addendum to Affidavit of Buyer
  • Original Addendum to Affidavit of Seller
  • Settlement Statement (Please indicate terms of First Mortgage)
  • Below Market Interest Rate Form 

X.  Lead Paint.
The City of Fargo complies with federal regulations regarding lead-based paint.  The City agrees to hire only certified inspectors, contractors and risk assessors to work with and assess lead-based aint/hazards. Any identified lead paint hazards will cause an HQS to fail.  Any work that must be completed to address lead-based paint hazards will be considered a “code deficiency”.

Indication of Lead Hazard. If the City receives an HQS inspection report or an appraisal that indicates a potential lead-based paint hazard (based on a visual assessment of deteriorating painted surfaces), Fargo Downpayment Assistance funds cannot be used, and will not be approved, until one of the following actions occurs:

  • The surface is tested (by a certified inspector or risk assessor) and the test comes back negative for lead.
  • The surface is tested and the test comes back positive for lead-based paint, a trained contractor is hired to address the lead paint issue (stabilize the paint using safe work practices), and the property successfully passes a “clearance” test after work is completed.  Note that the clearance test must be conducted by a certified inspector or risk assessor.
  • The homeowner assumes lead based paint is present (without conducting a test), contracts with a trained housing rehab contractor to address the lead paint issue (stabilize the paint using safe work practices), and the property successfully passes a “clearance” test after the work is completed.

Escrow Policy
Note that the Fargo Downpayment Assistance program does not allow a buyer to escrow funds to make lead paint related repairs after closing.  All required lead paint stabilization must be completed prior to closing as an approved HQS inspection is a requirement of our program.  The only possible exception to this escrow rule is if the only deteriorated paint surface is on the exterior of the building and weather does not permit repairs to be made immediately.  In that case, the City of Fargo will approve the application for downpayment assistance given the following conditions are met.

  • The buyer and seller agree to escrow sufficient funds to address the lead paint hazard.  Required escrow is based on a contractor’s bid for stabilization, adjusted for additional expenses associated with “safe work practices”.
  • The stabilization work is completed by a contractor that is trained in safe work practices.  The City of Fargo maintains a list of locally qualified contractors, available on the web at: http://www.cityoffargo.com/Residential/MaintainingYourProperty/Lead-basedPaint
  • The work is completed as soon as weather allows.  The buyer must notify the City when the work is completed.  If the City finds that the work has not been completed in a timely manner, the buyer will be required to return the Downpayment assistance, as the project will not be in compliance with program requirements.
  • The buyer is informed about the potential lead hazard that will exist until the required work is completed.  Children should not play outside near the deteriorating surfaces until appropriate “interim controls” have been put in place (i.e,. the house has been painted using safe work practices).  A copy of “Maintaining a Lead Safe Home” must be given to the buyer, along with a copy of the City’s determination that an escrow exception can be granted.


Loan reservations and applications should be submitted to:

Monica Graber, Assistant Planner
Fargo Department of Planning and Development
200 North 3rd Street
Fargo, ND  58102     
Phone: 241-1474
Fax: 241-1526
mgraber@cityoffargo.com