Purchasing a Below Market Rate (BMR) Home in California

Purchasing a Below Market Rate (BMR) home in California can be a game-changer for those seeking affordable homeownership in high-cost areas. However, navigating the BMR home-buying process can be complex, with specific eligibility requirements, resale restrictions, and unique financing challenges. As a seasoned real estate professional, I am here to guide you through each step and help you successfully secure a BMR home that fits your needs and budget. Here’s an in-depth look at the process and how my expertise can make your journey smoother and more manageable.

Step 1: Understanding BMR Homes and How They Work

BMR homes are designed to provide affordable housing options for low- and moderate-income households, especially in areas where market-rate homes may be out of reach. These properties are sold at prices below market rates, allowing qualified buyers to purchase a home at a lower cost. The catch? BMR homes often come with resale restrictions, ensuring that they remain affordable for future buyers.

This is where my experience comes in—I’ll help you understand these restrictions and the benefits of BMR homeownership. Together, we can evaluate if this type of property aligns with your long-term goals and budget.

Step 2: Checking Your Eligibility for a BMR Home

Every BMR program in California has specific criteria for eligibility, including:

Income Limits: Your household income must fall within a set range, typically based on Area Median Income (AMI), and may vary depending on the number of people in your household.
Residency or Employment Requirements: Preference may be given to individuals who live or work in the city where the BMR home is located, or have immediate family in the city
First-Time Homebuyer Status: Many programs require buyers to be first-time homebuyers, meaning you haven’t owned a home in the past three years.

Understanding and meeting these requirements is crucial. As your real estate professional, I’ll guide you through the eligibility process, helping you gather necessary documents and determine your eligibility with clarity and confidence.

Step 3: Completing a Homebuyer Education Course

Most BMR programs in California require buyers to complete a homebuyer education course from an approved provider. This course covers essential topics like budgeting for homeownership, understanding mortgages, and managing home maintenance. I can connect you with reputable course providers and answer any questions that arise, ensuring that you’re well-prepared for homeownership.

Step 4: Getting Pre-Approved for a Mortgage

Financing is one of the most crucial steps in the BMR home-buying process. Lenders may have specific requirements or restrictions for BMR properties, and not all mortgage providers are familiar with the nuances of BMR financing. Not every mortgage provider is able to write BMR loans. I have a network of trusted lenders experienced in BMR programs who can work with you to find a suitable loan product. With a pre-approval letter in hand, you’ll be well-positioned to move forward when a BMR home becomes available.

Step 5: Applying for a BMR Home

When you’re ready, it’s time to apply for a BMR home. The application process can involve multiple steps, including:

Filling out the application form: This includes providing accurate details about your income, assets, and household size.
Submitting documentation: Required documents may include recent tax returns, pay stubs, and proof of residency or employment.
Participating in a lottery (if applicable): In areas where demand for BMR homes is high, cities and counties may use a lottery system to select buyers. I can help you prepare for this, ensuring your application is complete and correctly submitted.
Documenting your points (if applicable): Some BMR programs have a point based system while others are purely a lottery in case of multiple applications.

In my experience almost all BMR listings have multiple-offers and the selected applicant is determined by lottery, by points or any other criteria decided by the city. Even if you are selected, there is an approval process by the city, where you must be approved as eligible. The city will review your eligibility and verify the information provided on your BMR application and make a decision based on not just your application but other competing applications in terms of needs. e.g. Preference is given to displaced individuals. This may take as long as 7-10 days after the offer is submitted.

If you’re selected, my support doesn’t end there—I’ll continue to guide you through the next steps and ensure a smooth transition to the closing process.

Step 6: Navigating Occupancy, Resale Restrictions and Long-Term Obligations

One of the most critical aspects of buying a BMR home is understanding the occupancy and resale restrictions that may apply. These restrictions are in place to keep the home affordable for future buyers and often include:

Occupancy Requirements: Most BMR homes require owner occupancy as primary residence, which means that you have to live there and cannot rent it out to some one else
Resale price caps: When you decide to sell, the resale price may be capped to maintain affordability for the next buyer.
Selling to an eligible buyer: In many cases, you’ll be required to sell the home to another qualified BMR buyer.
Holding period requirements: Some programs require you to own the home for a certain number of years before you can sell.

These restrictions can impact your long-term financial plans, and that’s where I come in. I’ll help you understand these conditions and guide you through what they mean for your future. Having worked with BMR buyers in the past, I know how to navigate these policies and ensure that you’re making a fully informed decision.

Step 7: Closing the Sale and Becoming a BMR Homeowner

Once your application is approved and financing is secured, we’ll move forward to the closing phase. Working with the program administrator, I’ll ensure all final steps are completed correctly, from signing the purchase agreement to completing the necessary paperwork. My goal is to make this process as smooth as possible, addressing any last-minute questions and coordinating with all parties involved to make your closing day a success.

Step 8: Planning for the Future as a BMR Homeowner

Becoming a BMR homeowner is a major achievement, but it also involves certain ongoing responsibilities. Here are a few tips I can help you with as you settle into your new home:

Understanding and budgeting for maintenance: As with any home, maintenance and repair expenses can add up. I can provide guidance on budgeting for these costs and recommend trusted local contractors.
Staying informed about program updates: Program guidelines or requirements may change over time. I’ll keep you informed of any updates that could impact your ownership or resale options.
Navigating resale restrictions if you decide to sell: When the time comes to sell, I’ll help you navigate the resale process, ensuring compliance with program requirements and finding a qualified buyer if necessary.

How I Can Help You Succeed in the BMR Home-Buying Process

Buying a BMR home requires knowledge, patience, and support. As a seasoned real estate professional with years of experience in the California housing market, I offer:

In-depth knowledge of BMR programs: I’ve helped clients navigate various affordable housing programs and can provide guidance tailored to your specific needs.
Access to a trusted network of lenders and service providers: My connections with lenders, inspectors, and contractors who understand BMR requirements ensure you’re working with professionals who prioritize your interests.
Personalized support and guidance: From eligibility to closing, I’ll be by your side, answering questions, handling paperwork, and providing step-by-step support.

Why a BMR home might not be the one for you?

Though the price of the home may seem appealing, it does come with strings attached on occupancy, resale and holding periods. If you are close to exceeding the income requirements, your probability of being selected among the other eligible and needy applicants is significantly reduced.

Additionally, the number of BMR home sales in a city are very few compared to traditional homes. It is a lottery system, the odds of your application being selected are quite low considering the sheer number of applicants. It may take multiple attempts for your application to even be selected (if at all) which can become a cause of frustration for buyers. In most cases there no visibility on why your application was not selected.

If getting into a home is a priority, especially if you are close to exceeding the income eligibility; then relying on a BMR hitting the market and being selected for the home might not be the best strategy for home ownership. There os are that you may never get selected. It may be better to consider purchasing smaller home which is a conventional sale build equity over the years which you can use for the purchase of your next home.

Final Thoughts

Purchasing a BMR home in California is a unique opportunity to achieve affordable homeownership in one of the nation’s most competitive markets. By partnering with an experienced real estate professional, you can simplify the process, avoid common pitfalls, and make informed decisions that align with your goals.

If you’re interested in exploring BMR homeownership or have questions about affordable housing options in California, I’d love to help. Let’s work together to find a BMR home that meets your needs and paves the way to your future as a homeowner.

Purchasing a Below Market Rate Home in California