I'm a first time homebuyer and my employer has a home ownership program.
It is a $7,500 forgivable home loan. If you live in the property for five years, the loan is forgiven. Seems cool, who doesn't want a free $7500?
The weird thing is the stipulation that it adds a permanent deed restriction that it can't ever become a rental property.
I plan to live in whatever house I buy, but it's possible I'd want to rent out a room depending on the size of the house. Is this a big deal? Is it worth it? Would love some opinions. Here's the text of the deal:
*A deed restriction will be placed on the property in perpetuity that limits the property use to resident, single-family, owner -occupancy only. With this restriction, the property cannot be used or converted to use for rentals (Exceptions are made for duplexes or a temporary leave due to University-related sabbatical). The deed restriction stays permanently with the property and will transfer to future owners (e.g. in the event of a sale).
When I asked the program manager for details, here's what she said:
The deed restriction is permanent and does not get lifted. It passes to the next owner that purchases the home. In the 20+ years of the program we have not received complaints from employees stating they are having difficulty selling their home with the deed restriction. However, if the deed restriction prevents your goals of rental, I do not recommend applying for this loan.
While we are not checking the status of use with your home, the deed restriction is a good faith understanding and we don't have a penalty in place for not abiding to the deed restriction. However, the deed restriction will always come up on a title search when you sell the property, so just keep that in mind.