Frequently Asked Questions
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This information is provided as a general resource and is not intended to fully describe or disclose all requirements or restrictions of the Pay it Forward Program. Program rules are subject to change.
Q. What makes Willow Bend different from other neighborhoods in Northwest Arkansas?
We plan to build 80 homes in the Willow Bend neighborhood. One-third of the homes will be sold at market rate to any buyer who wants to live in the neighborhood. Another one-third will be sold at market rate and reserved for homeowners who earn between 80-100% of Median Family Income (MFI). The final one-third of the homes will be reserved for qualified home buyers earning less than 80% of MFI. These qualified buyers will be able to purchase their home at a $35,000 discount. All homes feature sustainable, durable, and cost-effective green building techniques. The Willow Bend neighborhood offers sustainable living in a desirable location, at a price that is accessible for working families, seniors, and first-time homebuyers. Willow Bend features environmentally-friendly neighborhood design, green homes, and achievable homeownership.
Q. Will the Pay it Forward homes impact the appraisal value of the market rate homes?
No. The official sales price of every home at Willow Bend will be the market rate price, which protects confidentiality for all homeowners and also protects appraisal values. Whether you’re a neighbor or visitor walking, driving, or riding through the neighborhood, OR a realtor, appraiser, or banker reviewing purchase prices on the MLS or Washington County website, you won’t be able to tell the difference between Pay it Forward homes and market rate homes.
Q. Where are the Pay it Forward homes within Willow Bend?
The Pay it Forward homes are dispersed throughout the Willow Bend development, and they blend into this lovely, new sustainable neighborhood.
Q. Do Pay it Forward houses at Willow Bend look like other homes?
Yes. All of the houses at Willow Bend, in every price range, are architecturally designed under the supervision of Town Architect Robert Sharp. Pay It Forward homes may be smaller in some cases and/or may contain less expensive interior finishes or features than are offered in market-rate housing, but both construction quality and design are consistent with other homes built at Willow Bend.
Q. Who is eligible for a Pay it Forward home at Willow Bend?
The Willow Bend Pay it Forward Program will be available to households whose income is less than 80 percent of the median family income (MFI) in Northwest Arkansas. Please see the “Steps to Purchasing a Pay It Forward Home at Willow Bend” for additional qualification requirements for purchasing a Pay it Forward home at Willow Bend
Q. How much do Willow Bend’s Pay it Forward homes cost?
Houses in the Willow Bend Pay it Forward Program are priced to allow buyers to spend no more than 30 percent of their gross income on housing. The Pay it Forward homes are currently estimated to be available for $200,000-$250,000. The $35,000 Pay it Forward discount can help reduce that purchase price, and we will work with homebuyers to identify other forms of down-payment assistance and special financing programs that fit each buyer’s unique situation. The Pay it Forward discount makes homeownership achievable for homebuyers who qualify for mortgages between $165,000 and $215,000.
Q. How does someone qualify for a Pay it Forward home at Willow Bend?
As part of the sales process, prospective buyers in the Willow Bend Pay it Forward Program must qualify for a home mortgage with a participating mortgage lender. See “Steps to Purchasing a Pay it Forward Home at Willow Bend.”
Q. What is Median Family Income?
Median Family Income (MFI) is a leading economic calculation commonly used as a benchmark in affordable and attainable housing programs. MFI is an annual gross income figure. The U.S. Department for Housing and Urban Development (HUD) determines the median family income for the Northwest Arkansas area annually.
*MFI numbers change annually.
Q. What happens if income increases after the homeowner moves into their Pay it Forward home?
Purchasers of Pay it Forward homes do not need to have their income recertified in the future. The guidelines of the Pay it Forward Program, allow for income to increase after move-in.
Q. What kind of housing and credit counseling is available?
What if I need to work on my credit, in order to qualify for a mortgage? Partners for Better Housing is working with Credit Counseling of Arkansas to provide HUD certified credit repair and homebuyer counseling. Contact CCOA for more information, by visiting their website, ccoacares.com, or calling them at 479-521-8877. Most of their services are free to you, including an initial, confidential consultation about your home buying goals.
Q. What is the Willow Bend Pay it Forward Program?
The Pay it Forward Program has been designed based on national best practices for “shared equity homeownership”. When purchasing a Pay it Forward home at Willow Bend, homebuyers enter into what could be described as a partnership with Partners for Better Housing, a 501c(3) non-profit corporation created to support the community’s vision and goals including affordable and attainable housing. The market value for the Willow Bend Pay it Forward homes are higher than the price being paid by the homebuyer.
Partners for Better Housing is, in effect, making up the difference between the sales price and the market value of the home, similar to an interest-free loan. For example, if a buyer pays $215,000 for a Pay it Forward home whose appraised value is really $250,000, Partners for Better Housing will provide a housing subsidy at the time of purchase for $35,000.
For all Pay it Forward homes, Partners for Better Housing will hold a Purchase Option and Right of First Refusal for the discounted amount for a period of thirty (30) years. When that home is later sold, Partners for Better Housing will have a “Purchase Option” to repurchase the home at below-market sales price. If, as often happens, the home has increased in value, the owner and Partners for Better Housing both share in the resulting gain.
To continue our example, let’s say the homeowner is ready to resell their home 10 years after the purchase. Assuming that home prices have increased by at least 2% annually during the past 10 years (the average in NWA over the past few years has been 4%) the homeowner will earn a 2% annual return. Partners for Better Housing will be able to repurchase the home for $258,000 and keep it attainable for the next generation of homebuyer.
This purchase option allows Pay it Forward buyers to build equity and realize the value of their investment in real estate, while also allowing Partners for Better Housing to reinvest its funds in the Pay it Forward Program. That’s why we call it “Pay it Forward”.
Q. Why is the resale price capped at 2% annual growth?
One of the fundamental problems that makes housing unaffordable is that wage growth does not keep up with real estate value appreciation – particularly in fast-growing, desirable places. The 2% annual appreciation cap – technically referred to as a “resale formula” – is intended to strike a balance between building equity for the homeowner and maintaining affordability for future generations.
In exchange for accepting the 2% resale formula, the homeowner benefits in several ways:
1) A $35,000 discount allows for a lower mortgage payment and a better chance of qualifying for an affordable mortgage loan.
2) These homes are reserved specifically for buyers earning under 80% of MFI. Buyers in this price range are often competing with cash buyers, real estate investors and wealthier home buyers at a time when home sellers often want to sell their home as quickly as possible.
3) The Pay it Forward homeowner builds equity by paying down their mortgage loan AND earning up to 2% annual value appreciation, when the alternative may be renting or living in a less desirable neighborhood, further away from jobs, services and amenities.
Q. So does that mean the homeowner really owns the entire home?
Yes. The Pay it Forward homeowner owns 100% of their home subject to the Purchase Option and resale restrictions for a period of 30 years. The home is owned “fee simple” and the homes are not condos.
Partners for Better Housing retains certain rights including the right to have its contribution repaid in the event that a buyer vacates or rents out the property, defaults on the primary mortgage or refinances the home without Partners’ prior approval.
Q. Does Willow Bend’s shared-equity program mean a Pay it Forward homebuyer will never own their home?
No. When a homebuyer signs the final paperwork and closes on their home, the homebuyer owns the home. For a period of 30 years, the home is subject to resale restrictions that limit the home’s appreciation. After 30 years, the Pay it Forward homeowner will repay Partners for Better Housing for the amount of the initial housing subsidy (typically $35,000), as required under the Purchase Option and Right of First Refusal.
Q. If a homebuyer buys a Pay it Forward home at Willow Bend, can he or she sell it later?
In the first year of owning a Pay it Forward home at Willow Bend, the owner may sell back the home at the initial Pay it Forward purchase price to Partners for Better Housing, as detailed in the Purchase Option and Right of First Refusal. After one year, buyers can sell their homes and share the gains realized from the sale with Partners for Better Housing. Pay it Forward homeowners who are ready to sell are required to notify Partners for Better Housing, who will order an appraisal to determine the market value of the property.
Q. What happens if the home does not increase in value, or if the home decreases in value?
Partners for Better Housing will share in the net gain on the home at resale. If the home does not increase in value, then Partners for Better Housing only recoups the amount of the housing subsidy, because there is no gain to share. If the value of the home decreases, Partners for Better Housing’s housing subsidy is repaid based on available net proceeds after the primary mortgage and owner’s share of the equity is repaid, if any.
Q. Can a Pay it Forward homeowner modify their home without Partners for Better Housing approval?
All exterior changes or interior changes requiring a permit must be submitted for approval by the Homeowner’s Association for both Pay it Forward and market-rate homes. The owner is required to get Partners for Better Housing’s approval if the modifications will require a building permit. The Pay it Forward owner must provide a copy of any plans for any proposed improvements and an estimated budget of the projected costs in order for Partners for Better Housing to approve the improvements. This is necessary to ensure that any structural, mechanical, electrical and code compliance issues are addressed, in order to maintain a safe, affordable housing stock in Willow Bend. An Architectural Guidelines document will be provided to you, if you decide to purchase a home in Willow Bend.
Q. Does the homeowner get a “credit” for any improvements made to the home?
Partners for Better Housing will not “credit” the cost of improvements to the homeowner, though these improvements may add to the home’s appreciation value at resale.
Q. Can the homeowner pay off Partners for Better Housing’s housing subsidy before the thirty (30) year period?
Willow Bend’s Pay it Forward Program is primarily designed to offer the opportunity of homeownership to qualified buyers who typically cannot pay off such a loan before it is due. While the homeowner may repay the housing subsidy amount, it may not be to the homeowner’s advantage to do so. The Purchase Option and resale restrictions will not be released for a period of thirty years.
Q. Would the homeowner have to sell the home to another income-qualified buyer?
Not necessarily. Partners for Better Housing has an assignable first right of refusal to offer to buy the home at fair market value. Partners for Better Housing can then assign the purchase option to another income-qualified buyer, or the home could be sold to a market-rate buyer. The homeowner will need to contact Partners for Better Housing if they are interested in selling their Pay it Forward home.
Q. Are all the Pay it Forward homes at Willow Bend being sold this way?
Yes. One-third of the homes at Willow Bend will be part of the Pay it Forward program. Another third of the homes will be reserved for homebuyers earning 80-100% of MFI, but these homes will be sold at the market rate. All the homes currently being sold through the Pay it Forward Program will include these provisions. Future Pay it Forward homes at Willow Bend may be sold using different terms in order to meet the needs of a range of homebuyers.
Q. Are there any restrictions on the market rate 80-100% MFI homes?
All homes in the neighborhood – including the market rate homes – will be required to be owner-occupied as a primary residence. However, there is not a “resale formula” or value appreciation cap on the 80-100% MFI homes. Partners for Better Housing will hold a Purchase Option and Right of First Refusal to repurchase these homes when the homeowner is ready to sell. If Partners for Better Housing chooses to repurchase the home, the homeowner will pay a $2500 transaction fee to Partners for Better Housing for managing the sales transaction, but will not have to pay a realtor to list the home. This should result in a savings of $5-10,000 for the homeowner, allowing them to keep more of the equity in their home.
Q. Can the homeowner refinance or pull equity from the home?
Yes, if Partners for Better Housing has received proper notice and approves the refinancing. Since refinancing changes the owner’s equity in the property, and since Partners for Better Housing is sharing in that equity, refinancing has to be done under terms that are agreeable to both the owner and Partners for Better Housing.
Q. What happens when the home is ready to be re-sold?
When the homeowner decides to sell the home, he/she must give Partners for Better Housing notice of intent to sell in writing by certified mail. Partners for Better Housing then has up to 30 days to inform the homeowner of its intent to buy the home. If Partners for Better Housing chooses to repurchase the home, the homeowner will pay a $2500 transaction fee to Partners for Better Housing for managing the sales transaction, but will not have to pay a realtor to list the home. This should result in a savings of $5-10,000 for the Pay it Forward homeowner, allowing them to keep more of the equity in their home.
Q. Can a homeowner pass on their home through inheritance? What happens to the Purchase Option and shared appreciation resale restrictions? Does my son/daughter have to purchase it at market price?
In the event of the Pay it Forward homeowner’s death, the home’s title would pass to the homeowner’s designated recipients in accordance with any legal will and/or state law. There would be no need for heirs to “repurchase” or income qualify for the home; however, any mortgages would still exist and the shared appreciation resale restrictions and Purchase Option continue for the thirty (30) year term.
Q. Will taxes be assessed on the value of the home or the sales price?
Pay it Forward homes at Willow Bend will be assessed at the fair market value of the home and not the Pay it Forward sales price.
Q. Can the homeowner ever lease or rent their property to a third party?
No, because that would defeat the purpose and spirit of selling the home to a qualified buyer to promote and sustain mixed-income homeownership in our community. The home must be the owner’s primary residence, and the owner must be an “owner-occupant” of the home and claim the home as their homestead.
Q. Could the homeowner take on a roommate or boarder that is not on the deed?
Yes, as long as the homeowner continues to occupy the home. The rules for roommates and boarders are governed by the Willow Bend Property Owners Association (POA). You will be given a complete set of POA guidelines should you decide to purchase a home in Willow Bend.