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Public Employee Homeownership Grant (PEG) Program: FAQs for Lenders

Who is qualified to apply for the program?

Your clients are eligible to apply for the Public Employee Homeownership Grant (PEG) Program if they meet all of the following qualifiers:

  • Applicants who have been full or part-time employees of Loudoun County government, Courts and Constitutional Officers, or Loudoun County Public Schools for a minimum of 12 months. (Temporary, seasonal and probationary employees are ineligible).
  • Applicants who are either first-time homebuyers or buyers who own property outside Loudoun County which will be sold prior to settlement. This also includes undeveloped land and inherited real estate, whether or not the property was occupied as their primary residence).
  • Gross Annual Household Income between $35,150 and $82,050.
  • Applicants who have not been a resident of Loudoun County in the last 12 months. First-time homebuyers are exempt from the 12-month requirement. (Proof of residency will be required.).
  • Able to contribute at least $1,000 of their own money towards down payment/closing costs
  • Buyers has a contract to purchase a home within 45 to 60 days

What are the terms of the loan?

The loan is secured by a second lien on the home for a 5-year term at 0.00%. The maximum loan amount is $10,000. As long as the borrower maintains employment with the county or Loudoun County Public Schools (LCPS), keep the home as their primary residence and do not sell their home for a period of 5 years, the entire loan balance will be forgiven.

Is this actually a grant or a loan?

The funds are provided in the form of a forgivable loan. As long as borrowers comply with the terms and conditions of the program, their loan balance will be forgiven at 20% or $2,000 each year for five years. Borrowers will receive a 1099-form annually from the county for the forgiven amount as it is considered taxable income.

My client’s debt-to-income ratios are higher than the listed maximums. Why are you looking at debt-to-income ratios if the funds are a grant and not a traditional loan?

It is in the best interest of both the borrower(s) and the county to avoid causing undue financial burden for the homeowner as a result of the acceptance of the loan in the case that repayment should be required. Therefore, the county will consider the borrower’s existing debt along with the new mortgage payment by reviewing debt-to-income (DTI) ratios at the time of application.

My borrower is also participating in the Affordable Dwelling Unit (ADU) Purchase program. Can they use the PEG program in conjunction with their home purchase?

Yes. Many ADU buyers take advantage of one of the county’s housing finance programs.

My borrower will need more the maximum $10,000 to cover all closing costs and down payment. They qualify for the DPCC program as well. Can they use both programs?

No. Even if borrowers are eligible for both homeownership programs, only one may be used.

Application Process

My client has submitted a complete application and all supporting documents. How long will it be before they are notified of the approval/denial?

Applicants will generally hear from the county within 3 to 5 business days after submission of the full application. This timeframe may be extended if there are missing documents in the application packet. The entire application process from start to finish will typically take at least 45 to 60 days. If applicants are able to provide all required documentation with the initial application submission, this will help minimize delays.

What do you need from me to keep the application process moving as quickly as possible?

The first items we will need your assistance with include providing a copy of the 1003 and Loan Estimate or Initial Fee sheet. After pre-approval, we will request a “Request for Reservation of Funds” form which must be completed by the lender. You can also assist clients by sending documentation on their behalf should they request your help.

Are there any other conditions for acceptance of the funding?

Yes. Buyers must present a Certificate of Completion of the Virginia Housing Development Authority (VHDA) Homebuyer Education class prior to settlement. The class is offered statewide, but may also be taken online at no cost. Find out more at www.vhda.com.

Buyers will also need to attend the county’s HomeCents post-settlement seminar within 6 months of closing and submit your certificate to the Housing Finance Specialist. This seminar provides valuable information that will help them transition into homeownership. They will receive a large packet at no cost with lots of great resources to assist them along the way. They may also take this prior to settlement if desired. Find out more here.

Buyers must pay a $200 service fee at closing. This fee cannot be financed. Non-payment of this fee will cause settlement to be delayed. They may pay the fee at settlement with a check, money order, or cashier’s check made payable to County of Loudoun. They will just leave the check with the title company and it will be sent it to us with the closing package.

My client was declined for the program. Is there an appeal process?

There is no appeal process and all loan decisions are final. Applicants may apply again after one year to be reconsidered for approval.


How soon can we go to settlement after approval?

If all required documentation has been received from the applicant, lender, and the title company, settlement can occur within about 15 business days. This is primarily because a minimum of 10 business days is required in order for the county to process a check in time for settlement.

My client would like to get their earnest money deposit back at closing. Is this allowed?

No. The buyer may not receive any cash out at closing. The approved loan amount will be reduced in order to avoid cash out. 

My client is purchasing a condo with mandatory country club membership and fees. Can they use PEG funds to finance these expenses?

No. Costs related to country club memberships are not a permitted use of County funds and must be paid from borrower’s funds at settlement. Details of limits to common closing costs are in the Program Information document for lenders. All fees are subject to Loan Committee final approval.

What if the buyer wants to refinance in the future? Will the county subordinate?

Refinances will be considered if there is no cash out in the transaction. The county will not approve subordinations for Home Equity loans or a Home Equity Line of Credit. In these cases (or in the case of default), the remaining balance must be paid in full.

What if they decide to sell their home or end employment with the county?

Should they decide to sell their home prior to the 5-year residency requirement being met, the remaining unforgiven loan balance must be paid through the loan proceeds at settlement.

If they move out of the home or if are no longer employed with the institution which qualified the buyer for participation in the program, the remaining unforgiven amount will be converted to a loan at an interest rate of 3.00%. Monthly payments will be required until the balance has been paid in full.

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