What is a BMR Home? A Bay Area Buyer’s Guide to Below Market Rate Housing

If you’ve ever searched for homes in the Bay Area and spotted a property listed for hundreds of thousands of dollars less than comparable homes nearby, you may have stumbled across a Below Market Rate, or BMR, home.

BMR homes can create an incredible path to homeownership for buyers who might otherwise be priced out of the Bay Area. But the lower purchase price comes with important eligibility requirements and restrictions buyers should understand before applying.

What Is a BMR Home?

BMR stands for Below Market Rate.

Many Bay Area cities have affordable or inclusionary housing programs that require certain residential developments to include homes priced below market value. These homes are then made available to income-qualified buyers at restricted purchase prices.

In other words, this isn’t free housing. It’s an affordable homeownership program designed to make buying a home more attainable for qualifying households.

Who Qualifies for a BMR Home?

There is no single set of BMR requirements across the Bay Area. Each city or program establishes its own rules.

Depending on the program, eligibility may be based on:

• Household income and size• First-time homebuyer status• Whether the home will be your primary residence• Assets or available funds• Homebuyer education requirements• Employment or residency preferences• Mortgage qualification

Income limits are commonly tied to the Area Median Income, or AMI, and can vary significantly based on household size and the specific BMR program.

Some homes may also receive multiple eligible applicants, meaning buyers could have to participate in a lottery or other selection process.

Where Can You Find BMR Homes in the Bay Area?

BMR and affordable homeownership programs exist throughout the Bay Area, including communities in San Francisco, the East Bay, South Bay and Peninsula.

Programs and available inventory vary by city. Depending on where you’re looking, BMR opportunities may be offered through the city itself, a housing authority, a nonprofit housing organization or another administrator.

That means searching for a BMR home is a little different from a traditional home search. You may need to monitor individual programs and application periods in addition to watching the MLS.

The Biggest Advantage: Purchase Price

The obvious appeal of a BMR home is affordability.

In a market where a traditional home may cost $800,000, $1 million or more, a qualifying buyer could potentially purchase a restricted home for significantly less than its unrestricted market value.

That lower purchase price can mean a smaller mortgage, less cash required upfront and a more manageable monthly housing payment.

But there is an important tradeoff.

The Catch With BMR Homes

A BMR home generally does not operate like a traditional market-rate property.

Because the home was initially sold at a restricted price, there are often restrictions on what you can do with it later.

Depending on the program, you may face:

• Resale restrictions: You may not be able to sell the property at full market value.

• Limited appreciation: The formula used to calculate your future resale price may cap how much equity you can gain.

• Owner-occupancy requirements: BMR homes are generally intended to be primary residences rather than investment properties.

• Rental restrictions: Renting the property out may be prohibited or heavily restricted.

• Ongoing program requirements: The property may remain subject to affordability restrictions for many years or, in some programs, permanently.

This is why the cheapest home isn't automatically the best financial decision.

Is Buying a BMR Home Worth It?

For the right buyer, absolutely.

A BMR home can provide an opportunity to stop renting, establish stable housing and purchase in a community that might otherwise be financially out of reach.

But buyers should also consider their long-term goals.

If maximizing appreciation, converting the property into a rental or having complete flexibility over when and how you sell is important to you, a traditional market-rate home may ultimately be the better fit.

The key is understanding what you're buying, not just what you're paying.

Before You Apply for a BMR Home

Read the specific program restrictions carefully and understand how the resale formula works before purchasing.

BMR rules vary from one city and property to another, so don't assume the restrictions on one BMR listing apply to another.

And if you're trying to buy in the Bay Area but feel priced out of the traditional market, don't overlook affordable homeownership programs altogether. BMR housing is one of several paths that may be worth exploring.

Evangeline Nguyen | REALTOR®CA DRE #02210833 | eXp Realty