Sweat equity is rewarded with building program
Jan 31, 2014
Interfaith Housing Services has received a two-year, $360,000 grant from the U.S. Department of Agriculture to launch a mutual self-help new housing construction program in rural communities of less than 30,000 people.
"Basically it's designed to help qualified families build their own home at a lot lower cost because of their sweat equity," said Interfaith Housing Director Julia Westfahl.
Westfahl said the program is being launched in Lyons, where the city has donated building sites and waived permit fees, and Interfaith President and CEO John Scott said they want to launch a similar project somewhere in Reno County soon.
Westfahl said they want to build three to five houses on adjacent lots at the same time, so the future occupants can help each other build their houses by contributing 25 to 30 hours a week of labor, less if more than one family member is working.
No family takes possession of its home until all the families' homes are completed, Westfahl said.
Scott said that the family's sweat equity will reduce construction costs. When the house is completed, it may appraise at $140,000, but the family may need only a $90,000 mortgage to pay off the construction loan, leaving them with $50,000 in equity in their new home.
Scott said the family's labor on their house will work out to be worth about $30 an hour in savings on the construction cost and ultimately the reduction in their mortgage.
"That's a pretty good part-time job," he said.
Westfahl said that participants don't have to have construction skills. They may be able to provide their sweat equity by performing construction cleanup, bringing construction materials to the workers on site or doing simpler finishing jobs such as painting, seeding grass and landscaping. Participants will earn points toward their equity for various tasks.
Interfaith hopes to help 18 families build homes over the course of the two-year grant.
The USDA grant pays the salary of a construction supervisor, for grant administration and an Interfaith employee to recruit families for the program and help them fill out a USDA loan application.
Westfahl said participants in the program will go through the same financial education and budgeting classes that Interfaith uses for its Individual Development Account program. They will develop a budget for the construction of their home, which will be submitted to the USDA in an application for a construction loan.
Once the home is completed, the construction loan will be converted to a mortgage, but rather than a traditional 30-year mortgage it may be 33 to 38 years, at a reduced interest rate ranging from 1 to 3.75 percent, based on the client's income, to keep the monthly payment within the family's means.
Families may also qualify for $3,000 in down payment assistance from the Federal Home Loan Bank.
In Liberal, a number of homes already have been completed by families in an identical program funded by the USDA.
Susan Goans, Interfaith's group leader on the project, said that the average monthly payment, including taxes and insurance, on the houses in Liberal is about $550.
Sample income eligibility limits for the program are $30,900 for one person, $35,300 for a family of two, $44,150 for a family of four and $58,300 for a family of eight.
USDA also has approved the extension of the program supervised by Interfaith into McPherson, Harvey, Ford, Scott, Edwards and Harper Counties, but Scott said Interfaith would get its feet wet in Rice and Reno counties before moving on.
Families interested in the program should contact Goans at (620) 662-8370, ext. 716, or email email@example.com.