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Tom Kelly
Tom Kelly
The Real Estate Adviser

January 10, 1997

HAVING TROUBLE MAKING THE DOWN PAYMENT?

  • The Real Estate Advisor

    • BY TOM KELLY
    The Real Estate Advison

    Hate swinging a hammer in the rain? How about scheduling a work party on just about every Saturday for months?

    Both are not very attractive options to many people. However, to folks using this time as part of the down payment they intend to make on a new house, pounding nails in the rain on your day off from your everyday job is a dream come true.

    Most Self-Help Housing programs are sponsored by the United States Department of Agriculture and enable families with moderate and low incomes to use "sweat equity" as a down payment for homes.

    The first private self-help housing company in the state is Housing Partners in Everett which aims at the middle rung of the income ladder.

    "There are several housing programs for people with very little income," said Sheryl Hull, coordinator from Housing Partners, "but the people in the middle are often left stranded."

    Housing Partners goes directly to Cascade Savings Bank and Everett Mutual Savings Bank for mortgage financing on self-help homes. Banks have been reluctant to finance homes without a 20 percent down payment or mortgage insurance but both instituions have been impressed with the program and the families it attracks.

    "We are a little different than other self-help housing groups because we build our homes in five months," Hull said. "And, families can concentrate on building their own home themselves. They don't have to rely on a group for progress and success."

    Self-help housing means active "hands-on" involvement in the construction of the house. For many potential home owners, "sweat equity" building will stretch their skills while others find it a practical extension of their present skills. Hull said Housing Partners coordinates the level of expertise needed to guide self-helpers through the financing and construction process.

    Most self-help programs, offered through different entities in Western Washington, are funded by Rural Development (formerly the Farmers Home Administration) of the Department of Agriculture. are really an adventure in socialism. Groups of families, typically 8-10 at one time, work together until all the homes in the group are completed. It's a difficult concept from some young people to understand mainly becomes American industry does not usually operate that way.

    Bill Miller, director of self-help housing in Skagit, Island and San Juan Counties, said many consumers have preconcieved notions of the people who build self-help homes.

    "Many people espouse the idea and program, but they don't want them in their backyard," Miller said. "We run up against it all the time and it's the biggest drawback we face."

    Miller recently finished working on eight-home plats in Friday Harbor and Freeland and another 10-home site in Mount Vernon.

    "People often underestimate the group dynamic," said Andy Welsh, program director of self-help housing for the Kitsap County Consolidated Housing Authority. "It's one of those internal facets that you don't fully understand until you really get involved with it."

    Families often hold weekly meetings to air their views, frustrations and concerns. The discussions serve as an avenue to settle personality conflicts and disputes on such issues as the hours that people should work. The families can also ask questions of their supervisors of how their loan money is being spent and what materials are being purchased.

    Welsh, who said about 275 families have applied for the program in Kitsap and Mason counties with an estimated waiting period of 18-24 months. He said several discussions have taken place about starting self-help housing in Jefferson and Clallam counties and anticipates more progress this year.

    In order to qualify for self-help housing, families have to meet specific income guidelines. In most counties, maximum income limits are 80 percent of the median income.

    The self-help programs have really been around since 1946. That's when the federal government established the Farmer's Home Administration, a nationwide rural development program providing financing for business, indusrial development, community facilities and housing in rural areas.

    Barring unusual circumstances, the program takes about 12-13 months - five months in preconstruction (choosing house plans, completing the required paperwork and waiting for loan approval) and about eight months for construction.

    Welsh said his Kitsap-Mason self-helpers average about "a house a month per family" or 10 homes in 10 months if the group is 10 families. Two neighborhoods totalling 19 homes have recently been constructed just south of Port Orchard and a 50-lot subdivision has been earmarked for self-help housing in Poulsbo.

    Actual home sites are often chosen by lottery, but swapping has been permitted within a specific time period. Families may select interior and exterior colors, lighting fixtures, bath accessories, entry options, carpet, vinyl floor coverings, countertops and door styles. However, little deviation is permitted on the approved house plan and specifications. Some of the work can be subcontracted (such as roofing, plumbing and electrical) because of time schedules.

    Both Miller and Welsh say it's best for families to work on their credit rating as soon as possible because some credit problems can take as much as a year to resolve. However, clean credit can mean quicker processing time which can put a family in a new home faster than anticipated estimates.

    "If we get a family with a good credit rating, the time frame would be closer to six months," Welsh said.

    For more information about self-help housing, here's a Western Washington phone list by county: Snohomish - 259-9379, 258-2214; Skagit, Island and San Juan - 1-800-869-4005; Whatcom - (360) 734-4560; King, Pierce and Thurston - 863-8188; Kitsap and Mason - (360) 692-5596.



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