Funds available to buy, fix up homes

(Editor’s note: This is the second of two stories about the local housing industry and how to qualify for loans and grants.)

Register Reporter

Allen Countians looking to improve their housing situation are in luck: the United States Department of Agriculture’s Rural Development office in Iola has an abundance of funds, thanks to federal stimulus dollars.
Four programs in particular are available for those looking to purchase or repair a home in the area, said Area Specialist Randy Woodruff. The Guaranteed Rural Housing Loan, 504 repair loan, senior repair grant and USDA 502 direct purchase loan are all options for Iolans seeking to better their quality of life through improved housing standards.
Last year the Iola office, which assists home seekers in 16 counties in southeast Kansas, helped a record number of applicants, Woodruff said. Although the state office has not officially released those numbers, “it’s huge,” Woodruff said.
With stimulus funds available, loan officers are hoping to help even more people through the September 2010 deadline, Woodruff said.
“Because the loan process can take up to two months,” Woodruff recommends starting soon. In addition, he said, the federal First-Time Homebuyer Credit of up to $8,000 is still available through the end of April.

FOR SENIORS 62 and older, repair grants of up to $7,500 are available. The grants, which do not require repayment, are given as a “once in a lifetime” amount, Woodruff said. But, he said, that doesn’t mean all $7,500 has to be spent at once.
“They can come in and get $1,000 this year and $1,000 next year — if there is still money in the fund,” he said.
Because Woodruff subscribes to the old bird in the hand adage, he recommends getting as much necessary work done as possible upon initial approval. Senior 504 grants cannot be used for cosmetic improvements, but must address fire, safety and health issues.
“Wiring is definitely a fire issue,” Woodruff said. “Making sure there is a ground fault interrupter outlet near water sources is important,” he said. Other examples of fire, health and safety issues are broken windows, broken steps, improving heating, ventilation and air conditioning systems or making a home handicap-accessible.
“A ramp to get in the house” can be built, as can “anything that is to help the individual that is safety-related,” Woodruff said, including raised toilets for mobility impaired individuals. There are a few restrictions on the senior grant program.
An individual must make no more than $18,300 per year, or $20,900 for a couple. For couples, at least one individual must be 62 or older. Also, the grantee must continue to own and live in their home (barring death or disability) for the next three years.
Once approved, Woodruff said, “they basically have 90 days to get the work done.” Woodruff suggests seniors bid repairs before they apply for the grant. Then, when the money is awarded, work can start immediately.For those not yet seniors who need repairs on their home, a “504 loan” program is available.
Those who meet credit restrictions can borrow up to $20,000 at 1 percent interest. Individuals have 20 years for repayment.
While these funds, too, must be used for fire, health and safety repairs, “we’re a little more flexible since they are paying it back,” Woodruff said. One example Woodruff gave is that siding can be purchased with 504 loan funds, whereas unless its lack causes a safety or health risk, such a purchase cannot be made through the senior grant program.

FOR THOSE seeking to purchase a home, Guaranteed Rural Housing Loans provide up to 102 percent of the cost of a home. The necessary down payment can be financed into the loan amount. In addition, the borrower is not required to purchase mortgage insurance, meaning a lower monthly mortgage rate can be had than through conventional financing. Costs of repairs can also be financed into the loan.
Guaranteed Rural Housing Loans can be applied to existing or new construction. Manufactured homes or unsound homes are disqualified. A borrower must have an acceptable credit history and stable employment or a dependable income to qualify.
GRHLs also require an adjusted annual income within agency limits. For a family of four in Allen County, the maximum income limit is $73,600.
Guaranteed loans were designed by the agency to meet housing needs of U.S. citizens and qualified aliens in areas with a population of less than 20,000. Loans amounts are based on the appraised home value.
There is no restriction that a person be a first-time home buyer with this program, Woodruff said, but if a home is currently owned, it must be too far away for the person to commute to their place of employment. If the home is within the same area, it must be uninhabitable.
That makes these loans suitable for those who lose their homes through natural disaster, Woodruff said.
“Kind of like with the flood. If (an existing home) has already been red-tagged you can buy another home.”
In addition, those eligible for the loans must not be able to fund a 20 percent down payment. Their debt ratio must not exceed 29 percent for principal, interest, taxes and insurance and 41 percent for total debt to income.
To secure a GRHL, a borrower goes through a regular lending institution.
“Those folks fill (out the application) and submit it to us,” Woodruff said. “The money comes from the lender, but we guarantee the losses to the bank because (the borrowers) have to submit to our guidelines.”

LASTLY are USDA 502 direct purchase loans. These are geared toward low- to very low-income families as based on government guidelines. In Allen County, a family of four can earn no more than $41,850 adjusted gross income to qualify.
Adjusted gross income equals gross income minus childcare, $480 per child and medical expenses, Woodruff said. An applicant’s debt ratio shouldn’t be more than 29 percent, Woodruff added.
The 502 loans top out at $144,870 in Allen County, Woodruff said.
“This is a loan that we physically fund out of our own money,” he explained. Applicants “come in, we pre-qualify them, we screen them to make sure they have enough income,” he said. Applicants should have a property in mind when they apply for a 502 loan, Woodruff said.
“The application process is probably a little longer than a conventional loan, but the interest rate is pretty close,” he said. At the time of this writiing, 502 loans were charging 4.875 percent interest. Eligible applicants, however, could receive an interest rate as low as 1 percent.
Through a 502 loan, the USDA can also “contribute to the monthly payment, on a monthly basis,” Woodruff said.
The loans are due when a property is sold.

FOR MORE information or to apply for any of the available programs, call the USDA Rural Development office at 620-365-2901.