HomeBuyer
Initiated/Driven
Programs
Jim Mischler-Philbin,
Northern Communities Land Trust
Duluth, MN
Erika Malone
Kulshan Community Land Trust
Whatcom County, WA
Portland, OR
August 18, 2005
1
What are HomeBuyer Driven
Programs?
• Just like it sounds . . .
• The buyers drive the process
• They shop for homes on the open market like
“real” buyers, except
• They have financial assistance, education and
hand holding from the CLT
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Or, as Jim brilliantly states,
. . . Where buyers bring
homes to the CLT
instead of the other way
around
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NCLT’s Mission
Northern Communities Land Trust (NCLT) is a
community-based, membership-supported
nonprofit organization working to provide
quality, permanently affordable homeownership
opportunities for low-to-moderate income
households in the city of Duluth.
NCLT works with numerous housing partners,
neighborhoods, and City government to help
individuals and families realize the dream of
homeownership otherwise unavailable to them.
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NCLT
Board of Directors
To ensure community
representation, NCLT
members elect a
board of
directors that consists of:
• 1/3 NCLT homeowners
• 1/3 representatives of other organizations that
support low income people & issues
• 1/3 general community members
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HOMELAND
Home Ownership Means Equity, Legacy,
Affordability, Neighbors, & Dreams
• Purchase/rehab program
• Started in 1999
• 65 households have purchased
homes using the HOMELAND
Program
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KulshanCLT’s Mission
Kulshan Community Land Trust strengthens
community by holding land in trust for
permanently affordable homeownership
and other community needs, and by
offering financial assistance and
educational services to people of limited
means.
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KulshanCLT History
• KulshanCLT incorporated in 1999
• Hired first staff is 2001
• Started HBE in 2/2002
• First HBDP acquisitions in 7/2002
• Will start first new construction this fall
• First Condominium acquisition . . . . . . . . . . . . . .
. . . NEXT WEEK!
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Three ways to become
an NCLT homeowner
• New Construction
-Current project is called “City Homes”
• HOMELAND program
- Purchase and rehab
- Waiting list
• Resale of existing Land Trust homes
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2005 NCLT HOMELAND Funding
(10 units)
• $120,000 State Housing Finance Agency
-downpayment/affordability gap grants ($80,000)
-accounting, inspections, legal, emergency rehab & title insurance
($15,000)
- developer fees ($25,000)
• $120,000 Greater Minnesota Housing Fund (downpayment/gap)
• $50,000 Federal Home Loan Bank (down payment/gap)
• $220,000 HOME for Rehab (through HRA)
• $15,000 CDBG for Staffing (through HRA)
• $10,000 Private Foundation for marketing/staffing
• $750,000 (approx) in mortgage financing. Commitments from 4
local lenders
• $20,000 (in kind - HRA Rehab Administration costs)
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2005 Income Limits
(buyers’ gross annual income must be below these limits
at the time of purchase)
Household size
1
2
3
4
5
6
7
8
Income limit
$30,600
$34,950
$39,300
$43,700
$47,150
$50,650
$54,150
$57,650
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What is an Affordable Home?
• Family does not spend more than 30% of gross
income for housing costs
– Housing costs include:
•
•
•
•
•
Principal
Interest
Taxes
Insurance
Lease Payment (if going through the Land Trust)
• For example:
– A family with a gross annual income of $24,000 is
able to afford a house payment (including all the
15
above costs) of about $600/month
Compare NCLT homeownership to
conventional homeownership
Same
•
•
•
•
•
Homeowner obtains a mortgage with a bank
Homeowner accumulates equity
Home can be inherited
Homeowner pays property taxes
Homeowner can make alterations and improvements
Different
• The purchase price of an NCLT home is lower–20 to 30 %
below market rate–because the land is already paid for, and
because of various subsidies NCLT has obtained
• Homeowner leases the land for $25/month from NCLT
• Home must be sold to an income-qualified buyer. Homeowner
receives 100% of what they have paid off on the mortgage, 16
plus 30% of the appreciation on the home.
There are currently 103 Land Trust homes in the City of
Duluth.
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HOMELAND Program
2004 Homebuyer Statistics
Average gross annual income = $25,308
Average percentage of median income = 59%
Average mortgage = $72,500
Average monthly housing payment (includes
principal, interest, property taxes, homeowners
insurance and lease fee) = $560
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HOMELAND Program Features
 Buyers find homes—chose from homes that are for
sale ANYWHERE within the city limits of Duluth
 Free home inspections/property analysis
 $15,000—$25,000 downpayment grant
 Up to $22,000 grant for rehabilitation
 5-6% 30-year fixed interest rate
 Up to $3,000 interest-free MHFA loan to
cover closing costs (for qualified buyers)
 Buyer is required to contribute $1000 or 1% of
purchase price, whichever is less
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HOMELAND,
continued
• HOMELAND buyers share appreciation of
their homes with future buyers, ensuring
long-term affordability of homes
• Compatible with other homeownership
assistance providers and programs
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HOMELAND Property Criteria
Lot Requirements:
 Adequate space between homes for maintenance
 Side lot lines at least 1 foot from house
 Rear lot lines at least 5 feet from house
 Front of home cannot abut sidewalk
Foundation/Structural Integrity:
 No evidence of substantial settlement
 No excessive dampness
 Concrete floor in basement
 Concrete or treated wood perimeter foundation
 No major structural defects
Exterior:
 Minimum of 5 years life expectancy of current roof
 Serviceable siding
 Serviceable windows with screens
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HOMELAND Property Criteria, cont.
Interior:
 Separate cooking facilities
 Separate bathing facilities
 No excessive peeling of potentially lead-based paint
 Ventilated attics and crawl spaces
 Ventilated bathrooms (operable window or exhaust fan)
 Minimum of 6 square feet of countertop in the kitchen
 Adequate smoke detectors
 Bathroom and kitchen floors impervious to water
Mechanical:
 Operating central heat capable of heating dwelling
 Permanent walls and floor in utility rooms
 All wells and private sewage system approved by government authority
 Adequately functioning plumbing
 Minimum of 5 years life expectancy for hot water heater and furnace
 Reasonably insulated
 Minimum of 100 amp service
 Grounded circuits for all appliances
 No hazardous wiring or fixtures
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HOMELAND Program
Application and Purchase Checklist
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Land Trust Orientation
Land Trust Application
Income Verification by Land Trust staff
Homebuyer Education Class (“Homestretch” AND/OR “Home Buyers Club”)
Financial Prequalification by Land Trust staff
Mortgage Pre-Approval by North Shore Bank or Wells Fargo
Final Interview and Approval by Board of Directors
Buyers find a home
Review of Land Lease with an attorney
***Before a purchase
agreement can be signed,
Purchase agreement***
potential homebuyers
 Inspection Contingency
must complete a Land
 Financing Contingency
Trust application, have
Appraisal
their income verified by
Title Commitment showing no liens or defects in title
Land Trust staff, and be
mortgage pre-approved
Homeowners insurance secured
from a participating
Rehab sign-up with HRA
lender
Closing, recording of documents
Rehab completed and inspected
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KulshanCLT Program Overview
• First acquisition in July 2002
• Currently own 31 homes
• Most in the City of Bellingham,
4 “in the County”
• Average purchase price
= $145,710
• Average square footage
= 1039 sq. ft.
• Average monthly cost (PITI
and ground lease fee) = $720
– Maximum = $901
– Minimum = $472
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KulshanCLT Funding sources
• House Key + CLT – Washington State Housing
Finance Commission secondary funding $25,000 per home (LOAN – 3% simple interest)
• City of Bellingham HOME funds
– $15,000, $20,000 or $25,000 depending on
household income and size
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KulshanCLT Funding sources
(cont.)
• Federal Home Loan Bank
– $7,000 per unit – if first mortgage is through
Washington Mutual (Affordable Housing Program)
– $5,000 per unit – through member bank
(Home$tart savings)
• Washington State Housing Trust Fund
– $19,000 average per unit – grant
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Other sources of funds
• Buyers Financing
– Conventional first mortgage
– Washington State Housing Finance
Commission (House Key)
• Other silent seconds
– Home$tart (FHLB)
– HomeChoice (WSHFC) – or specialty product
– Habitat for Humanity
– Employer contributions – have yet to do
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KulshanCLT’s HBDP Funding Breakdown
Total
cost
Total
Average
Percentage
of total
acquisition
Buyer’s
1st
HOME
2nd
HTF
Grant
Other
$4.64
million
$3.02
million
$520,140
$826,340 $217,390
$149,670
$97,290
$16,780
$26,650
$7,001
100%
66%
11%
18%
5%
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KulshanCLT Outreach, Intake and
Education
• How do people know about us?
– Coverage in the media (newspaper articles, TV public
service announcements)
– Free advertising (Community Calendars, etc.)
– Word of mouth
• HomeBuyer Education
– Free and open to the community
– 6 hours, sponsored by the WSHFC
– Eligibility requirement to participate in the program
• HomeOwnership Services
– Credit and budgeting for hopefuls
– Home Repair classes for HomeOwners
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Roll Film
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KulshanCLT’s Application Process
• Apply – application attempts to get borrower ready to go
to the bank
• Check eligibility and “bankability”
• Letter obligating subsidy to borrower
• Send them to the bank
• Pre-approval for a loan – shopping price
• Shop with a real estate agent
• Purchase and Sale agreement
• Inspection
• Seller’s work orders and repairs
• Close and split title
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Key Components
of the Land Lease
•
•
•
•
99-year renewable land lease
Homes must be owner-occupied
You pay all taxes and assessments
You receive credit at resale for any
improvements you do to the home (if
documented and appraisal obtained)
• Home can only be sold to another low-tomoderate income homebuyer at the price
determined by the Resale Formula
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HOMELAND Program Statistics,
Round 1
(location, household size, gross annual income, % of median income, mortgage amt)
HOMELAND Round One (2000)
West Duluth (4) $14,117 = 31% $39,500
West Duluth (1) $17,682 = 56% $47,900
East Hillside (3) $17,199 = 42% $51,900
Duluth Hts (1) $19,240 = 61% $51,200
Observ. Hill (2) $26,241 = 73% $41,150
Lincoln Park (1) $20,390 = 65% $73,000
East Hillside (1) $12,261 = 39% $22,600
West Duluth (1) $16,041 = 51% $52,500
West Duluth (3) $25,584 = 64% $39,675
Riverside
(1) $14,000 = 45% $51,000
Underserved populations:
Single female head of household: 1
Household of color: 0
Average Median Income: 53%
Average purchase price: $58,555
(High $73,000, Low: $37,000)
Average mortgage $45,842
Average gross income: $18,275
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HOMELAND Program Statistics,
Round 2
(location, household size, gross annual income, % of median income, mortgage amt)
HOMELAND Round Two (2001)
Lakeside
(1) $20,176 = 58%
Lakeside
(1) $24,648 = 71%
Central Hillside
(4) $34,680 = 70%
Denfeld
(2) $25,100 = 63%
Central Hillside
(1) $25,200 = 72%
Gary/New Duluth (4) $28,036 = 56%
West Duluth
(2) $23,556 = 59%
Morley Heights
(3) $26,208 = 59%
East Hillside
(1) $24,445 = 70%
Lakeside
(2) $23,740 = 60%
$65,750
$53,065
$45,000
$48,000
$31,650
$70,217
$40,000
$86,250
$61,000
$66,500
Underserved populations:
Single female head of household: 2
Households of Color: 1
Average Median Income: 64%
Average purchase price: $73,650
(High: $101,800, Low: $48,500)
Average mortgage: $56,750
Average gross income: $25,870
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HOMELAND Program Statistics,
Round 3
(location, household size, gross annual income, percentage of median income, mortgage amt)
HOMELAND Round 3 (2002)
East Hillside
(1) $15,314 = 43%
West Duluth
(2) $18,720 = 46%
East Hillside
(1) $19,348 = 55%
Gary/New Duluth (1) $22,619 = 64%
West Duluth
(2) $30,222 = 74%
Lincoln Park
(1) $21,200 = 60%
West Duluth
(1) $23,478 = 66%
Duluth Heights
(1) $23,920 = 67%
West Duluth
(2) $11,376 = 35%
East Hillside
(2) $22,177 = 55%
West Duluth
(2) $24,200 = 60%
Lincoln Park
(1) $26,726 = 77%
Endion
(2) $18,093 = 45%
West Duluth
(2) $16,640 = 41%
Lakeside
(1) $27,822 = 80%
$71,300
$52,900
$58,000
$71,200
$71,000
$43,840
$51,000
$60,000
$37,650
$43,840
$63,000
$61,900
$71,635
$58,900
$49,600
Underserved Populations:
Single female head of household: 5
Household with disabled member: 1
Average Median Income: 58%
Average purchase price: $72,450
(High: $86,500, Low: $58,000)
Average mortgage: $55,475
Average gross income $21,450
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How a purchase with NCLT
compares after 10 years
for a home originally worth $75,000
Approx. Income Needed to Buy
Original Purchase Price
Value at Original Purchase
Value at Resale
Amount of Appreciation
Owner’s Share
Amount Originally Borrowed
Amount Still Owed
Sale Price of Home
Pay Remaining Loan Amount
End up with
Interest Paid
Principal Paid
Approx. Income Next Buyer
With NCLT
$19,827 (6.5% interest)
$60,000 (home only)
$66,000 (home only)
$126,237 (home only)
$60,237 (home only)
$18,071 (30%)
$60,000
$50,247
$78,071
$50,247
$27,824
$35,756
$9,752
$24,911 (6.5% interest)
$28,097 (8% interest)
Conventional
$27,985 (8%)
$75,000
$75,000
$143,451
$68,451
$68,451 (100%)
$71,750
$62,525
$143,451
$62,525
$80,926
$53,534
$9,244
$48,143 (8%)
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How a purchase with NCLT
compares after 10 years, cont.
Assumptions:
1. The home is owned for 10 years.
2. Property values appreciate.
3. Taxes and insurance do not appreciate.
4. Initial HOMELAND Grant was $15,000 to first buyer.
5. Interest rates of resale are identical to original sale.
Notes:
1. If property values go down or remain constant, NCLT Leaseholders are not
guaranteed a profit, and could take a loss, just like non-NCLT Leaseholders.
2. This example assumes no capital improvements take place.
3. While the return in cash from a sale after 10 years is much lower with the NCLT
purchase, it is important to remember the NCLT buyer paid $166/month less for a
house payment during the 10 years. $166 x 12 months x 10 years = $19,920.
$19,920 (without figuring possible interest if the money was invested) added to the
$27,824 is a total of $47,744—a bit closer to the return of $80,926 of the
conventional deal.
4. It is also important to remember that $3750 of the $80,054 return is money paid as
downpayment at the beginning of the 10 years while there was no downpayment
needed for the NCLT transaction.
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HOMELAND homes
Endion
Lincoln Park
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HOMELAND homes
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HOMELAND homes
West Duluth
Lakeside
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Kulshan CLT’s Resale Formula
Mortgage amount + downpayment = X
Resale price = X + 1.5% of X
Compounded annually
THE FINE PRINT
(plus the monetary value of approved improvements and minus the
monetary value of any excess damage)
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Kulshan CLT: Housing Example
1
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Kulshan CLT: Housing Cost
Example 1
House profile
Financing
Purchase price
$132,400
First mortgage
$78,500
Square footage:
831
Buyer’s cash out of pocket:
$1,324
Bedrooms:
2
Total subsidy:
$56,439
Bathrooms:
1
Owner’s monthly payment
(including $35 ground lease fee)
$580
Household at 52% of AMI
With the CLT model if home is sold in 10 years the sales prices will be
The homeowners equity at the time of sale through the CLT is
$92,639
$28,076
If home is sold in 10 years (based on conservative estimate of market trends – increase of
4% per year) on the open market the sales price would be
$195,984
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Another Kulshan CLT
Example (2)
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Example 2
House profile
Financing
Purchase price
$119,900
First mortgage
$95,920
Square footage:
778
Buyer’s cash out of pocket:
$1,295
Bedrooms:
2
Total subsidy:
$26,552
Bathrooms:
1
Owner’s monthly payment
(including $35 ground lease fee)
$701
Household at 78% of AMI
With the CLT model if home is sold in 10 years the sales prices will be
The homeowners equity at the time of sale through the CLT is
$112,822
$33,093
If home is sold in 10 years (based on conservative estimate of market trends – increase of
4% per year) on the open market the sales price would be
$177,481
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And. . . Still another (3)
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Example 3
House profile
Financing
Purchase price
$154,375
First mortgage
$102,600
Square footage:
1,268
Buyer’s cash out of pocket:
$5,044
Bedrooms:
3
Total subsidy:
$54,756
Bathrooms:
2
Owner’s monthly payment
(including $35 ground lease fee)
$781
Household at 67% of AMI
With the CLT model if home is sold in 10 years the sales prices will be
The homeowners equity at the time of sale through the CLT is
$124,925
$39,352
If home is sold in 10 years (based on conservative estimate of market trends – increase of
4% per year) on the open market the sales price would be
$228,513
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Thank you!
No applause
Just throw money
No, really . . . .
ANY QUESTIONS??
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