In the Shadow of the Appalachians
The Greater Charlottesville area (to include Greene County) is the setting for some of the most luxurious estates in the nation. But did you know this prosperous region is also home to thousands of dwellings that are unfit for living? Many homes in the area qualify as "substandard" and more than half of these homes are owned or occupied by low-income families that are unable to afford repairs. Many of these dwellings lack indoor plumbing and most have poor insulation, so they aren't well heated. Rotting roofs and floors make them unsafe. Habitat for Humanity, a world-wide nonprofit organization helps solve the problem of substandard housing, one family at a time.
A Helping Hand, Not A Hand-out
Habitat volunteers work side-by-side with Habitat homeowners, known as partner families. The partner families invest hundreds of hours of their own labor and "sweat equity" into building their own houses and the homes of fellow partner families. Habitat homes are sold to partner families at cost (no profit to Habitat) with a no-interest mortgage. Because there are no labor costs, no profits for the builders and no interest, most partner families pay less per month for their Habitat home than they paid in rent for a substandard dwelling.
How are Habitat Homes Financed?
The target sale price for a Habitat home is $67,000. This means that the monthly mortgage payments will be less than $300 for 15 - 40 years. The appraised value of the typical Habitat home is around $125,000 - $160,000. The resulting equity is held by Habitat in a "second mortgage" that is forgiven over the life of the loan. The monthly mortgage payments go into a Fund for Humanity that is used to help build additional Habitat homes. Based on the current sale price and mortgage terms, this means that for every 30 homes completed, another is fully funded every year.
How are Partner Families Chosen?
Low-income families qualify to be Habitat partner families through an application and review process. This process documents their current housing deficiencies. Partner families must have income to repay the mortgage.
Who does Habitat select as partner families?
Habitat selects families who live in substandard or overcrowded housing and whose income is between 25 percent and 60 percent of area median income. This places the focus on families who would have very little chance of becoming homeowners without Habitat. For example, the minimum annual income for a Charlottesville family of four is $16,500. Habitat families are selected based on need for housing, ability to pay the mortgage, and willingness to partner with Habitat to build houses.
What does Habitat require of families?
The families help build their own homes and those of other Habitat families. They are required to contribute at least 200 hours of "sweat equity" depending on the number of adults in a family. This is time spent helping build houses or volunteering for Habitat in other ways. Many families catch "Habititis" and continue volunteering long after they have finished their required hours and moved into their own homes. Partner families also pay $80,000-$120,000 (depending on location and the number of bedrooms) in an interest-free mortgage, held by Habitat for Humanity of Greater Charlottesville. Local volunteers build the houses with some supervision from Habitat staff and that volunteer labor saves each partner family $30,000 or more in labor cost. Mortgage terms vary from 15 to 50 years, depending on the family's ability to pay. Most families carry a 25-30-year mortgage and pay about $300-$400 per month in principal payments, real estate taxes, and property insurance. The mortgage covers the cost of building materials, supervision and some of the costs of land and development. Rising land costs continue to present one of the largest challenges to home ownership in our area.
What if the family sells the house?
A typical Habitat for Humanity of Greater Charlottesville house is appraised between $150,000 and $220,000. The typical first mortgage is about $90,000. Habitat also holds a forgivable second mortgage equal to the difference between the appraised value and the first mortgage. That mortgage covers volunteer labor and some other donations. A portion of that second mortgage is forgiven for every year that the family lives in the house and makes the payments on the first mortgage. In addition, Habitat has an Appreciation Sharing agreement with each partner family. This means that the first time the house is sold outside of the family, Habitat will get half of the home's appreciation in value since the family bought it from Habitat. The interest-free first mortgage and the forgivable second mortgage give the family a good deal. The Appreciation Sharing agreement helps Habitat to be a better steward of the donors' money and to continue helping low-income families become homeowners for generations to come. Habitat also retains a right of first refusal to purchase each home in case a family needs to move and Habitat wants the house to sell to another family. We also put covenants in the deeds, which prevent homes from being used as rentals. When we are able to build clusters of Habitat homes, those neighborhoods remain stronger if they remain owner-occupied.
How does Habitat use income from mortgage payments?
Partner family mortgage payments are received into Habitat's "Fund for Humanity", which is used to further the mission of Habitat by paying for more land and houses. Through this revolving loan fund, donations to Habitat help build new homes for generations to come. A donation to Habitat is a perpetual investment in decent affordable housing for qualified partner families.
Do families succeed as homeowners?
Our families take great pride in their homes and are usually able to stay current in their payments. Of the more than 150,000 Habitat Houses built around the world so far, 1.18% have resulted in foreclosures. Habitat for Humanity of Greater Charlottesville has refinanced one home for a family that had employment problems, lengthening their mortgage, but has never had a foreclosure. The families' success as homeowners can be measured in many ways. One can see it in the good care they take of their homes. Children's grades and personal expectations for their own lives often improve when they move from a substandard, crowded or high crime situation into a simple, decent affordable home. Partner families gain not only equity, but also personal confidence and satisfaction from helping to build a house and then becoming proud homeowners.
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