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Frquently Asked Questions
About Homeownership
What if I have bad credit?
The Housing Development Alliance is prepared to work with you to improve your credit so that it will not keep you from qualifying to own a home. All of the different programs we work with have different credit standards. At the minimum they all require that you have current credit, which means no accounts in collection and all your bills are currently being paid on time. We do not provide clients with loans to pay off bad debts, but we will help you devise a plan to improve your credit so that you can become eligible for a home loan.
What if I do not own any land? Or if there is not a well or septic tank on my land?
The Housing Development Alliance can include the cost of buying land and developing it in the total loan amount. Land development includes: drilling a well, putting in a septic system, graveling a driveway, and grading the land into a house seat.
Can I buy a house that is already built?
The funding that we have available is intended to build homes. However, there are other programs available that may be able to help you purchase an existing home. you find a home you want to buy, we will be happy to refer you to them.
How long will it take before I know if I am approved?
It takes about 5 months for us to build a house. It takes about 2 months for us to buy a piece of land. And it takes about 3 months for us to work with your lenders to set up an affordable home loan package, submit your paperwork to the funding sources and get you qualified for a loan. So it takes just under a year before you are actually ready to move into your new home. If you have to work on your debt or credit, the process could take longer.
Is there an application fee?
No. However there are some other fees associated with processing your application. These fees vary depending on who finances your mortgage.
What is the interest rate?
The interest rate on your loan will be between 5% and 8%. However most of our clients receive an interest subsidy which lowers the monthly payment to an affordable level. Based on your income and the program guidelines the interest you pay will be between 0% and 8%. The average interest on our client’s loans is currently between 1% and 3%.
How much will my payment be?
The Housing Development Alliance attempts to put together financing so that the house payment will be between 20% and 29% of a family’s gross monthly income. However under certain circumstances, a family’s payment may be as high as 30% of their gross monthly income. A portion of this payment, usually between $90 and $120, goes toward paying your property taxes and home owner’s insurance.
How much will it cost?
The total cost of a new home can include any of the following:
- Buying Land
- Water (city or well)
- Sewer (city or septic tank)
- Grading, gravel, sidewalks, etc.
- Costs of closing the loan
- Construction of the house
The cost of the first five varies greatly from project to project and it is difficult to estimate an average cost. However, most of our clients pay between $70,000 and $80,000 for their homes.
Is there a down payment required?
Most of our houses include money through the Self-Help Housing Opportunity Program, also known as SHOP. Through the SHOP program, people invest sweat equity in their homes, which enables them to get their home without a down payment. One of the requirements of this program is that the new home owner assists in the construction of the new home. This can range from actually hammering nails to painting, to spreading grass seed. However, if a person is unable to help in this fashion, because of age or physical disability alternate arrangements are possible, such as getting friends and family to help on the home.
What other costs are there?
There are many costs associated with closing a mortgage loan. While you could pay these in cash when the loan closes, most of them can be financed into your total mortgage. Costs include, but are not limited to: attorney fees, survey, appraisal, recording fees, escrow start up, loan origination fee. Which of these can be financed is determined by which funding sources are used. You will need to buy one year of insurance before the loan closes. The cost of insurance is anywhere from $400-$900, depending upon the location of the house. You will also need to save money to pay your utility deposits and service installation charges, roughly $400.
How big will my house be?
The Housing Development Alliance has a variety of 3 bedroom plans that range in size from 1,000 to 1,150 sq. ft. There are many floor plans that you can choose from. Most are single story homes with an 8 foot by 16 foot front porch and a small stoop for a second exit. Each plan can be customized to your needs including making the home fully wheelchair accessible (ADA compliant).
What about property taxes and homeowners insurance?
You will be responsible for buying one year’s insurance before you loan closes. As stated earlier this can range from $400 to $900 depending on the location of the house. When the home loan closes your lender will set up an escrow account in your name. Each month you will pay 1/12 of your taxes and insurance as part of your monthly payment. This is done to keep you from having to come up with a large amount of money one time a year and to protect us by making sure that the taxes and insurance are paid on time. When the tax bill and the insurance bill are due, your lender will use the money in your escrow account to pay the bills for you. You may need to forward these bills to your escrow agent, if they are sent to you by mistake.
What are the utility costs?
Our houses are designed to be very energy efficient and low maintenance. Electric bills, including heating and air conditioning, range from $50-$90 with responsible energy consumption.
What is included in the new home?
Your new house will be ready for you to move in once it is complete. It will be fully carpeted, except in the kitchen and bathroom which will have vinyl flooring. It is ready for electricity and telephone service. If you choose we can include in the cost of the home a refrigerator and range. You will be responsible for picking out the colors and style of things such as carpet, paint, siding, cabinets, and light fixtures to personalize your home to your tastes. Additionally, it will have a driveway, sidewalk, and a small concrete pad at the bottom of the back stoop.
If you have any other questions, or want a more specific answer, feel free to call 436-0497 and ask for Pam or Chris.
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Nancy contacted the Housing Development Alliance in December 2003, shortly after her husband died. After working with the housing counseling staff to qualify for homeownership, she selected a lot on Baker Avenue in Hazard. At the time, she was renting a place on Walnut Street, just one street over from her new home. “I wanted to stay in town,” she explains. “I feel at home here.”
Because the land is so steep, the design of Nancy’s home is unique to the Housing Development Alliance. It is a one and one-half story house, with a foam block foundation. Funding for the home was provided by Kentucky Housing Corporation - HOME Program, HUD's Rural Housing & Economic Development program, and USDA - Rural Development.
Towards the end of construction, Nancy and her daughter Linda worked with the carpenters and volunteers on the house, painting, cleaning, and working in the yard. Many of the plants and the tree in the front yard were originally planted by Nancy’s husband. She has carefully transplanted them to honor his memory. “I wish Boyd could have been here for this,” she says, smiling wistfully.
Once she moves in, Nancy is looking forward to planting a new garden as well as more trees. “It’s so peaceful and quiet on here,” she notes. “I wanted something for my children, a place to call home. I just wish every family could have something like this of their own.”
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