For many families part of the American Dream is owning their own home. For low income borrowers this may at times feel unachievable. Perhaps it is difficult for you to find a home that is in your price range. Maybe you are having a hard time qualifying for a loan. It may be that the houses you can afford are old and inefficient leaving you with worries about paying for repairs. Perhaps you don’t feel that you can afford the payment or that you have not saved enough money to help make a down payment. If you have answered yes to any of these questions, let me tell you about the Mutual Self Help Housing Program.
The Mutual Self Help Housing Program, I will call it MSHP sometimes for short, is funded by the USDA/Rural Development office. This amazing program, started in 1970, has helped more than 40,000 borrowers across the United States to build their own home. People who build in the program receive a lot of benefits, they learn how to build their own house, they can qualify to get assistance making the payments, the homes are new and usually energy efficient, and the program does not require a down payment, instead you help build the home to save money, something known as sweat equity. Let me tell you how the program works.
Who are you working with?
The USDA works with local nonprofits and housing agencies to run this program. The agency will find a group of families that are interested in building their own homes and help them apply for a loan through the USDA. That’s right, the loan isn’t through a bank, its directly through the government. Once they have a group of families who are qualified for the loan, usually between 6 to 12 families, they begin construction. The families usually build in the same neighborhood so each family will select a lot from those that are available and a house plan. The house plans vary with each agency and in different areas so you will need to check with your local agency to see what they offer. The homes usually have between 2 to 4 bedrooms and are usually energy efficient.
Building the home
The agency who is running the program has a construction supervisor. Their job is to teach the borrowers how to perform certain tasks in the building process. Mutual Self Help Participants will often learn how to frame, shingle, lay flooring, and interior/exterior finish work. Jobs that require a license, such as plumbing and electrical, are done by licensed contractors. The building process usually takes between six to 12 months and during that time a home is built for every family in the group.
There are a couple of great things about building your own home. First you learn construction skills. This can help you save money in the future because you know how to make your own repairs instead of having to hire someone else to do the job. Second the cost of your home is reduced. Instead of paying the framer $20 an hour you are doing it yourself and this means you house costs less to build. The great thing about this is the families often end up with a substantial amount of equity in the home. The last thing to keep in mind is all the time you spent working with other families. When you move into your new home you will already know many of the families in your neighborhood because you spent the last 6 to 12 months building with them.
How do I get the loan?
Remember how I told you earlier that the loan comes from the USDA? This is important to keep in mind. The loan is called a 502 Direct Loan and it is only available in rural areas. These means the loan cannot be used in cities or areas with a substantial population. This is why the agencies that run the Mutual Self Help Housing Program build in small towns.
There are a few things that the USDA will look at to qualify you for the loan. The loan is for low income borrowers, this may be more than you think. To find out if you qualify check with the MSHP agency or USDA Rural Development office in your area. They will check your income, credit history, and debt levels much like getting a regular loan through the bank. If you don’t qualify for some reason the USDA will tell you why and what you need to change. Don’t give up, if you have credit or debt issues find a reputable counseling agency to help you get work through those issues.
Why is this loan so great? Depending on your income, the payment can be adjusted to help make the home more affordable for you. Interest rates on the loan can be reduced as low as 1%. The loan also does not require a down payment, your work on the home will act as the down payment instead. It is important to remember that some of the subsidy you get may need to be paid back when you sell the property. This combined with your sweat equity makes the USDA 502 Direct loan hard to beat.
Overall the Mutual Self Help Housing Program can be a fantastic way for your family to obtain a home. You can make new friends, gain equity in your home, get a fantastic loan,
Want to learn more?
Learn more about the program straight from the horses mouth, look on the USDA’s website or give them a call to find out more about the Mutual Self Help Housing Program.
Finding an agency in your area is easy. The quickest way is probably to use an internet search engine, like bing or google, and search for “mutual self help housing” and the state that you want to build in. You can also call your local USDA Rural Development office and ask what agencies participate in your area.