There are several subordinate acquisition and rehab loans that are also available for consideration. These could be used in conjunction with a traditional mortgage, funding the renovation work that will be completed and some portion of the original acquisition. Chart
The Small Building Initiative should leverage existing down payment assistance programs. A complex web of existing, temporary and restricted programs exist that would assist the purchase of two- to four-unit buildings. These represent strategic financial sources to be accessed by the efforts in Woodlawn. I propose that the Small Building Initiative provide down-payment assistance to two- to four-unit buildings that are moderately renovated and that are formerly vacant, in the form a 5 year forgivable loan for which households up to 120% AMI are eligible. This particular down-payment assistance is intended to fill the gap for households at 80-120% AMI, prioritize projects that renovate properties, and require continued residence consistent with existing programs. The focus of lending to two- to four-unit buildings (and not homes converted to single family homes) means that this effort will create additional rental housing as well.
While supporting new homeowners is one focus, another focus must be allowing current owners to upgrade their homes. Supporting their ability to refinance allows them to invest in their buildings as well, further upgrading the neighborhood. Several options exist. First, homes can be refinanced through the 203(k) loan program. Second, the TIF-Neighborhood Improvement Program has begun or will soon begin to provide renovations for existing homeowners covered by the West Woodlawn TIF, up to $22,500 for a 4-unit building, with up to 30% available for interior repairs that are health and safety related. Finally, NHS of Chicago also provides renovation loans. Facilitating greater access requires publicizing these existing opportunities, and possibly leveraging the TIF-NIP program with additional funds.
The Small Building Initiative should leverage existing down payment assistance programs. A complex web of existing, temporary and restricted programs exist that would assist the purchase of two- to four-unit buildings. These represent strategic financial sources to be accessed by the efforts in Woodlawn. I propose that the Small Building Initiative provide down-payment assistance to two- to four-unit buildings that are moderately renovated and that are formerly vacant, in the form a 5 year forgivable loan for which households up to 120% AMI are eligible. This particular down-payment assistance is intended to fill the gap for households at 80-120% AMI, prioritize projects that renovate properties, and require continued residence consistent with existing programs. The focus of lending to two- to four-unit buildings (and not homes converted to single family homes) means that this effort will create additional rental housing as well.
While supporting new homeowners is one focus, another focus must be allowing current owners to upgrade their homes. Supporting their ability to refinance allows them to invest in their buildings as well, further upgrading the neighborhood. Several options exist. First, homes can be refinanced through the 203(k) loan program. Second, the TIF-Neighborhood Improvement Program has begun or will soon begin to provide renovations for existing homeowners covered by the West Woodlawn TIF, up to $22,500 for a 4-unit building, with up to 30% available for interior repairs that are health and safety related. Finally, NHS of Chicago also provides renovation loans. Facilitating greater access requires publicizing these existing opportunities, and possibly leveraging the TIF-NIP program with additional funds.
In addition, as part of the marketing of the Small Building Initiative, the marketing agent should establish relationships with Chicago lenders that provide acquisition and rehabilitation loans, as well as 203(k) lenders, to understand how to appropriately broker or otherwise prepare prospective buyers to successfully qualify for loans. Understanding and researching each individual lender requires consideration of the following elements:
¥ Is the lender a reliable entity and are their rates reasonable?
¥ How do they use the 203(k) program and other loans for two- to four-unit buildings?
¥ Do they exercise the 10% bonus on appraised property values?
¥ What protocols exist for how they count rental income in approving mortgages?
¥ Are there different reserve or down payment requirements specific to two- to four-unit buildings?
¥ How best can an intermediary support the rehabilitation/acquisition process?
¥ Do they loan to non-profits using the 203(k) program to create affordable rental housing?