Many people love the feel of an established neighborhood with mature trees, historic homes and the cozy ambiance. But sometimes that means buying a home that needs some renovations. That can seem overwhelming especially when it comes to making a budget. We reached out to Terry Gearhart from the Neighborhood Finance Corporation to learn more about the programs they offer for mortgage lending and renovation loans.
What is the Neighborhood Finance Corporation?
NFC provides unique lending programs and other services to facilitate neighborhood revitalization in Polk County and Cedar Rapids, Iowa through partnerships with residents, governments, community-based organizations, lending institutions and the business community. This program is made possible through partnerships with the Cities of Des Moines, Cedar Rapids, West Des Moines, Windsor Heights, Urbandale, Polk County, and Des Moines and Cedar Rapids area financial institutions and neighborhood associations. Together we are improving neighborhoods.
How is the Neighborhood Finance Corporation different from a traditional mortgage lender?
Our mission is to simply help with neighborhood revitalization. We only lend to residents in approved lending neighborhoods with loans involving renovations for home repairs or improvement with no income limits. We provide Purchase, Refinance, Home Improvement, Energy Advantage and Exterior only repair programs. Each loan is paired with a forgivable loan up to the first $10,000 towards the cost of repairs/improvements, ($15,000 in Cedar Rapids), and if it is a home purchase, up to $2500 for closing costs to qualified applicants along with several down payment assistance programs that have forgivable or deferred loan features. This creates affordability, provides homeowners with a safe and sustainable home.
How does the NFC Down Payment Assistance Program work?
All down payment assistance programs have limits on household income. They are either forgivable or deferred loans in addition to the repayable loan. NFC Reinvest is a $10,500 deferred loan with no interest or payment. We also have Journey to Homeownership, Federal Home Loan Bank down payment assistance programs. The City of West Des Moines Historic District also has additional down payment assistance that can be layered in with other NFC assistance.
What is the Journey to Homeownership Program?
The Journey to Homeownership (J2H) Program is an affirmative asset initiative for eligible homebuyers in the NFC lending areas. The program focuses on overcoming the systemic barriers for African American in homeownership by providing down payment and closing cost assistance, combined with the intention of addressing other barriers through community partnerships. It provides additional deferred loan down payment assistance for $10,500 or $15,000 of assistance that can be layered with other NFC programs of assistance.
What is the Refinance Loan Program?
Refinance programs are for borrowers who already live in an existing home or are purchasing on a contract for deed. Borrowers receive loan forgiveness up to the first $10,000 towards repairs or improvements regardless of household income and NFC is the first mortgage lienholder, ($15,000 in Cedar Rapids) We lend up to 95% of the “after improved” appraised value. The primary loan to the first 80% of value is market interest rate. Any balance up to 95% of value is placed on a tandem second loan for ten years at 2% interest. Borrowers avoid PMI insurance and build equity faster back into the home. Most traditional lenders can only provide a cash out refinance up to 80% of the existing value so limits what they can do. This is advantageous to a borrower who uses NFC for their refinance when repairs and improvements are included.
What programs does the NFC have available for existing homeowners?
Existing homeowners who have owned their home for at least one year can apply for loan forgiveness towards repairs and improvements or the Energy Advantage Deferred Loan Program.
How does loan forgiveness work?
When NFC is the primary mortgage holder in a Purchase or Refinance loan, there are no income limits for determining the amount of forgiveness. You will receive a credit for up to the first $10,000 towards the cost of your repairs or improvements.
When NFC is in a second lien position behind the mortgage from another lender, we would use a Home Improvement or Front Porch loan program. Loan forgiveness is calculated at 25, 33 or 50% of your project contractor bids, up to a maximum of $10,000 of forgiveness based on total household income, regardless of who is on the loan.
You are credited upfront when financing for the project is structured and that finance loan is paired with the forgivable note that goes away at 20% per year over 5 years of continued ownership and occupancy. NFC will perform periodic reviews to confirm that you still own and occupy the home as your primary residence. At the end of year 5, we release the lien for the forgivable note.
What is the Energy Advantage Deferred Loan?
When you add or replace items such as: solar, heat pump, new efficient HVAC system, Energy Star windows and doors, and other items you can apply for a Energy Advantage Deferred Loan.
NFC’s Energy Advantage is a $10,000 deferred loan*, with 0% interest (0.136% APR), that is paired with a NFC repayable and forgivable loan (forgivable loan up to $15,000 in Cedar Rapids and $10,000 in Polk County) to meet your renovation and energy improvement goals to save on your energy costs.
The Energy Advantage program is funded by local governments. Currently, the Energy Advantage program is available in the NFC lending areas (Cedar Rapids, Des Moines, Urbandale, and West Des Moines). Please check with NFC to determine if you meet the program qualifications, as it varies by location.
The Energy Advantage deferred loan will be paired with a NFC repayable loan and forgivable loan.
What is the best way to apply for these programs?
Call the main office line at (515)-246-0010 to schedule a consultation with a loan officer. You may also connect to one of our three Mortgage loan Originators Bridgett Robinson, Richard Cook or Kari Vitzthum. Their telephone numbers and email addresses can be found on our website under Staffing using this link: https://neighborhoodfinance.org/staff/