Affordable Housing Project Moves Forward

You don't see a lot of housing construction these days. But a project in Milton, known as Cameron's Run, is an exception.

The development calls for 50 units of mixed housing, including market rate, senior retirement and affordable-- the affordable as part of the Champlain Housing Trust.

Development partner Don Turner estimates that in Milton, the real estate market for mid-priced homes is down around 5 percent and prospective homebuyers look carefully at the cost.

"Everything seems to be priced relative," Turner said. "If the price is good-- the people are interested. If it's just over that, forget it. They're not going to buy it."

The developers say land trust home sales here have actually picked up over the past year, although this housing development was already under construction when the recession hit. Still, the builders think Vermont's housing market overall may be very close to hitting bottom.

But the recession still leaves most housing construction in limbo. Erhard Mahnke of the Affordable Housing Coalition says even after the Vermont legislature overrode the governor's budget veto, spending on the state's main affordable housing program, the Housing and Conservation Board, was cut substantially.

"This year, they got about half of the flexible state funding that they got last year," Mahnke said. "There's been some backfilling with federal recovery dollars and other federal monies. But basically, you're looking at probably half of the production that we were able to do annually over the past few years."

It means that affordable housing production in Vermont will drop from an average of 300 to 500 units a year to about half that. Housing construction loans through the USDA's Rural Development office have slowed to a trickle.

"I think maybe I made one loan in the past two years, and two in the past four years, I believe," said Steve Campbell of USDA Rural Development.

Meanwhile, Don Turner says Cameron's Run is on track.

"Everything that we had planned is coming to fruition, so we're happy about that," Turner said. "And probably not as fast as we wanted, but it's taking time. But we're willing to be patient and work through this."

Construction Loan: Remodel your Home Without Any Burden

Everyone wants their house to be comfortable enough to accommodate every member of the house. If you want to incorporate some changes in your house and start some construction for the purpose, you will require a good amount of money. In case you do not have the necessary amount, you can borrow a construction loan and work according to your needs.

Construction loan is usually called a story loan. This is so because the lender of the loan wants to know the actual ‘story’ behind the loan meaning that where you want to utilize the money, why you need the changes, how you plan to accomplish it, etc.

Being a temporary secured loan, it would require the borrower to pledge this house as collateral to borrow the money. Moreover construction loan is an interest only loan which requires the borrower to pay only the interest during the time of construction of the house.

While borrowing a Construction Loan, the borrower should be very particular about the rate of interest. He can receive the loan rate in two forms, locked interest rate or variable interest rate. Through the variable rate of interest, the borrower can take up the loan and the rate may rise during the course of construction of the house.

When the borrower takes up the locked interest rate option he should be careful about the other expenses that are locked in the loan amount. These hidden expenses can amount to great sums of money and can cause the borrower heavily. If the borrower is being offered low rate of interest for locking, he should get it in writing from the lender so that the lender is not able to back out from his commitment of the rate.

Construction Loans.

The mortgage market meltdown that began in the third quarter of 2007 severely affected the construction lenders. First major institution to announce that it is dropping out of the market was late Washington Mutual, followed by IndyMac Bank, Citi Bank and Chase, who were then followed by smaller banks and lending institutions.

Though most every bank is still in the mortgage business none of them have ventured back into the construction loan field. The reason is the fact that construction loans, whether made for ground up construction or remodeling loans are based on the future value of a property and banks are finding it difficult to judge present value in declining markets, let alone future values.

There are a number of lenders who still make construction loans but they are only a few and far in between and their guidelines are much tighter than before.

Gone are the days when stated income construction loans were routinely made for up to 100% of the future value. Under current guidelines a barrower will be lucky to find a lender willing to make a construction loan at 75% loan to future value given that the borrower can fully document income and has impeccable credit.

For those interested in remodeling their homes FHA offers a construction loan program called 203k which some lenders offer.

The FHA 203k is a remodeling loan only and offered for single family residences. The loan may be used to remodel an existing home and add a second unit to it so long as the second unit shares at least one wall with the original structure. FHA never offered any stated income programs so the borrower has to fully document income and the loan limits are subject to limitations.