What is Mutual Self-Help (MSH) housing and what does it mean to me?
The MSH housing program is about offering home ownership to first time homebuyers with limited income in a very unique way. It does not waive the requirement for good credit, stable income, and the ability and willingness to meet your future debt payments including a home loan payment. In that way it really is no different than the home loan that you might apply for just about anywhere else. However there are two unique features that make it different, and for some more attainable, than other home loans. Participation in the building of your and your neighbor's homes as part of a Building Group Membership is required (no building experience necessary) and is one of the unique features. The other unique feature has to do with your home loan payment. Your home loan payment is generally lower than other home loan payments as it is based on your income and not the current interest rate as determined by the market place! Some Building Group Members rates are as low as 1%; others may be at or near market rate. The lender in this case is the United States Department of Agriculture (USDA) Rural Housing Service. We will help you understand all about the home buying process while asking your help putting together a home loan package which we submit on your behalf to USDA. Before you close on your home loan, we begin 12 hours of training to familiarize you with the loan paperwork, accounting processes during construction of your home, and the construction process itself.
Who is Housing Kitsap?
We are a not-for-profit municipal corporation dedicated to helping income eligible individuals and families find affordable housing, community services, and home repair. We also develop and redevelop communities and urban areas. Since 1973 we have been responsible for the completion of over 1200 MSH homes. We even provide the MSH program in Jefferson and Mason counties!
Do I have to have perfect credit?
Remember that just about everyone lending money these days will look at your credit report. Home loan lenders are no different and in fact they look really hard! Good credit is important to them and should be to you also, if you want to own your own home. Here are some of the USDA 502 loan parameters pertaining to credit:
- All debts, including existing utilities, should be current and have a history of timely payments.
- Child support payments must be current.
- There should be no more than two payments over 30 days late within the last 12 months.
- There can be no outstanding collections within the previous 6 months.
- There can be no charge offs in the last 3 years.
- There can be no bankruptcy in the last 3 years.
- There can be no federal debt delinquency.
- All judgments must be satisfied in full.
Exceptions to the above rules are sometimes granted for situations that arise which are outside of your control. These are granted on a case by case basis only
What if my credit report indicates that I have not established any credit?
Home loan lenders like to know, and USDA is no different, that you have shown an ability to meet your debt obligations. If you have no history of making monthly payments, as would be shown on your credit report, it is difficult for them to get a feel for whether you will make your payments on time or not. Sometimes people make payments that do not show up on a credit report. You may pay rent, utility bills, or auto insurance. Perhaps you have been putting a little money in savings each month, which is another form of payment. But with none of the above, no checking account, and no other type of credit, it can be very difficult for us to help you get your home loan, even if you have good income! If this is the case, and you want to own your own home, you should (at a minimum) begin renting a place. Open a checking and savings account, and maybe even borrow a little money, but try very hard to not borrow more than 2/3rds of the purchase price.
What if my credit is not so good?
Generally there is no quick and easy fix to getting ahead of debt obligations when you are behind. Budgeting is one very good way that has been proven to work. We have HUD certified debt and credit counselors on staff at Housing Kitsap. Give us a call to take advantage of this free service. In the meantime you should still apply and you will be put on the MSH waitlist. And that is good news because by the time your income and credit meet the program and loan qualifications you may already be at the front of the line!
How do I know if I am eligible for the program?
Your household may not earn more than 80% (see Income Criteria) of the county median income with certain adjustments. Prior to being placed on the MSH waitlist we will review your application and make a preliminary determination of income eligibility based on the annual gross earnings (wages earned before taxes and other deductions) of everyone currently living in your household, minus $480 for each dependant, minus the cost of qualified childcare. If you are preliminarily eligible you will be placed on our MSH waitlist. Program eligibility DOES NOT guarantee home loan eligibility. That will be determined at the time you are contacted for a MSH home opportunity.
When will I know it is my turn for an opportunity to be a Building Group Member?
Applicants are chosen from the waitlist for an opportunity to be in the next Building Group based upon a number of criteria including: date application received, credit history, income, and desired building area.
I would like to know if I qualify for the program and the home loan before a Building Group is being formed?
As we have a limited budget and staff, it is not possible to fully prequalify all of our applicants. Much of the information we provide in this document and on our website is based on the questions we have received over the years. Most of the answers to your questions can be found here and on our website, including:
If, after reviewing this website and information we have provided through the mail, you still have questions, please email us at SelfHelpWaitlist@kccha.org or call us at 360-535-6139 or 1-800-693-7070 ext. 6139. We will be happy to answer your questions.
So should I just wait for the phone to ring?
We do very little screening at the time of application. Thorough screening does not take place until we begin forming a building group. As a result, it is very difficult for us to be able to let you know if you will be in the next group in your area. The following items are a couple of things to keep in mind:
- Although you may not qualify for a home now (some of the time this is due to credit history or too much debt), you do not lose your place on the waitlist. In the meantime, it makes sense to budget hard and clean up any credit issues because your original date of application stays the same. if you have a new phone number, have moved, or for some reason have difficulty receiving your mail, then you need to let us know ASAP (you may use this link on our internet home page: Update My Wait List File) so that we can contact you when it is your turn to be part of a building group.
- You will not know if you definitely qualify for the program and for the USDA 502 Home Loan until your turn for a home comes. We order and review your credit report after we receive your initial application and authorization for us to request your credit report. Applicants that appear to qualify for the program based on the results of the credit report will be placed on our Active waitlist. Applicants on the Active waitlist will be called for a home opportunity before applicants that are not preliminarily qualified for a home loan. Therefore, it is extremely important if you are on our waitlist and you have information that is important and may help you better qualify that you visit our website and click on Update My Wait List File. This just might be the information we need to move you to the Active waitlist. And remember, your original application date moves with you to the Active waitlist!
What about income and other requirements for an USDA 502 Home Loan?
First, you must qualify for the program, which requires that you do not make too much income, after adjustments, per our discussion above at How do I know if I am eligible for the program? When you meet program requirements and credit requirements the next step has to do with debt to income ratios. Which is lots of jargon for the simple fact that a certain percentage of your gross income (before tax is taken out) may be used to make your house payment including taxes and insurance (this is the housing payment ratio). And another percentage of your gross income may be used to make all your debt payments including your new house payment, with taxes and insurance, plus any other debt like minimum credit card payments, auto loan payments, etc. (this is your total debt ratio). As a general rule of thumb your housing payment ratio should not exceed somewhere between 29% and 33% of your gross income and your total debt ratio should not exceed 41% of your gross income.
How much cash out of pocket will I need?
Anticipate having a couple hundred dollars saved for a credit report, some tools, weather protection clothes, boots, etc.. Prior to moving into your new home you will need an additional $400+/- for your first year's homeowners insurance.
How much will my house payment be?
That is a tough question, because your interest rate (somewhere between 1% and market rate) is based on your income. In fact as your income changes so may your interest rate, but never less than 1% and never more than the maximum rate at the time of your loan closing. Other variables include current land and building material costs. We aim to serve those who would not otherwise be able to afford to buy a house. We have helped over 1000 families and individuals afford their brand new homes and we are focused on helping many more do the same!
May I pick the location of my house?
Housing Kitsap locates property where building group memberships of 10 to 12 may build their homes. It is often very difficult to find so many lots next to each other. If you know of potential building lots, please contact our office by email or phone so that we can look into it.
How long will it take to build my house and how much time will I be required to commit each week?
Generally you should anticipate 10 to 12 months construction time. Each week each Building Group Member household will be responsible for 30 hours of productive labor. You will be able to use volunteers to help with some of those hours.
May I sell my MSH home?
You may sell your home at any time after occupancy. You will not be able to get back into the program again for three years once you sell your home. If you sell your home, you will be required to pay back any down payment assistance funds and government subsidies that you have received.
Is the program for families and married couples only?
The Mutual Self-Help Program is for everyone that qualifies regardless of age (you must be at least 18 years old), sex, national origin, ethnicity, race, disability, religion, or marital status.
May I pick my house plan?
There are a number of house plans available. We try to accommodate the plan you select, but we must consider what you can afford, the lot size, and the size of your family.