Cohousing-L Mailing List: Re: Affordability and banks

[Rob Sandelin (robsan]

 Martin Tracy  wrote:

> Much of the architecture, design, and resulting effectiveness of cohousin
> dictated by and limited to what the banks will accept.


I have yet to see any major issues from banks in our area regarding 
architectural or design issues within cohousing. What I have seen is 
concern over legal ownership, insurance and market value Vs loan value. 
 Banks don't care too much about anything other than resaleablity, that 
is if they have to assume a property, they want to be sure they can 
sell it quickly.

I spoke on the phone yesterday with a housing activist in our area 
about low income housing and banks and mortgages as such.  A couple of 
tidbits from our area, your mileage may vary (Although I'll bet there 
is an organization doing low income housing in your state)

1.  If you want to do subsidized mortgages in a duplex, all units under 
the same roof should be subsidized.  In an attached wall condo setup 
the bank wants to insure that the whole building is in the package.  So 
if you are doing duplexes, or groups of three or four units in a 
building, the whole building should be in the same program.

2.  If you don't find the program you want or need, it may be possible 
to create one.  In our area a coalition of banks have pooled a bunch of 
funds for "innovative mortgage programs" targeted for low income (note: 
in our area every teacher qualifies as low income).  Most of these are 
no downpayment type of programs but I gathered that individuals who had 
special needs and could define those clearly had some success doing 
unique programs.

3.  Find out where the federal block monies are going in your area.  
Apparently the Feds have been giving huge chunks of funds for housing 
programs which are run by the States and Cities.  In our area, because 
of an overage of money, a couple dozen people who had state subsidized 
mortgages through this program got a letter saying, thanks for being in 
program, your mortgage is paid.

4.  One potential sticking point in many programs is that they are 
fussy about funding "common elements".  One way around this is to move 
the price of the subsidized units up an extra  percentage, and then use 
the extra to quietly pay for the commons.  There are market rate 
indexes for what a home of such and such should cost and cohousing 
seems to be at the low end of the price index for comparable homes.  
Banks will fund units as long as they are within the median (or 
slightly above in our area). So for example say a two bedroom cohousing 
unit costs $140,000  of which $10,000 goes towards the commonhouse.  
The bank will fund  $130,000 (cost minus the commons). The index for 
your area has comparable units for $150,000.  You can charge a profit 
above cost to the bank (they are totally used to developers making 
profits) and then put the profit into the commonhouse.  You will have 
to pay income tax on the profit but how you (the cohousing group) 
spends the money is your choice.

5.  Find an expert on the programs available.  Each state has its own 
set of rules and programs and many municipalities do also.  I did a 
small amount of calling around and discovered there are 25 different 
mortgage assistance programs available in our area.  Where there are 
programs, there is usually a beaucrat or six who can tell you about them.

6.  Make affordability decisions and connections early in the process, 
ideally before design starts.  It can take awhile to realize funds from 
these programs and you will learn along the way how to fill out the 
forms, what you need, etc.

7.  Ask about the funding cycle. Some programs happen once, others are 
funded each year.  Your chances of funding are better at the beginning 
of the funding cycle than toward the end.

8.  New programs spring up all the time so don't get discouraged if 
what you need doesn't appear to exist.  Get in the pipeline, give 
people you meet on your search for funding  your phone number and 
impart them with your enthusiasm for cohousing.  Send them a thank you 
card after meetings. Do follow up smoozing if they show interest.  That 
way, if a new program comes along, you will be the first person they 
will call about it.


Rob Sandelin
Puget Sound Cohousing Network