If you have a low income and thought you'd never be able to own a home, you might be interested in a United States Department of Agriculture (USDA) rural development program that helps low-income families finance homes that not many people know about. Instead of having to come up with a down payment for a home, the program allows families to use "sweat equity" to make the down payment on the house. The sweat equity accounts for 10% - 15% of the value of the home.
The "sweat equity" is the labor that the family must provide to build the houses. Each family that participates in the program is required to contribute a minimum of 40 hours of labor each week until all the houses in their group are completed. This is usually a 10 to 12 week period. The labor is overseen by a building supervisor employed by the construction company who trains each of the families and assigns them to specific construction jobs. When the houses are complete, the families usually have done over 60% of the labor. This labor is what counts as the down payment on the house.
In order to qualify for this program, a family's annual income can be no more than 80% of the area's median income with the lowest income families and those living in substandard housing given first priority. The families must not be able to obtain credit elsewhere, but they do need to have a reasonable credit history. The interest rate on the home loans depends on the family's income and can be as low as 1% and as high as the going market rate. Default rates for the program are in the 2% to 3% range.
The program has had great success thus far with the families that get the homes taking usually great care of them. They also rarely sell them. To help prevent families from trying to make quick money on the homes, if a family does decide to sell their home, they're required to repay any interest credit received from the USDA.
While the USDA is attempting to expand the program in some of the
under served areas of the country, they are having a difficult time. Ever increasing land prices in areas such as Florida and California make it difficult for the program to obtain land as the program must compete with for-profit developers in bidding on the land.
For those who are low income or know of someone who is, this can be an excellent opportunity for someone who thought they could never own their own house due to lack of funds to do so. For more information you can visit the USDA website
Owning A Home Through Sweat Equity
