Homeownership FAQs
Mutual self-help housing is a group method of home construction for limited income families. Utilizing “sweat equity”, homes are constructed by individuals as owner-builders under the supervision of PSHH. As a result, a substantial cost savings is realized as well as a strong sense of pride in ownership and community spirit.
Families who cannot afford to build or buy modest homes by customary methods may qualify for a self-help home. They must have good credit and have the ability to repay a loan. While all applicants are welcome and encouraged to apply for our housing opportunities, please note that the Lender may require U.S. Citizenship or Permanent Resident status for all borrowers, but not for all household members.
Generally 10 families make up a self-help building group. With the help of PSHH, families form an informal association and agree to help each other build their homes.
PSHH provides a construction supervisor for each group of families. The supervisor teaches the families how to build their homes, orders materials, brings in professional contractors at the proper time, and sees that the homes are built in an efficient, workmanlike manner.
The families do almost all of the construction except the plumbing, electrical, drywall and stucco work. Those jobs are contracted to licensed professionals. Each family has to contribute a minimum of 40 productive hours per week. “Family” hours include the labor of adults and youth 16 years and over. Single applicants must provide written verification that another adult has agreed to help them with the required labor.
Generally it takes 3 to 4 months for loan application and approval, and 12 months in actual home construction. Since most of the families in a self-help group work during the day, most of the work on the homes is done weekends. If a family is not willing to make this commitment, they should not join a self-help group.
Just as with conventional built homes, the self-help home plans are approved and the homes inspected during construction by the city or county building departments. Energy efficiency of the homes exceeds requirements.
The size of the house depends on the community, the number of people and the makeup of the family. Most homes have three or four bedrooms and are between 1,100 to 1,500 square feet.
We build homes in San Luis Obispo, Santa Barbara, Ventura and Monterey counties, wherever we can find land that is zoned to allow single family homes and has all the needed services such as water and sewer and is available at a price that will be affordable to the future limited income homeowners.
To begin processing a loan a credit check is required. If approved for a loan, construction insurance and purchase of basic tools will need to be purchased. Property taxes have to be paid during construction and the lender impound account funded at the end of construction. The estimated total is about $5,600-6,000. The “sweat equity“ serves as a down payment.
Various lenders including U.S. Department of Agriculture (USDA) Rural Development provide the mortgage/construction loan. The loan covers the cost of the land, construction materials, and contractors. The loans are for 30–38 years. Interest rates are fixed at funding. When available, subsidies may reduce monthly payments.
Mortgage payments (including property taxes and insurance) are typically about 1/3 of the household’s gross monthly income (amount before income and employment taxes are deducted). If your monthly gross income is $3,600, you can expect your mortgage payment to be about $1200.
Our Home Ownership department can assist with:
- Prepare application for land and construction loans from USDA and other lenders
- Educate families on the self-help program, home ownership responsibilities, loan qualification, taxes, insurance, and escrow
- Provide approved house plans
- Apply for building permits and building inspections
- Prepare construction cost estimates. Order materials and sub-contractors during construction.
- Supervise and train families in proper construction methods
- Pay construction invoices related to the homes (with family loan funds) and maintain an accounting of funds for the families and the lender
PSHH also provides Home Ownership Counseling (HOC) which consists of seminars and individual counseling for first time home buyers as well as homeowners at risk foreclosure.