loans are serviced by a single servicer, who
also provides a take-out guaranty beginning in year five for the remaining
term of the loans. With cooperation from the city of Sioux Falls, the development
authority was able to sell tax-exempt bonds to finance the project, instead
of relying on direct government subsidies. By December 1999, 48 affordable
homes had been built and sold for $81,500 each, and 40 lots were sold
at $14,500 as affordable home sites.
To make the homes available to low-income
families, down payments were set as low as $500, and 100 percent low-interest
financing was available to homebuyers meeting the income limits of first-time
homebuyer program. Financing for the entire project was provided through
SDHDAs issuance of $4.45 million in tax-exempt bonds. Citibank provided
a letter of credit to enhance the sale of the bonds.
Costello Companies provided construction management
and marketing, and served as the listing agent. Through the companys
website, potential homebuyers could view the lot locations and the six floor
plans available, and they also could access a purchase agreement. Because
of bulk sales and common construction and closing dates, the appraiser and
title company provided reduced costs to homebuyers. The homes were built
by Stencil Construction.
Phase II of the program began in spring 2000.
Because of this program, lower-income homebuyers are able to obtain affordable
housing with built-in equity, minimal closing costs and small down payments.
Furthermore, monthly payments are greatly reduced because mortgage loans
are uninsured, low-interest, first-time homebuyer loans.
To replicate this project, the following steps
need to be taken:
- Determine need for the project.
- Identify potential partners.
- Establish a partnership with a general contractor
to complete construction and a realty company to provide marketing
and coordinate closings.
- Obtain low interest construction financing.
State and federal statutes allow SDHDA to be a developer of affordable
housing and to use tax-exempt bonds for that purpose.
Contact: Darlys Baum, Thomas Costellow, and
Jim Schmidt, Phone: (605) 773-5157
Tracking Number: 608
Winning Category: Program (Housing - Single Family)