Do you need to make critical repairs to your home but lack the money to tackle them? The city of Wichita may be able to help.
The city is re-launching the homeowner repair loan program, offering up to $25,000 in forgivable and deferred loans to help make critical repairs, such as water or sewer lines, heating and air systems or electrical repairs.
Sarah Gooding with the Wichita Housing Authority explained how the program works at 1st District Councilman Brandon Johnson’s monthly breakfast on Feb. 3.
Gooding said the city began taking new applications on Feb. 1.
To qualify for the home repair loan program, you must be the homeowner of record, you must live in the property as your primary residence, you must be current on property taxes, you must have homeowner’s insurance and you must be at or below 80% of the median household income for the size of your household.
You can borrow up to $5,000 as a forgivable loan. If you continue to live in the home for five years, the loan is forgiven. Any amount borrowed over $5,000 up to $25,000 remains as a lien on the property and must be repaid when the house is sold or transferred. All deferred loans require a 10% homeowner match. For example, if your project costs $13,000, you will get $5,000 as a loan that will be forgiven in five years and $8,000 as a zero-interest loan that will be deferred until you sell your home or transfer the title. You will have to pay $800 out of pocket to match the deferred loan, making the amount you will have to repay when you sell the property $7,200.
Gooding said that repayment of deferred loans when the property is sold helps to maintain a pool of money that can in turn be used by the city to provide more loans.
But she acknowledged there can be circumstances where the lien can be a problem. If, for example, if you need to do more work on your home down the road and try to apply for a home equity loan, having a city lien in place may cause the lender to say “no.”
But, she said, the banker can send a letter to the city asking for the city lien to be made subordinate to the bank’s first loan.
In most cases, the city will agree and the bank will go ahead and make a new home improvement loan to the homeowner, she said.
A homeowner who has the resources does not have to maintain the city loan in deferment. If he wants to pay it back there’s no rule that prevents that.
Some homeowners at the meeting argued that there should be some provision to forgive some or all of the deferred loan if the homeowner maintains the home as his primary residence for much longer than the five years required to forgive the first $5,000.
“You can’t leave your heirs a home that’s paid for if they have to pay off a $20,000 loan to clear the title,” one homeowner said. “It seems to me like there ought to be a system that forgives a percentage of the deferred loan for every additional five years you live in the home. Chances are whatever the city loan paid for all those years ago has had to be re-done at least once.”
Gooding explained that it is the repayment of deferred loans that provides the city with the funds to make additional loans to other needy homeowners.
“Most homes are worth more money – sometimes a lot more – as time goes by,” she said. “The city loan is interest-free, so it’s not costing you anything as long as you live in the house.”
How much is 80% of median income?
For the Wichita area, the income limit for the city repair loan program is based on household size.
The annual income limit for a one-person household is $47,700; for two people, $54,500; for three people,$61,300; for four people, $68,100; for five people, $73,550; for six people, $79,000, for seven people, $84,450 and for eight people, it is $89,900.
For additional program information or to apply, visit wichita.gov/420/Home-Repair. Program questions may be directed to Home Repair staff members at (316) 462-3713.
