Many thanks to Howard Tolbe, in his Oct. 30 letter to the editor, for calling attention to the biggest challenges for local families looking to own their own home — lack of affordable housing, homelessness or living in overcrowded housing, and lack of preparedness in applying for mortgage loans.
The need here on Kauai is tremendous and Habitat is here to work with individuals and families who want to improve their lives through homeownership.
In the letter it was stated that when local families are disqualified for loans then “lots that are open get sold to outsiders from the Mainland or other countries.” I do not have knowledge of how other housing programs work in this regard. However, this has never occurred with Kauai Habitat, and is not the case with our particular program. The letter also referenced perceived flaws in the loan-qualification process.
The reality is, lending is not a simple process these days. Habitat must and does adhere to federal regulations and certain necessary structures that help guide us through the process in providing affordable homes to our community. Basically, as we inform people inquiring about the program, what lenders are looking for is credit-worthiness — confidence that the loan applicant can make timely payments on a consistent basis.
With the Kauai Habitat program, our affordable mortgage lenders have consisted of U.S. Department of Agriculture Rural Development 502 Direct loans, Native American Housing Assistance and Self Determination Act, and when resources are available, Kauai Habitat can also be a mortgage lender.
Although the Habitat homes cost about 50 percent of the normal market value, Habitat home buyers still need to qualify for an average loan amount of $225,000.
This year on Kauai, our local Habitat affiliate’s interested home buyer list has over 2,800 households that have expressed a need for our self-help program. We have had overwhelming responses to our previous housing offerings and, to date, have not had problems finding families that qualify.
One of the requirements to qualify for these mortgage loans is lines of credit. Providing utility bills in the applicant’s name, as the past editorial letter mentioned, is indeed one of the ways to satisfy this requirement. For the Kauai Habitat program, an applicant must have two (2) traditional lines of credit (credit cards, loans, rent).
If this is not the case, then a combination of three (3) lines of credit consisting of both traditional plus non-traditional lines of credit can satisfy this requirement. Examples of non-traditional lines of credit include: utility bill, day care, car insurance, cell/landline phone, Hulu/Netflix, medical bills, school tuition and more. A full list is available on our website.
If a family has no lines of credit at all it is a reality that even our programs cannot lend money if there is no way to confirm that a family can repay. But, having no lines of credit does not mean that the family can never apply.
Many families and individuals are not able to qualify due to lack of income, too much debt compared to income, a very low credit score, and sometimes no lines of credit. However, what we inform them is that they need to do a little bit more work on their finances in order to become Habitat home buyer-ready.
In these cases we will continue to work with these families, also partner with other nonprofits that do additional credit counseling, so that the families can reapply when they are ready to qualify for a loan. We often have families that did not qualify for a loan and a few years later, after making some changes, do qualify.
We also have great tips that our staff has compiled to help people who are working to become ready for a program like ours. Visit kauaihabitat.org under the Homeownership tab for more details about the “Top Ten Things You Can Do to Get Yourself Ready for Homeownership with Kauai Habitat for Humanity.”
I once again thank Mr. Tolbe for calling attention to the affordable-housing problem on Kauai and hope that this letter helps clarify these misconceptions about the Habitat program.
Stephen Spears is executive director of Kauai Habitat for Humanity.