What is this program?
The 0% Interest Home Repair Loan Program launched in April 2015 provides loans to Detroit homeowners looking to complete home repairs or improvements. Homeowners have ten years to pay back the loans, which are provided at no interest. That means homeowners only pay back what they borrow.
The program is a city-led partnership with the Detroit Local Initiatives Support Corporation (LISC) and Flagstar Bank. This is a public-private commitment focused on revitalizing Detroit’s neighborhoods. It is designed to help homeowners address health and safety issues, fix their homes, and eliminate blight.
Who can apply for the program?
Check the eligibility requirements to see if you qualify.
Why is this program needed?
It can be difficult to borrow money for critical home repairs. The 0% Interest Home Repair Loan Program is designed to fill a market gap by investing public and private funds in Detroit neighborhoods.
The program’s goal is to help Detroit homeowners who have stayed in the city to invest in their homes and neighborhoods.
What kinds of home repairs are eligible for this loan program?
If the home has health and safety hazards, those issues must be addressed first before other repairs can be made. The homeowner can choose finishes based on personal preference as long as the cost is within their approved loan amount. The homeowner may not contract with the contractor for additional work or pay for additional work until after the work paid for by the loan program is completed. The following are sample projects:
- Correcting health and safety hazards including lead, mold and asbestos (required);
- Kitchen and bathroom remodeling;
- Electrical repairs;
- Furnace replacement;
- Roof replacement;
- Repairs to existing attached or unattached garages and existing driveways;
- Plumbing;
- Door and window replacements;
- Porches and structural support.
How much can I borrow?
Loans are available between $5,000 and $25,000 for Detroit homeowners who own and occupy single-family homes. For duplexes, repairs can only be completed in the occupied units. For example, in a 2-family unit, if the homeowner occupies one unit and the second unit is vacant; no repairs can be done in the vacant unit.
How soon must the loans be repaid?
Loans are paid back over ten years. There is no fee for paying back a loan early. Homeowners pay back only what they borrow beginning 75 days after your loan closing.
Who’s funding this program?
Funding comes from a variety of sources, including U.S. Housing and Urban Development (HUD) Community Development Block Grant funds, as well as funding from a private investor and the Local Initiatives Support Corporation (LISC).
What do borrowers have to pay back?
Borrowers are only required to pay back the principal on all loans – you only pay back what you borrow. The partners for 0% Interest Home Repair Loan Program’s partners absorb most of the operating & loan underwriting/origination costs that would normally be charged to the borrower through interest payments.
How can I apply?
Applications can be downloaded from this site, sent by mail from an intake center, picked up from an intake center or picked up from the City’s Housing & Revitalization Department (Coleman A. Young Municipal Building, 2 Woodward Avenue, Suite 908). A full list of locations can be found at www.detroithomeloans.org.
Applicants must complete the application and submit all required documents to an intake center. Assistance with completing the application is available at the intake centers by appointment.
Is there a minimum credit score for this program?
The minimum FICO credit score for this program is 560, which is below the average credit score of most U.S. consumers. There are free resources available to help you find your score and understand what it means.
What if my credit doesn’t meet the minimum?
There are resources available through the local intake centers to help you improve your credit and financial standing.
Are there any closing fees?
Yes, there is a $150 fee that the homeowner pays to the lender during the loan closing . There are no other fees or charges, and the loan is provided with no interest. Normally, typical fees for loans of this size range from $350 to more than $1,000.
Can I hire anyone to work on my home as part of this program?
Contractors performing work as part of the 0% Interest Home Repair Loan Program must be on the approved contractor list through the City’s Housing & Revitalization Department (HRD). Contractors who are not currently on the HRD approved list for the single-family repair programs may submit an application to be added to the contractors list. HRD staff reviews contractors’ qualifications including past work performed, amount of experience, insurance and financial capacity. Homeowners have the option to self-select from this list or allow the construction manager to select on your behalf.
Placement on the contractor list does not guarantee a future contract since contract awards are based on selection of the lowest qualified bidder. As a homeowner if you want to use their own contractor, this contractor must be on the approved HRD contractor list prior to the construction manager issuing the bids.
Will I get the chance to sign off on work on my home before contractors are paid?
Yes. Contractors are paid in installments, but will not be completely paid until both the City and the homeowner sign off that the work has been performed in a satisfactory manner.
I just purchased a home in Detroit. Can I apply for this loan?
This program is for Detroit homeowners who have owned and lived in a Detroit home for at least 6 months. Unoccupied, vacant units are not eligible for this program.
Are land contracts acceptable forms of ownership?
Yes, as long as the seller signs off on the loan documents. Also, the land contract should be recorded with the Wayne County Register of Deeds.
Will these repairs raise my property taxes?
Most home repairs eligible for this program are considered to be part of normal home maintenance, and they will not increase the taxable value of a home. If an eligible repair changes the physical structure or livable space of a home, the taxable value may change.
How were the target areas designated?
The City submitted an application to HUD and asked for ways to qualify as many residents as possible. HUD determined the targeted areas by drawing boundaries that encompass neighborhoods where a majority, but not all, residents are low to moderate-income as determined by census tract data. Within these targeted neighborhoods, ALL homeowners can apply regardless of income.
Why not use just a grant-only program?
Through a 0% interest loan program, the City is able to help more homeowners with limited funds than it previously could with the grant-only program – which essentially functioned as a “lottery” due to limited funds. The home repair grant program maintained a waiting list of thousands of applicants. Less than 10% of homeowners on the wait list were selected with their average wait time being up to 18 months. The 0% Interest Home Repair Loan Program allows the City to make the greatest possible impact with limited funds on neighborhoods across Detroit in all council districts.
Are any grant programs still available?
A limited number of grants through the Senior Emergency Repair and Citywide Lead Programs are available to seniors, those with certain disabilities, and low-income households with children under the age of 6. Visit the city’s website or contact (313) 224-6380 for more information on these grant programs.
If a homeowner has received a grant in the past, are they eligible for the loan program?
Yes.
If I have a current mortgage on my house, am I eligible for a loan?
If you already have a mortgage, you are still eligible for a loan as long as your Loan to Value ratio is less than 150%. That means a homeowner with a house valued at $100,000 who owes $140,000 may be eligible to borrow up to $10,000 through the 0% Interest Home Repair Loan Program.
Is homeowners insurance required before applying or getting approved?
Homeowners insurance is required for this program. If you do not currently have insurance, please provide at least one quote and/or a copy of your cancellation letter from the insurance company with your application. You can also check with Michigan Basic Property Insurance Association as a short-term alternative. Visit http://1.usa.gov/1BBVzKX for more information.
Through this program, homeowners are able to escrow the property insurance into the monthly loan payments. This escrow is required if the homeowner cannot provide proof of having two consecutive years of property insurance.
What happens if the homeowner stops making payments on the loan?
The applicant is responsible to repay the loan as agreed. The loan will be reported on the applicant’s credit report and a lien put on the property. If an applicant fails to repay, the lien will remain on the property and prevent future transfer or sale of the property. All efforts will be taken to collect the loan to the full extent of the law. If a loan becomes past due, support will be provided to the applicant to bring the loan current and ensure they continue to make payments so the homeowner can remain in their home.
How long is the warranty period for the completed repairs?
The State of Michigan requires that all contractors to warranty rehabilitation work performed for a period of 18 months. Additional warranties from the manufacturer may also apply. Warranties will be provided by the contractors upon completion of the work.
Who qualifies as the client and/or the co-client?
The client must be on the deed, demonstrate proof of occupancy and demonstrate they have lived in the home for six months. The co-client does not have to be on the deed and may have lived in the home for less than six months.
All persons on the deed do not have to be listed as a co-client unless it is determined by the owners. A spouse is also not required to be listed as a co-client. However, anyone listed on the deed must sign off on the mortgage & promissory note at the loan closing even if they are not the client or the co-client.
Why do I have to provide and document the income of all household members age 18 years or older?
This is a federally funded program. The federal government requires the documentation of total gross household income for all people living in the house that are 18 years of age or older. This income is used by the lender during the underwriting review to determine the debt ratios. Household members that are not the client and co-client are NOT responsible for making loan payments.
Household income includes the gross income of the client, co-client (if applicable), and all person’s 18 years or older living in the home. The income of dependents over the age of 18 living in the household but attending full-time college is not included in the calculation to determine eligibility for the program.
What happens in the event of the death of a homeowner before the loan is repaid?
In the event of the death of the property owner(s), assumption of the remaining loan balance is permissible under certain conditions. Heirs who qualify and intend to occupy the property as their principal residence may assume the loan and shall execute a new mortgage and promissory note for the balance with the lender.
