The following article was originally published by the Cedar Rapids Gazette on January 6, 2020
Like a lot of young adults, Matt Morrison wanted to buy a starter home but hadn’t built the reserves for making a down payment or paying for improvements often needed with a first home.
Through the Neighborhood Finance Corp., he found some of both.
The program designed to spur reinvestment in neighborhoods teetering on decline provided a no-interest deferred down payment loan, a mortgage and a $10,000 forgivable loan for repairs if Morrison stays in the home for five years.
“It really helps with the down payment if you don’t have a nest egg,” said Morrison, 28, of Cedar Rapids. “It helped me to find something between the $80,000 and $100,000 price range and have a shot at it.”
Neighborhood Finance Corp. has provided 45 loans to 41 borrowers worth more than $2 million and representing $915,582 in renovations since beginning lending last year in targeted areas of Cedar Rapids.
In December, the Cedar Rapids City Council expanded eligible areas to include additional neighborhoods in the southwest quadrant along Kirkwood Boulevard, Wilson Avenue, Johnson Avenue and C Street/Ely Road. The expansion came in response to demand from those areas and from recognizing the program had more capacity, officials said.
All low-moderate income census tracts, core neighborhoods and certain neighborhoods adjacent to the core, chosen by age of the housing stock, assessed value and homeownership rates, already had been established as lending areas.
A map of eligible areas is available at neighborhoodfinance.org/lending-map/cedar-rapids.
“Our goal is to provide loans to 60 homebuyers or homeowners in Cedar Rapids in 2020,” Preusch said. “We look forward to reaching this goal in year two as more people know about the value we bring to homebuyers and homeowners, and we increase our outreach and marketing.”
As real estate agents gain familiarity, they can promote it to potential homebuyers, which is what happened for Morrison.
He had found a home on Indiana Street SW that was dilapidated but had potential. The two-bedroom, one-bath home had been in foreclosure and empty for a year. Pipes had burst, causing water damage, and the house “smelled like a musty pond dog,” Morrison said.
His uncle, Tim Hanna, who’s also a builder, purchased the home from the bank initially for $38,000 in October 2018, and began repair work for Morrison.
Morrison purchased the home for $60,615 in February, plus the $6,000 down payment loan, which does not generate interest and doesn’t need to be repaid until he sells or refinances. After five months and an interior renovation including new floors, cabinets, kitchen and bathroom, he had invested $80,000, including the sale price.
“I probably wouldn’t have gotten a house,” he said. “I would have had to wait longer to save money.”
He credits the program for allowing him to begin building equity much sooner.
Overland said the renovated home has been a boost for values in the neighborhood, which is an important goal for the city because its operations are funded largely by property taxes heavily influenced by assessed values. Neighborhood Finance Corp. helps with lending on properties that banks and credit unions might shy away from, he said.
“By taking the worst house on a block and making it usable — in this case completely redone — is a huge benefit to the neighborhood,” Overland said. “Nobody wanted to live next door to that.”