ST. LOUIS • Being in the gray areas between poverty, low-income and the middle class makes it hard for people to easily secure a mortgage and buy a home.
Assistance from a new mortgage loan fund assembled by Habitat for Humanity St. Louis and three banks — Midland States Bank, First Bank and Royal Banks of Missouri — is intended to make the process easier. The fund will pay for Habitat homebuyers’ closing costs.
The banks will each do five closings on a rotating basis. Midland funded the first five, beginning in December last year. First Bank closed two, according to a release from Habitat, and is on schedule to fund another three in the Tiffany neighborhood in June.
The program is especially valuable in St. Louis because rents are on the rise right now, said Kimberly McKinney, Habitat for Humanity St. Louis CEO of 20 years.
Census Bureau data show the median gross rent in the St. Louis area steadily climbed to $858 two years ago, up 20 percent from $712 in 2009.
“Right now with a majority of candidates we see they are cost-burdened because of the rental market,” McKinney said, referring to applicants paying more than 30 percent of their income toward rent.
“It’s critical because if you’re having a tough time paying $1,200 a month on $35,000 a year, how can we ease that pain? And it’s by having more affordable homeownership opportunities,” she said.
For the past couple of weeks, Lawrence Tate and his two toddler sons have enjoyed the house he bought through Habitat for Humanity St. Louis. Just like all other Habitat homeowners, he put 350 hours of sweat equity into the four-bedroom, two-bath home.
Before the Habitat home, the boys and their father lived in a leased one-bedroom apartment. Tate paid $500 a month for five years, and said one day it dawned on him how much money he’d paid in rent.
“That’s $30,000 I paid in rent to a landlord,” Tate said. “I was like, you know what, man, I could be paying a mortgage and have a house. So that’s what I decided to do.”
Tate went looking for a home, and a loan to finance it, but no bank would give him the latter. He briefly considered finding a rent-to-own property, but in the midst of exploring that, a relative suggested he contact Habitat.
Along with a Habitat team, he began building his house about two years ago. Construction was stalled when Habitat moved from Forest Park Avenue to Grand Boulevard, he said, but the house is worth the wait.
“(My sons) love it,” Tate said. “They get to run through it, and my little baby can walk through the whole house. He couldn’t do that much moving in the one bedroom.” Tate said he loves to watch them play in the backyard and that he can decorate the house the way he wants. He even likes being able to mow his own grass.
When a homebuyer goes through Habitat, the nonprofit agency lines up a loan with one of several third-party lenders they work with. While an individual may qualify for Habitat’s homebuyer program, they still may not meet conventional underwriting standards. Underwriters typically look at credit, capacity and collateral.
Within those three qualities, pieces such as credit score and debt-to-income ratio may keep a Habitat-qualified applicant from “fitting the box” for a mortgage loan, said David Noble, director of community and economic development at Midland States Bank.
“That doesn’t mean they don’t deserve the opportunity of homeownership,” Noble said.
It’s rare for an individual or family who approaches Habitat to check all the boxes required by conventional loans, McKinney said. The mortgage loan fund will fill in the gap.
Habitat for Humanity St. Louis, a 501(c)(3) organization, receives about 5,000 calls a year from people requesting information about Habitat’s homebuying program. Buyers put in the sweat equity, a down payment and then are on track for a 30-year mortgage. Habitat also provides life skills classes to help renters transition smoothly into homeownership.