Identifying The Right Programs
Sweat equity new construction home loans are managed by individual state programs. Borrowers must be able to meet minimum monthly mortgage payments. Potential homeowners must have reasonable credit which would allow them to qualify for a home. These types of programs are not for low income buyers who have a bad credit history.
Sweat equity means that the homeowner is taking partial responsibility for contributing to the construction of their home. Each program requires a minimum number of hours be spent by the family. Hours may be accumulated through painting, physical construction or landscaping on the property. All building is overseen by a qualified contractor.
The homeowners commitment to the construction of the home is required to be ongoing. In some cases, agencies require that the homeowner spend a minimum of forty (40) hours of work per construction week. This can be a burden for some families, however in the long run it can be very beneficial as it will reduce the amount of the down payment or the overall purchase price of the home.
It has been demonstrated that homeowners who take advantage of these types of sweat equity programs tend to say in their homes longer. This is largely because the programs encourage the homeowner to be actively involved in the plans, layout and building phases of the home.
Should the homeowner sell the home before the allowed period, the USDA and HUD do require that portions of the reduced amount be repaid. This often discourages borrowers from selling their homes too soon after construction. These loans also tend to have a lower rate of default than other home loans.