Guide to Affordable

Homeownership Options

A RESOURCEFUL TOOL FOR

FIRST TIME HOMEOWNERS

“Reaching The Dream to Your Own Home”

 Mission Statement

Spanish Coalition for Housing (SCH) is a non-profit community

based organization whose mission is to provide comprehensive
counseling, education and housing resources necessary for
low-to-moderate income families to develop competence and
responsibility in meeting their financial and housing needs;
provide the necessary information and assistance to renters and
homeowners, enable them to avoid rent delinquencies, mortgage
defaults and foreclosures; aggressively market available
resources to all low and moderate income Spanish speaking
persons and others who require advocacy to which ensures that
they have equitable opportunity to access resources.

SCH services the Chicagoland area, the North Side office serves
north/northwest communities and the Humboldt Park Re-
Development Area; the Lower west side office serves the
Pilsen / Little Village Empowerment Zone Area; the Southeast
Side office serves the Calumet Enterprise Zone Area.

Spanish Coalition for Housing

Page 2
 Table of Contents
Mission 2

What is a Condominium 4

Advantages of Buying a Condominium 5

Home Owners Association 7

Assessment Fees 8

How to Purchase a Condominium 9

Frequently Asked Questions 11

Real Estate Profiles 13

Community Land Trust 20

Affordable Housing Programs 22

References 23

Summary/Sponsor 24

Spanish Coalition for Housing

 Spanish Coalition for Housing

What is a Condominium?

Chicago is a large metropolitan city.

However, with a growing population, housing

in Chicago is becoming more and more ex-

pensive. With the value of square footage in

the city steadily increasing, construction of

large single family homes is declining. Condominiums provide an affordable alternative to

building wealth and ultimately your quality of life. So, rather than throwing your money

away on rent and paying off someone else’s investment, consider investing in your own

future.

A condominium, also referred to as condo, is a housing tenure in which individual

units are portions of property individually owned. Each unit is property of an owner, how-

ever common areas, such as hallways and recreational facilities are jointly owned. Your

ownership extends inward, from your interior walls, floors, and ceilings. In addition, you

are also a partner with all other owners in a complex. Therefore, the exterior structure i.e..

foundation, exterior walls, roofs, common area, and amenities are considered property of all

the owners and are regulated and maintained by the Condominium Association.

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 Spanish Coalition for Housing

Advantages of Owning a Condominium

Renting vs. Owning

While renting you will not be able to build any wealth. Through owning property

you will. You should not let high interest rates get in the way of your dream of

homeownership. Today interest rates average 6.25%, but

20years ago they a were as high as 19%. When considering

whether to buy or not, don't let interest rates be the only rea-

son to hold you back, think about the long term benefits,

building wealth.

Invest into your own future.

Building Wealth

Equity is defined as the value of a property minus the

owner's outstanding mortgage balance. Therefore if you pur-

chased a condominium two (2) years ago, at $200,000, and

now that same condominium is worth $240,000 you just built

$40,000 in equity. Further, any payment made on the principle

will also be added to that amount, increasing your equity, and

ultimately your wealth.

 Spanish Coalition for Housing
Affordable

Granted you may not be able to immediately move into your ideal house, however rather

than paying off someone else’s investment while attempting to save, consider temporarily set-

tling in a more affordable property to build equity. Unlike with single family homes, the dollar

amount per square foot is significantly less, due mainly to land cost. You can build many more

condos than you can single family homes on the same amount of land. Today the market for

building single family homes is decreasing. Prices for these properties are soaring due to an

increased demand for single family homes and limited supply being built.

Tax Deductible

While we may already know that one has tax benefits to owning your own condomin-

ium, one is not exactly sure what they are. Among the biggest, is being able to deduct the

property taxes and even in some cases assessment fees from your taxable income. Further, you

can deduct interest and property taxes every year and any additional points you paid in the year

you purchased your condo. Points refer to a form of pre-paid interest. Although there are

limits as to how much and how little can be deducted, one is allow to deduct up to $100,000 of

home equity indebtedness.

Security and Pride:

Being able to go home after work, knowing that your day at work wasn't simply to pay

the bills but to build a more stable quality of life, will create wonders on your outlook on life

and self accomplishment.

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 Spanish Coalition for Housing

Home Owners Associations

“What is a Condo Association?”

An elected group of unit owners that act in the best interest of the condominium association
within the guidelines set out in the condominium association by- laws.

Features include:

⇒ A private government.

⇒ Headed by an elected Board of Directors.

⇒ Collect fees, fines, and assessments from Condo owners.

⇒ Owners regardless of unit size, have an equal voice on voting issues.

⇒ Owners, are allowed to vote in elections to choose the board members.

⇒ Enforce the associations bylaws, governing documents and regulations agreed up by

the committee.

⇒ Allocate and distribute condo association fees for necessary maintenances and repairs

⇒ Manage the common areas of a complex such as landscaping, common buildings, rec-
reational facilities common walls , attached housing developments, and infrastructure
such as streets mailboxes, sidewalks, and parking lots.

⇒ Annual general meetings must be held within six (6) months of the end of the condo
corporations fiscal year to ensure that unit owners have a chance to review the finan-
cial statements in a timely manner.
 Spanish Coalition for Housing
Assessment Fees
Assessment Fees

Assessment fees include monthly payments made to a condominium association consisting of

shared fees and services for the property. They are legal expenses for a judgment against the

homeowners association. Expenses include the need to repair from a natural disaster, or to

make improvements or services. Such fees and services include building insurance, building

maintenance, utility service, water service, and trash removal. When considering the purchase a

condominium, it is important to include this fee in addition to your mortgage as a fixed ex-

pense.

Special Assessments

In addition to assessment fees, special assessments are additional emergency funds paid by unit

owners. Theses funds are held in a separate account by the condominium association to pay for

emergency maintenance, repairs, and other services. Such situations include, the immediate

need for a new boiler or new roof. Prior to choosing a condominium, it is wise to ask when the

last time large repairs where made to a complex as well as how high or low the reserves fund is.

Reserves include the amount of money placed aside in the event a large purchase needs to be

made towards the maintenance or repair of the complex. In the event of an emergency, individ-

ual unit owners will have to pay a greater amount of money to fund such unprecedented repairs.

⇒ Assessments and Special Assessment Fees are mandatory upon request

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 Spanish Coalition for Housing

How to Purchase a Condominium

I. Get pre-qualified for a mortgage.

It is critical to know how much you can afford in

order to see what property best suits your needs

financially. It can be very easy to overwhelm

yourself and convince yourself that you can afford

a $300,000 mortgage. However, stop, assess the

situation, and take your time, this will be the

largest purchase you will be making, therefore

make sure to take your time and not let anyone rush you into a property you are not

comfortable with.

II. Be aware of what is covered by homeowners association insurance.

In addition to paying assessment fees, find out exactly what is not included in your

homeowners association insurance. Typically appliances in your unit are not covered

by the homeowners association insurance.

III. Review the Covenants, Conditions, and Restrictions.

Important to understand the terms and responsibilities you are to abide by. Typically

restrictions such as pets, noise, and parking spaces are disclosed here.
 Spanish Coalition for Housing
Continued….

IV. Check the Homeowners history of assessments to see how many have been made

in the last 10 years and how large

Ask to review when the last repairs for your complex were made. This will serve as a

good indication as to when a new major repair will have to be made. This information

will not only help you plan ahead but also help indicate whether or not this complex is

for you.

V. Request a market analysis, if working through a realtor

In order to make sure you are provided the best price and to protect yourself from

overpriced property, find out the selling prices of condos in the building or area. It is

also good to find out how fast the condos are increasing in value. If you are planning

on temporarily staying in this unit, here would be a good indication to start figuring out

where profit can be made.

VI Talk to owners in the complex..

The best source to life in a condo are the actual owners in the complex. People are

usually willing to tell you their complaints rather than withhold that information.

Finally once you feel comfortable with all you hear, its time to make an offer and work

on terms and conditions.

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 Spanish Coalition for Housing
Frequently Asked Questions
ARE THERE SPECIAL MORTGAGES FOR FIRST-TIME HOMEBUYERS?

Yes. Lenders now offer several affordable mortgage options which can help first-time
homebuyers overcome obstacles that made purchasing a home difficult in the past. Lenders
may now be able to help borrowers who don't have a lot of money saved for the down pay-
ment and closing costs, have no or a poor credit history, have quite a bit of long-term debt,
or have experienced income irregularities.

HOW DO INTEREST RATE CHANGES AFFECT MY FIXED MORTGAGE?

If interest rates drop significantly, you may want to investigate refinancing. Most experts
agree that if you plan to be in your house for at least 18 months and you can get a rate 2%
less than your current one, refinancing is smart. Refinancing may, however, involve paying
many of the same fees paid at the original closing, plus origination and application fees.

WHAT IS AN ESCROW ACCOUNT?

An escrow account is a place to set aside a portion of your monthly mortgage payment to
cover annual charges for homeowner's insurance, mortgage insurance (if applicable), and
property taxes. Escrow accounts are a good idea because they assure money will always be
available for these payments. If you use an escrow account to pay property tax or home-
owner's insurance, make sure you are not penalized for late payments since it is the
lender's responsibility to make those payments.

WHAT STEPS NEED TO BE TAKEN TO SECURE A LOAN?

Complete a loan application. To do so, you'll need the following information.

⇒ Pay stubs for the past 2-3 months
⇒ W-2 forms for the past 2 years
⇒ Information on long-term debts
⇒ Recent bank statements
⇒ tax returns for the past 2 years
⇒ Proof of any other income
⇒ Address and description of desired property
⇒ Sales contract
During the application process, the lender will order a report on your credit history and a professional ap-
praisal of the property you want to purchase. The application process typically takes between 1-6 weeks
 Spanish Coalition for Housing

Facing Your Fears

Granted Interest rates are rising, making one afraid of purchasing now. How-
ever, lets not forget what happened in the early 1980’s when interest rates
peaked to 19 % and slowly began to decline to 14% in 1984. Because the mar-
ket tends to fluctuate, you want to make sure you do not get fluctuated out of a
purchasing your home.

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 Spanish Coalition for Housing

Real Estate Profiles

Affordability of Existing Homes

Location Single Family Condominiums Income Units Sold Average

Homes Required Median
Income (AMI)
Level

2004: $152,910 2004: $237,670

Humboldt $52,357 402 80%
Park 2005: $195,370 2005: $185,094

2004: $497,871 2004: $281,675

Logan Square $109,096 1,816 Over 140%
2005: $564,388 2005: $303,214

2004: $100,659 2004: $95,941

South Chicago $34,028 297 Over 140%
2005: $130,739 2005: $90,625

2004: $101,634 2004: $174,996

North $35,334 113 50%
Lawndale 2005: $117,243 2005: $163,158

2004: $196,281 2004: $260,133

Pilsen $69,384 55 100%
2005: $230,825 2005: $274,258

2004: $159,387 2004: u/a

Little Village $54,925 210 80%
2005: $207,238 2005: u/a
HUMBOLDT PARK

Market Overview
Sales Price Range Average Days on Mar-
ket
Less than $149,000 40

$150,000—$199,000 31

$200,000—$249,000 88

$250,000— $299,000 18

$300,000—$399,000 169

Source: U.S. Census, Record Information

Analysis: Demographics Percentage of Population

Due to gentrification, the market value

White 3.2%
for property in Humboldt park is no
longer affordable for low-to-moderate African American 47.7%
income families. However, because of
the dedicated and creative work of Hispanic 48.0%
stakeholders in the community there are
affordable housing programs which assist Asian 0.36%
those with lower incomes purchase prop-
Other 0.91%
erty.
Median Income $28,728
LOGAN SQUARE

Market Overview
Sales Price Range Average Days on Market

Less than $149,000 87

$200,000—$249,000 31
Location within
the city of Chi- $250,000— $299,000 93
cagoLatitude
Longitude41°
57′N 87°43.8′ $300,000—$349,000 76
WNeighborhoo

$400,000—$449,000 33

$450,000- $ 499,000 70

$600,000—$699,999 56

Source: U.S. Census, Record Information

Analysis: Demographics Percentage of Population

White 26.3%
If you already own property in this
area you have experienced or
African American 5.19%
witnessed high appreciation on all
types of property. In an already
Hispanic 65.1%
growing and appreciating location,
the housing bubble shows no signs
Asian 1.31%
of bursting here, due to a large
synergy of people looking to invest
Other 2.13%
long term.
Median Income $36,245
SOUTH CHICAGO

Market Overview
Sales Price Range Average Days on Market

Less than $149,000 17

$150,000—$199,000 119

Source: U.S. Census, Record Information

Analysis: Demographics Percentage of Population

Despite common knowledge, prices White 3.94%

for single family homes continued
to rise, however, condominium African American 68.0%
prices decreased, thus, creating a
buyers market. Although prices for Hispanic 26.4%
property increased, they continue to
Asian 0.13%
be comparably affordable, $130,000
for single family homes, and Other 1.54%
$90,625 for condominiums.
Median Income $34,279
NORTH LAWNDALE

Market Overview
Sales Price Range Average Days on Market

Less than $149,000 13

$150,000—$199,000 90

$200,000—$249,000 93

Source: U.S. Census, Record Information

Analysis: Demographics Percentage of Population

White 0.92%
The market here favors property
African American 93.8%
priced under $149,000 taking an
average of 13 days on the market to
be sold. Property priced above will Hispanic 4.54%

experience a three month average

waiting period to sell property. Asian 0.13%
However, buyers looking for single
family homes in this area can expect Other 0.65%
increases in appraised values for their
homes, based on last years behavior.
Median Income $18,342
PILSEN

Market Overview
Sales Price Range Average Days on Market

Less than $149,000 16

$150,000—$199,000 42

$200,000—$249,000 45

$250,000— $299,000 106

$300,000—$399,000 105

$500,00— $549,000 39

Source: U.S. Census, Record Information

Demographics Percentage of Population

Analysis:
White 8.15%

Pilsen is undergoing rapid develop-

African American 1.76%
ment. Currently many affordable
housing developments are taking
place to ensure that people with lower Hispanic 88.9%
incomes can continue to live and
thrive in this community. Further- Asian 0.27%
more, Pilsen’s housing market stands
to realize significant appreciation, al- Other 0.92%
lowing those who own the opportunity
to build wealth. Median Income u/a
LITTLE VILLAGE

Market Overview
Sales Price Range Average Days on Mar-
ket

Less than $149,000 38

$150,00—$199,99 1

$200,000—$249,999 66

$250,000—$299,999 96

Source: U.S. Census, Record Information

Analysis: Demographics Percentage of Population

White 3.52%
The market here greatly favors prop-
African American 12.9%
erty priced under $200,000. If you
are looking for a home or condomin-
ium under $200,000 here is where Hispanic 83%
you would be able to find it. How-
ever, one must act promptly. Prop- Asian 0.13%
erty in this price range sells fast. In
2005, it took a little over a month for Other 0.41%
property priced under $150,000 to
sell indicating that this price range is
very desirable and marketable in this Median Income $32,320
 Spanish Coalition for Housing

Community Land Trusts

Community Land Trusts (CLT) are private nonprofit corporations. They are created to
purchase and hold land for the advancement and affordability of a desired community. This
is accomplished through providing secure and affordable access to land and housing for
community residents. Developments sell the units to low income families who agree to
purchase under limited sale restrictions. Through this, high quality affordable housing is
produced, keeping the property affordable permanently.

The CLT owns the land and regulates who can purchase the unit at the affordable price.
Unlike most subsidy programs, the unit will remain permanently affordable, without any time
limits. In addition, when a homeowner decides to move, resale formulas will regulate the
sale. Through this the unit will remain affordable to the next
owner, while at the same time ensuring the seller the right to
recapture some of the appreciated value of the home.

Through CLT’s homeowners receive all the benefits of owning a

home, an opportunity to profit from appreciated value, security,
tax benefits, while paying at a true affordable rate.

Features of a Community Land Trust

Dual Ownership. The CLT owns the land, while the homeowner owns the improvements on
the land.

Leased Land. Through a renewable ground lease, the homeowner owns the unit, granting the
use of the land for 99 years.

Permanent Affordability. Prior to the owner selling the unit, the CLT must approve the next
owner is of low income through the terms of a ground lease. Further, the sale price is
regulated through a resale formula designed to grant the current owner a return on their
investment, while keeping the unit affordable.

Permanent Responsibility. The CLT is allowed to force repairs, cure defaults, and monitor
resale, ensuring the interest of a community and property.

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 Spanish Coalition for Housing

Community Land Trust Cycle

I. Community Land
Trust purchases rights II. CLT sells you a unit
to land and property at an Affordable rate,
from a community

IV. If you choose to sell,

profit will be regulated by
resale formula to ensure
permanent affordability of
III. You own the unit,
unit to next owner. CLT owns the land
beneath.

Resale Formulas
Subsidy retention programs all use resale formulas to set a future price that will be fair to both the selling
homeowner as well as retaining the unit affordable for a new buyer. Two of the most popular resale formulas
include, the Appraisal-based formula and the Index Formula

I. Appraisal – based formula

Calculates the owners equity by adding onto the homeowners initial investment a certain percentage, usually
25% - 50 % maximum, of the appreciated value for every year that a homeowner remains in the CLT unit.
The appraisal is however, just for the value of the unit and not the land beneath.

II. Index Formula

Adjusts the original purchase price of the home by adding or subtracting predetermined factors that affect the
value of the homes value. Such factors can include, a deduction for depreciation, penalty for unusual damage,
inflation adjustments.
 Spanish Coalition for Housing

Affordable Housing Programs

New Homes for Chicago

Now in its eleventh year, the New Homes for Chicago program has ap-
proved over 65 developments, or over 1,600 new affordable single fam-
ily homes or two-flat homes, or condominiums which are either com-
pleted or in process throughout Chicago. Prices under this program are
$155,000 for single family homes or condos and $200,000 for two-
flats.

Chicago Partnership for Affordable Neighborhoods (CPAN)

CPAN is a partnership between the City of Chicago and developers to ensure opportunities for
affordable condominiums in market rate developments, particularly in appreciating neighbor-
hoods, through two steps: developer write-down and purchase price assistance to homebuyers.

Eligible homebuyers are first-time buyers (have not owned a home within the last three years) with in-
comes up to 100% of median (see table for maximum household incomes by family size). Purchase price
assistance may be available for households with incomes up to 80% of median, who demonstrate a gap
between the amount of the first mortgage they can secure, and the affordable sales price. Purchase price
assistance is in the form of a deferred loan at 0% interest, which is reduced on an annual pro rata basis.

Public Safety Officer Homeownership Incentive Program

Chicago police officers, firefighters, and paramedics (referred to here as "public safety officers") who pur-
chase homes in targeted areas of Chicago may be eligible to receive $3,000 in down payment and closing
costs assistance. If the purchase is located in a CHA Redevelopment Property (defined as a residential de-
velopment constructed as part of the CHA Plan for Transformation, as designated by the Chicago Housing
Authority), $7,500 in assistance may be available.

The deferred loan is available per household and may be used for a down payment or closing costs, in-
cluding title insurance; credit reports; recording fees; appraisals; points; transfer stamps; third-party prop-
erty inspection fees; first year's payment of mortgage insurance; and other customary bank related closing
charges. This loan will be fully forgiven if the officer resides in the home for at least five years.

Teacher Housing Resource Center

In an effort to attract and retain the best and brightest teachers to live in Chicago, Mayor Richard M.
Daley created the Teacher Housing Resource Center (THRC). THRC provides comprehensive services for
teachers that includes homeownership education, down-payment assistance, assistance with finding a
home mortgage and special discounts especially for teachers in new residential developments and rehabs.

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 Spanish Coalition for Housing

References

American Fact Finder. 2006. 22 June 2006. US Census Bureau.

http://factfinder.census.gov/home

Chicago Area Housing. 2006. Chicago Housing and Community Development. 18

July 2006. http://www.chicagohousing.com/HomePage.asp

Chicago Fact Finder. 2006. University of Notre Dame. 18 July 2006.

http://www.nd.edu/~chifacts.

Community Land Trusts. 2006. Policy Link. 18 July 2006.

http://www.policylink.org.

Department of Housing. 2006. City of Chicago. 25 July 2006.

http://gov.cityofchicago.org

Multiple Listing Service of Northern Illinois, Inc. 2006.

http://mlsni.net/

Mortgage Indexes: Historical Data. 14 June 2006. Mortgage-x Information Services.

http://mortgage-x.com/general/indexes/default.asp

Home Buyer Assistance. 2006 City of Chicago. 31 July 2006.

http://gov.cityofchicago.org.

Home and Communities. 4 August 2006. US Department of Housing and Urban Devel-
opment. http://www.hud.gov/faqs/faqhomebuy.cfm

US Census Record Information. 20 July 2006. US Census Bureau.

http://factfinder.census.gov/servlet/
 Spanish Coalition for Housing

Summary
Homeownership continues to serves as the most viable and secure way to build
wealth today. However, as much as we hear this, we convince ourselves that right
now, we are not ready. Consider reflecting on your spending habits and ability to
save...have you been able to curb your habits to save more? Or do you continually
find yourself pushing your deadline of purchasing a home another year. Rather
than planning on saving and take the initiative. Explore the possibilities of
Affordable Housing. Here, you can establish the forced savings you always
planned for, but never followed. Build the foundation towards a better quality of
life you always dreamt of but never acted on.

Special Thanks

bank
Created by Ulises Ruelas
Homebuyer Information
Spanish Coalition for Housing

4037 W. North Ave

Chicago, IL. 60639
Phone : 773.342.7575
Fax : 342.8528

For a copy of “Guide to Affordable Homeownership Options”

e-mail request to hgamboa@AOL.com
or
uruelas@spanishcoalitionforhousing.com