Low-cost, alternative building methods contribute little to affordable housing if local financial institutions will not provide construction and long-term mortgage financing for the home.
Through partnerships with local banks and other community organizations, the Missoula Northside Project received construction financing and was able to offer mortgage financing to homebuyers at attractive rates.
Norwest Bank Montana provided both the construction and permanent financing for the homes through the Community Home Ownership Program (CHOP). WORD and CRBT worked closely with the lending officers at Norwest to answer questions about straw bale construction and to increase the comfort level of the bankers financing this innovative project.
"Norwest felt comfortable with the materials and the experience level of WORD and the builder based on past experience," said Richard Melone, vice president of Norwest.
Melone pointed out the contractor's extensive experience with straw bale construction, which was a factor in reinforcing Norwest Bank's confidence in the project.
Additional funding assistance was provided through the North Missoula Housing Partnership (NMHP) and the city of Missoula. NMHP is a coalition of local residents, community groups, neighborhood businesses and government officials. Coalition members contributed funds to a mortgage pool that offered purchasers of the straw bale homes down payment assistance and second mortgages at a below market interest rate.
A city/county program was used to buy down points to reduce the interest rate on the primary mortgage, making the monthly payments more affordable to the homebuyers. The straw bale homes, affordable to families at 60 percent of median income, were purchased at a price of $86,500 and required a modest down payment of only $2,800.
This purchase price does not include land. WORD maintained ownership of the land through a tax-exempt community land trust. (Please contact WORD if you'd like more information about the land trust.)
Unfortunately, WORD could not offer a first mortgage guaranteed by the Federal Housing Administration (FHA) because of the use of unconventional building materials. However, according to Tracy Mumma of CRBT, FHA is now working on developing standards to provide loans for houses built with straw bale construction.
