Navajos now can get home loans

Dean Tsosie frames a house in Naschittii, NM for the Navajo Housing Authority in this 3006 fil e photo. The house will be a four bedroom and three bath house when completed. [photo by Daniel Zollinger/ Independent]

By Kathy Helms
Diné Bureau

WINDOW ROCK — Navajo do-it-yourselfers have not been eligible for home loans under Credit Services Department’s Home Loan Program, but with changes approved this week by Budget and Finance Committee, they now are eligible for loans up to $85,000.

But that’s just one of the changes designed to boost Navajo home-ownership. Active duty military personnel also will get a break, as will Navajos with good credit scores. And even those with not-so-good scores still could be eligible for low-interest loans.

Fort Defiance Delegate Harold Wauneka, sponsor of the legislation, commended the staff that worked on the document, saying it “will benefit and work for the clients that we service every day.” The next part of the department’s agenda will be to educate the general public as to changes.
Louise Johnson, department manager, said work on the home loan policy has been ongoing since 2006.

“We felt that the need to make these amendments was very critical,” Johnson said. “One of the things we encountered from our Navajo people is they wanted to build their own homes instead of involving general contractors to do the work, which is very costly. Right now, the current policy only allows home construction to be done by general contractors, and that is the reason why a lot of our customers shy away from it.”

The change in policy now provides a section on new home construction by owner-built or non-licensed builders, according to Delores Begay, loan officer.

“A lot of the customers are self-help people — they’re plumbers or carpenters by trade. They’ve been in the construction business for a long time. Instead of paying someone, they would be able to build their own homes.”

Begay said the average cost of building a house runs about $120 a square foot. “One of the reasons why we put in owner-built is to combat the high cost of building materials,” she said. “For new home construction by non-licensed builders, the maximum amount that we would allow would be $85,000 with 5 percent down.”

The maximum loan amount for new home construction has been increased to $200,000 from $125,000 due to building material and contractor costs. For existing site built homes the amount has been increased to $200,000 from $85,000; and for new manufactured homes, the maximum loan amount has been upped to $100,000 from $85,000.

Under the new Soldier’s Relief Act, any time military personnel are deployed on active duty, the interest rate can be lowered to zero percent for the duration of their military service, Begay said. There was no such clause in the old policy.

The Credit Scoring Guide also has been revised:

• Coral customers with 700-plus credit scores will be extended the maximum loan amount of $200,000, with a debt-to-income ratio of 65 percent.
• Turquoise customers scoring 650 to 699 are eligible for a maximum loan of $150,000, with a debt-to-income ratio of 60 percent.
• Silver customers scoring 600 to 649 are eligible for up to $135,000, with a debt-to-income ratio of 55 percent.
• Copper customers scoring 500 to 599 are eligible for up to $80,000, with a debt-to-income ratio of 50 percent.

Before this week, there was no credit scoring system, Begay said.

“We just run the measure by the banks. They won’t look at a home loan unless your credit score is 650 or better.

However, we’re trying to help our Navajo people become homeowners. We don’t want to replicate the banks out there because we know the needs of our people and the type of financial situations they are in on the reservation.”

There is also a new loan term schedule, Begay said. A loan of $100,000 or more can be paid back over 30 years. “With a medium house ranging to about $60,000, we’re looking at 15 years,” she said, while a loan of $5,000 or less is two to three years.

The loan closing fee schedule also is being changed from $100 across the board to a fee based on the loan amount.

“For example, $2,500 to $6,999 would be $75. For $200,000, the fee would be $200,” Begay said.

While outside lenders generally have a deferred payment procedure, there was no such policy in place for Navajo customers. That too, has changed.

“At one point or another in our lives, we do encounter some financial situations where we need to make a decision. And a lot of our people come in, like maybe for graduation, with unexpected expenses that they incur and sometimes they want to defer a payment.

“So this is where we have that option of deferring one monthly payment. We’re going to have them pay a fee of 10 percent of the monthly amount,” Begay said. Only two deferred payments will be allowed in a calendar year.

Whereas interest rates previously were fixed at 6 percent, a new guide has been developed based on the customer’s credit score. Coral customers would be eligible for 5 percent; turquoise, 5.5 percent; silver, 6 percent, and copper, 6.5 percent.

“This is rewarding some of the people with very good credit, offering low-cost rates for their homes; and it also gives people with not-so-good credit the opportunity to become a home owner,” Begay said