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The contract-for-deed program called Bridge to Success was designed by a consortium of public, private and nonprofit partners.
Jesse Ferden, 31, and his girlfriend Nikki Wickham, 27, moved into their first home in St. Paul’s Dayton’s Bluff neighborhood in September only blocks away from the lower-level duplex they had been renting.
“We like the neighborhood,” Ferden said. “The houses are beautiful, and we want to be there on the ground floor to help bring the neighborhood back.”
Ferden and Wickham don’t own the home — yet. Though they make a combined $96,000, the couple didn’t qualify for a mortgage because of student-loan repayment problems and medical bill mishaps when they were younger.
The goal of the program is to help people interested in earning a way to home ownership by repopulating foreclosure-ravaged communities in the Twin Cities urban core.
“It’s about (getting) for-profits to lend in these communities again,” said David Reiling, CEO of Sunrise Community Banks in St. Paul, one of the partners in Bridge to Success. “It’s not impossible.”
A contract for deed is a seller-financing tool that allows a buyer to make incremental payments toward the ownership of a home.
Dayton’s Bluff Neighborhood Housing Services or Greater Metropolitan Housing Corp. are the sellers and the groups will finance up to $200,000 per home at a fixed interest rate of 7.5 percent.
Buyers contribute a down payment of $2,000 or 2 percent of the purchase price, whichever is less. The contract lasts three years, then the buyer must refinance into a traditional mortgage.
But the program isn’t without critics.
“A lot of people look at the contract (for deed) with suspicion,” said Gary Beatty of Greater Metropolitan Housing.
Some say that by allowing nontraditional buyers to qualify for homes, the program merely restarts the cycle that led to the mortgage problems in the first place, he said.
But there are protections built into the program, including requiring people to take homebuyer education and financial management courses.
Ferden says that counseling has been invaluable.
“Everybody makes mistakes, and some mess it up more than others,” Ferden said. “Unfortunately, we’re one of those couples that had really bad credit.”
Now, they have a better handle on how to manage bills and expenses, he said. Without their good income and a strong history of paying their rent on time, they might not have qualified for the program, Ferden said.
“I’m glad (someone) saw we were good hardworking people and gave us a chance to live in a home,” he said.
