An enthusiastic response to Chicago’s new Bungalow Initiative shows that owners are eager to modernize and maintain the the 11/2 story, rectangular brick structures that became common about 80 years ago.
Mortgages and rehab loans offered by South Shore Bank, Old Kent Bank and Founders Bank, three participants in the city’s Bungalow Initiative, are being snapped up by those seeking to acquire or touch up the homes.
“Most borrowers want to do something like rehab an attic and turn it into a bedroom, replace windows or do roof work,” said Ray Gliwa, area sales manager for Old Kent’s mortgage department. “Many times, they don’t know what they want, they just know that they have certification for their bungalow and are anxiousto use the program’s favorable terms,”
With 86 branches in Chicago’s greater metro area, 10 of them in the city or near its suburban boarders, Old Kent is underwriting the greatest volume of BungalowInitiative related loans.
Special terms of the loans mean that Bungalow Initiative lenders waive an origination fee, which can run to 1 percent of the loan amount; an appraisal fee which can cost from $275 to $400, and an application fee, a cluster of costs that under traditional lending arrangements can total as much as $3,000, depending on the loan amount.
Then, there are tax credits, up to $2,000 annually, made available through the city Smart Tax Program to bungalow buyers earning up to 115 percent of the area median income ($78,085 for a family of three).
Those credits apply through the life of a mortgage secured under the program, according to Charles Shanabruck, director of the Historic Chicago Bungalow Association.
Shanabruck’s non-profit HCBA was launched along with the Bungalow Initiative last fall. It provides education about bungalow communities, including their architecture and history. The group also consults with bungalow owners and rehabbers, linking them to information and resources useful to their bungalow rehabs.
The association currently operates out of an office on West Division Street but will relocate to a downtown office soon.
Matching grants are also available. Families earning up to 80 percent of median income, ($45,200 for a family of three) can qualify for $3,000 grants if they spend $5,000 on a bungalow rehab. And families earning up to 60 percent ($36,000 for a family of three) can qualify for a full $5,000 match if they spend that much on improving a bungalow.
Then there are the loans themselves, offered at competitive market interest rates, with some buyers qualifying for a down payment of only 3 percent. Of four loan varieties offered under the Bungalow Initiative, Gliwa says cash refinancing loans are most often sought.
“Something we have found out about bungalow applicants so far is that many of them have been in their homes for a long time and have good equity. With this loan we lend up to 90 percent of current appraised value.”
Aside from cash refinancing loans, and straightforward mortgages where no rehab money of any sort is sought, two loan styles require general contractors selected by bungalow owners to register with the bank, in order to receive four payment disbursements through the life of the rehab project.
Those disbursements then follow bank staff inspections of the work. Purchase/rehab loans allow buyers to pay only interest during the course of their rehabs, up to nine months.
Second mortgage or equity loans are available to bungalow owners who already hold a first mortgage at favorable interest rates, and who wish to take on a moderate amount of rehab, less than $50,000.
Both interior and exterior rehabs qualify for the special loans. While bungalows tend to be characterized by well-built exteriors, their interiors may be perceived as functionally obsolete, ill-suited to contemporary lifestyle, with small kitchens, baths and bedrooms.
“We encourage rehabbers to honor the original architectural methods, replace the windows with double hung, similar to those that are there, not with picture windows or things like that,” Shanabruck said.
Shanabruck said a current effort under way within the Department of Housing working with the Department of Energy, will select five bungalows in the Chicago Lawn and Marquette Park neighborhoods, to be upgraded for maximum energy efficiency. In bungalow-intensive communities such as Portage Park on the North Side, where 198 bungalows were sold last year and Belmont-Cragin, where 250 bungalows sold, Shanabruck said prices varied dramatically. One in Englewood sold for only $10,000, while another sold for $580,000 near Ashland and Foster Avenues on the North Side.
Gliwa says he’s seen prices range from around $100,000 to $250,000 on the South Side to $180,000 to $300,000 on the North and Northwest Sides. A review of Initiative Design Guidelines do’s and don’ts is on the Web at http://www.chicagobungalow.org.
