In the spring of 1986, I read an ad in a local paper that said the Gainsboro neighborhood of Roanoke, Virginia, would deed land for free to qualifying individuals so they could build a home. Once you secured financing and provided verification, the land would belong to you.
There were four houses already newly built in the area. My husband and I talked to two of the home owners and found they did not obtain traditional bank loans. Their houses were built by Jim Walter Mortgage Company, who traditionally built in rural areas and not the city.
Jim Walters completed 90 percent of the home building process, the perspective owner, the other 10. The interest rate on Jim Walter Mortgages share was 10 percent with a 20-year mortgage. The way it worked was, rather than make a down payment, the owner was responsible for painting the interior, installing plumbing pipes if there were none, shelves, telephone wiring and flooring. If you so desired, you could do more of the work yourself.
The homeowner was also responsible for securing electricity for the contractors and building a foundation for a basement. We opted for the Jim Walter contractors to build a crawl space This added to the amount we would owe.
We were told that based on similar houses, our 10 percent would cost us about $2500 out of pocket, and that total electric would run about $120 monthly. Both actually cost us twice what we were told. We ended up spending about $5,000 out of pocket for our 10 percent, and our light bill was as high as $240-$400 during the first winter.
A basement would have cost us at least $10,000, so we opted for Jim Walter to build a crawl space. This added $2,000 more to what we owed them. We had to rent and provide gas for generator for the workers. They began late, missed days because of rain, and were close to two months behind schedule in completing the house, which caused us to spend more than we planned for the generator.
There had been no houses on the land we were deeded for more than 20 years, therefore there were no pipes for plumbing or water service. It cost us an extra $1400 to have it installed. After many delays and extra money, our home was finally built. We could not move in until the city inspected it and gave us a certificate of occupation.
Jim Walter Homes did not include taxes and insurance in the mortgage payment as banks do, therefore twice a year we were responsible for paying real estate taxes separately. And we paid the mortgage insurance monthly.
Initially, hearing 10 percent interest and 20-year mortgage sounded like a great deal. Looking back, I believe a 30-year bank loan, which included taxes and insurance in the monthly payment, would have been simpler. I know that paying a one time specified down payment and closing costs would have been easier on our finances, than paying double what we were told our 10 percent of work would cost.
In addition, Jim Walter Homes did not allow homeowners to sell the house while money was still owed. With a bank loan, someone can take over your mortgage. With Jim Walters, you must pay them off in full before you can sell the home.