We kept monitoring a number of foreclosures we earmarked – and witnessed the price tumble over time. I distinctly remember a beautiful large, sturdy, gray stone six flat, gutted on the inside, listed for $140,000. Imaging, that is $23,350 per unit! Very tempting, but too large of a building for us – we are first time buyers after all. The last time I checked the price was down to $75,000.

These buildings are on the market for very little money, but no one buys them. How can that be? Even if they need a lot of work, they are still a steal. Well, it’s not only the tons of tender loving care they need (see also 04/02/2009 posting), they are basically uninhabitable in their current condition.

Banks and mortgage lenders got very picky. They like to see a good credit history and a juicy down payment. The other thing they require is a property to be inhabitable before they finance the purchase. Inhabitable is defined as the property having a functioning bathroom and kitchen with running water and electricity. We looked at about 25 vacant foreclosures and none of them met that requirement.

We heard wild tales of buyers investing several hundred or even a thousand dollars into a property prior to closing, fixing up the bathroom and kitchen so they could secure financing. And even then there was no guarantee that the deal would go through. Too much of a déjà vu for us after our recent attempts to purchase a vacant city lot.

And honestly, not inhabitable is good for us, as we will remodel everything green anyway. Except – how are we going to finance the purchase and the rehab? I heard on National Public Radio that a lot of foreclosures are bought for cash. That is fine if you’re a builder with a cash flow, or if the property requires no major work. But that is not our world.

The solution to our problem fell into our lap during a beat meeting. Two representatives from a local community bank, ShoreBank, attended the meeting to spread the word about their Rescue Loan Program for homeowners at risk of foreclosure. We’d researched and talked with a lot of lenders, but ShoreBank was new to us.

A brief conversation after the beat meeting led to an appointment in which we learned about ShoreBank’s Rehabber Loans program. The bank’s mission is to invest in communities on Chicago’s South and West Sides, provide financing to improve housing stock, increase home ownership and offer special products for first time buyers.

Bingo! ShoreBank’s product appears to be a perfect match for our purchasing and rehab plans! The interest rate on the rehab loan seems a little higher than on other conventional mortgages, but at least ShoreBank is willing and interested in investing in the rehab, even if the subject property is uninhabitable as it is now.