A Loan Revival
March 25, 2009
Back in the 1980s, FHA offered a loan which permitted the purchaser of a fixer property to include the cost of repairs in the purchase loan. It was the 203K FHA loan. For almost 20 years this loan has disappeared from the lending scene. Sometime last fall, FHA announced the revival of the 203K program.
The Section 203K program is the Department of Housing and Urban Development's program for the rehabilitation ad repair of single family properties. Since many properties now on the market are in need of repairs, this loan is an excellent means to help revitalize distressed neighborhoods.
The target market for these loans includes bank-owned properties, foreclosures and short sales; i.e. homes that have fallen into disrepair; properties where renovations were begun, but never completed; out dated kitchens, bathrooms, etc.
Many types of improvements are eligible provided that they become a permanent part of the property and add value. Improvements such as roofs and gutters, heating and ac systems, flooring, wells or septic systems, painting, interior and exterior, safety and energy efficient upgrades, handicapped accessibility improvements, etc.
Obvious luxury items such has swimming pools, bar-b-ques, gazebos, etc. cannot be included nor can structural improvements nor room additions.
The loan is based on the "as is" appraised value plus the borrowers proposed repairs and the value after the work has been completed.
The improvements must comply with HUD's Minimum Property Standards and all local codes and ordinances. A complete description of the work and the quantity and cost of each item must be documented. Cost estimates must include labor and materials sufficient to complete the work by a contractor.
When the 203K loan is closed, the proceeds designated for the rehab work are placed in an interest bearing escrow account and dispersed after the work has been completed and an inspection of compliance obtained.
While the process may seem a bit complicated, it is similar to any construction financing which sets up completion benchmarks for the payment to the contractor. The 203K loan is worth investigating if you are thinking of purchase a fixer as your primary residence.
Back in the 1980s, FHA offered a loan which permitted the purchaser of a fixer property to include the cost of repairs in the purchase loan. It was the 203K FHA loan. For almost 20 years this loan has disappeared from the lending scene. Sometime last fall, FHA announced the revival of the 203K program.
The Section 203K program is the Department of Housing and Urban Development's program for the rehabilitation ad repair of single family properties. Since many properties now on the market are in need of repairs, this loan is an excellent means to help revitalize distressed neighborhoods.
The target market for these loans includes bank-owned properties, foreclosures and short sales; i.e. homes that have fallen into disrepair; properties where renovations were begun, but never completed; out dated kitchens, bathrooms, etc.
Many types of improvements are eligible provided that they become a permanent part of the property and add value. Improvements such as roofs and gutters, heating and ac systems, flooring, wells or septic systems, painting, interior and exterior, safety and energy efficient upgrades, handicapped accessibility improvements, etc.
Obvious luxury items such has swimming pools, bar-b-ques, gazebos, etc. cannot be included nor can structural improvements nor room additions.
The loan is based on the "as is" appraised value plus the borrowers proposed repairs and the value after the work has been completed.
The improvements must comply with HUD's Minimum Property Standards and all local codes and ordinances. A complete description of the work and the quantity and cost of each item must be documented. Cost estimates must include labor and materials sufficient to complete the work by a contractor.
When the 203K loan is closed, the proceeds designated for the rehab work are placed in an interest bearing escrow account and dispersed after the work has been completed and an inspection of compliance obtained.
While the process may seem a bit complicated, it is similar to any construction financing which sets up completion benchmarks for the payment to the contractor. The 203K loan is worth investigating if you are thinking of purchase a fixer as your primary residence.
posted by shirley harry at 8:42 AM
0 Comments:
Post a Comment
<< Home