September 4, 2012 4:30 pm
Luckily, the FHA offers the 203k loan, which makes it possible for homeowners to take care of home repairs after getting a mortgage. The loan is an all-in-one mortgage program for home construction projects that combines the mortgaged amount with your estimated home repair costs, and bundles them into one.
The extent of the rehabilitation may range from relatively minor work (it must be at least $5,000) to major reconstruction on the home’s structure. Categories for work allowed include modernization and improvements to the home’s function, elimination of health and safety hazards, adding or replacing roofing, gutters, and downspouts, enhancing accessibility for a disabled person, making energy conservation improvements and changes that improve appearance and eliminate obsolescence.
The loans can be used to finance the rehabilitation of the residential portion of a property that also has non-residential uses and may also cover the conversion of a property of any size to a one- to four-unit structure. A home that has been demolished or will be razed as part of rehabilitation is also eligible.
FHA 203k loans are especially useful for people buying foreclosed, abandoned, or otherwise run-down homes. The caveat is that 203k loans may not exceed local FHA loan limits.
To be eligible for the FHA 203k mortgage program, homes must be owner-occupied, must be only 1-4 units and must be at least one year old. New homes are not considered.
If you plan to demolish a structure as part of the work, you must ensure that the home’s existing foundation remains and that the home will be rebuilt on the same foundation.
What’s more, for less expensive repairs, FHA’s Streamlined 203k program permits homebuyers to finance up to an additional $35,000 into their mortgage to improve or upgrade their home before move-in. This allows new homebuyers to quickly and easily tap into cash to pay for property repairs or improvements, such as those identified by a home inspector or FHA appraiser.
To learn more about 203k loans, contact our office today.
Published with permission from RISMedia.