In a recent New York Times article, a woman and her elderly parents were looking to find the right place for them both to live. After months of searching all they could find was a dilapidated Victorian sitting empty after two years on the market as a foreclosed property. Five months later, the house has been transformed into a safe and comfortable home and the neighbors are estatic.
As of January 2012, thirty-five percent of the homes on the market in the US were either short sales or foreclosures. Thirty-seven percent of those homes were categorized either “below” or “well below” average condition, according to the National Association of Realtors.
Locally, the percentages were a lot lower but even one deteriorating home can impact a community.
This is the kind of situation that can take down a whole town let alone a neighborhood. So what was once a lonely outlier loan is the now becoming the “popular girl” or guy (can a loan have gender qualities?) as these homes enter rehab through the FHA 203K loan or a similar product by Fannie Mae called Homepath.
Called the home improvement loan, the FHA 203k was originally conceived by the US Housing and Urban Development agency (HUD) to help revitalize neighborhoods and expand opportunities for home ownership. They work with lenders, local housing agencies and nonprofit organizations to rehabilitate homes and combine the FHA rehab loan with other funding opportunities.
There are loan limits according to which state and county the buyer lives in. Larimer County has a loan limit of $312,500 for a single family detached home and $600,000 for a four-family building. The 203k loan can apply to a multi-family unit as long as the buyer claims primary residence in one of the units. Some other restrictions apply.
So instead of buying a home then getting another loan for construction costs (almost impossible these days) there is only one loan and all the interest paid qualifies for the regular homeowner IRS deductions.
And the repairs can be minor or more daunting like structural repairs. You can use the Streamline version of the loan or the Full version which has more requirements but can go a long way to making what was once a community eyesore, the reigning neighborhood princess or prince. (Do homes have gender qualities?)
Make sure your lender has experience with these loans because they need more attention and care than most loans though even the “easy” ones are not always easy.
As for the family who moved into the renovated Victorian, they couldn’t be happier with their experience with a FHA.203k loan. It took time and hard work, but ultimately, it paid off turning what could have been a money pit into a gracious and livable home.