A Lone Loan: The Benefits of Section 203(k) Rehab Mortgage Insurance
If you own a home—or are planning to buy one—that’s over a year old, you might be needing to make some renovations or extensive repairs that can end up being quite costly; and unless you have an endless supply of cash on hand, those costs can really hit you where it hurts.
Fortunately for you, Section 203(k) Rehab Mortgage Insurance makes an allowance for that, enabling you to finance or re-finance your home so that the expenses incurred to rehabilitate or repair the house will actually become part of the mortgage. Normally, the loans that homeowners or homebuyers need in order to make renovations or repairs have extremely high interest rates and come with short repayment schedules that have balloon payments. Section 203(k) serves as insurance that a single long-term or adjustable-rate loan will cover both the acquisition of a property and its repairs. To explain things a little more simply, instead of facing both a mortgage and an independent loan for repairs that each have their own repayment schedules and interest rates that seem to spin out of control, you’ll be making one payment for everything—which, in the end, will mean you’re paying interest at a better rate that won’t leave you sick with buyer’s remorse.
According to the U.S. Department of Housing and Urban Development, as long as the costs exceed $5000, “The extent of the rehabilitation covered by Section 203(k) insurance may range from relatively minor to virtual reconstruction.”
Some of the types of improvements allowed by Section 203(k) of the National Housing Act (12 U.S.C. 1709(4k)) include:
- Making alterations to a home’s construction or fully reconstructing it
- Making improvements to the home that will modernize its function to make it compliant with structural codes and enhance its energy-efficiency
- Making alterations to eliminate health or safety hazards
- Making enhancements to beautify the home
- Repairing or replacing plumbing lines
- Installing a water well or septic system
- Replacing an existing roof, gutter system, and downspouts or installing new ones
- Replacing floors or adding new flooring where it may be needed
- Making property improvements, such as a major landscaping project
- Making improvements for handicap accessibility
There are, of course, certain requirements to be met in order to qualify for Section 203(k) financing, so check with your local HUD office to see if you’re eligible. One of your best allies will be a home remodeling contractor, so find one in your area who has a good reputation for the quality of their work and for their business practices. Depending on their level of expertise, they might even be able to offer you guidance on what may or may not be covered by Section 203(k). It’s important to know that every penny you invest will be handled properly, so do all of your research to ensure that your repairs or renovation project will last longer than it takes the ink to dry on your loan agreement.
Don’t let the costs of remodeling or repairing a home leave you struggling! Give the team at Omega Construction & Design, Inc., a call today!