SW Florida Real Estate Insider - Rehab Loans

• REHABILITATION LOANS
  

There is an ever increasing inventory of foreclosured homes on the market, many with new low prices that are allowing the First Time Homebuyer back into the market. That is the good news. The bad news is that many of these homes need a lot of work. In many cases, the buyer does not have the funds to make the home liveable. Here are two loan options that can help the home buyer who intends to occupy the home:

1. FHA 203(K) loans:

This program allows for rehabilitaiton of owner occupied structures of 1-4 units and condominiums. It can also used to convert a one family dwelling to a two, three or four family dwelling and vice versa.

There is a minium amount of $5,000.00 for the cost of eligible improvements, minor or cosmectic repairs are not acceptable on thier own, but may be added to the minimum requirement. ( There are exceptions to the minimum if repairs is less than $5000.00 but is needed for house to be safe and livebale)

Overview:

• Seller receives thier money at closing just like a normal purhcase and the rehab take place AFTER closing.
• Average time from contract to close is 60-90 days (extra days are needed to do the "work write up and cost estimate"
• Mortgage loan is based on the "after improved" value
• Work must being within 30 days of of Rehabilitation Loan Agreeement and must not stop for more than 30 consecutive days; all work to be completed within 6 months
• Up to 6 months of mortgage payments can be included in the mortgage if the borrower is not able to occupy during the rehab. (this allows borrower to rent somewhere else during the construction and not have to worry about making the mortgage payment on the new house)
• This loan can be used to remodel a home to accomadate wheelchair access
• First time homebuyers can also qualify for this loan
  
  

Eligible Improvements:

• structural alterations and reconstruction



• improved functions and modernization



• elimination of health and safety hazards

The below link will take you directly to HUD's F.A.Q.'s on this topic.

http://www.hud.gov/offices/hsg/sfh/203k/faqs203k.cfm

2). Rural Housing Loans (Section 502):

Section 502 loans are primarily used to help low-income individuals or households purchase homes in rural areas. Funds can be used to build, repair, renovate or relocate a home, or to purchase and prepare sites, including providing water and sewage facilities.

All of Collier County is considered "rural" and portions of Lee County.

There are gross income limits and additional credit requirements:

http://www.rurdev.usda.gov/rhs/sfh/GSFH_Income_Limits/FL%20GRH.pdf

Overview:

• The property must meet FHA requirements or similar standards and the Rural Development Thermal Standards www.rurdev.usda.gov/ga/thermal.doc
• No Mortage Insurance is required, however there is a one-time quarantee fee that is charged and can be financed
• seller receives thier money at closing and rehab takes place after closing
• 3 estimates will be needed for the work done to the home