One of the best parts about New England are all the quaint and historic properties that pepper its small towns and cities alike. As you drive along any New England highway or dirt covered back road you are bound to see several beautiful cape cod style houses, old Victorians, or classic salt boxes. Who hasn’t wondered what it might be like to live in one of these gems? To imagine the wonderful mysteries that lie behind their doors. The only thing that might keep some of us from achieving this dream is that often these unique, architectural gems are in ill repair or outdated. This can make the dream of owning one of these properties a bit daunting. Perhaps, it is difficult to imagine how you can finance necessary renovations and the cost of the property without multiple loans and a lot of headaches. Well, it is possible and there is an easy way to do this—it is a rehab or 203K loan.What is a Rehab Loan?A rehab loan or 203K loan is a unique loan product that can be taken out to cover both the purchase and renovations on a primary residential property. This makes a rehab loan the perfect way to purchase a fixer upper home, those diamonds in the rough in need of some TLC. Prior to the creation of 203K loans you would have to take out one loan to purchase a home and another to cover the renovations of the property. Often, banks were unwilling to give a loan for a property that needed repairs because they considered it too high risk. However, this changed with the 203K or rehab loan because they are FHA insured, which means that they are government insured, taking some of the risk out of the home loan/home buying experience and making banks more likely to provide these loans. The government insures these loans in an effort to help rehab neighborhoods that have fallen into disrepair and to help low- and middle-income buyers to be able to purchase a home. Taking out a rehab loan has helped many people who thought they would never be able to own their own home, not only own a house, but to create a dream home!What are the different types of Rehab Loans?There are two types of rehab or 203K loans; a conventional 203K and a streamlined 203K loan. You might be wondering what is the difference between these two types of loans? It sounds like the streamlined 203K might be quicker or easier? This is not necessarily the case. Both of these loans can take an equal amount of time to procure. The streamlined 203k can be less complicated and have less paperwork. However, it is a limited repair program, which means that it will cover smaller repairs like carpet, paint, a new furnace, or new appliances. It does not cover large scale repairs and has a limited maximum amount that can be borrowed. The conventional 203K loan on the other hand in a full repair program, it will cover full gutting of a house, large jobs like roof repair or replacement, cellar replacement or repair, among many other large-scale jobs. In addition to this conventional rehab loans can also provide housing costs to the home buyer for the duration of the renovations. A conventional rehab loan also requires that you work with a 203K consultant, which can make the process much smoother. Both of these loans require that you use licensed and vetted contractors and give a limited time (usually 6 months) to complete the work on your home. Which means you will be living in your dream palace in no time! What are the Pros and Cons of a Rehab Loan?
What should you do next? So, when you find that diamond in the rough, that little bungalow by lake with the crooked shutters and the peeling paint or the old Victorian mansion with beautiful bones that you just know can be your personal paradise, you now have a financing option that can make your dream home a reality! Go out and find that hidden gem and then consult a find a 203K consultant that can walk you through the process! Next week I will let you know just what is required to be a 203K consultant!Continue reading “How Can You Buy That Diamond in the Rough Property and Make it Your Palace?”