improvement loans help buyers and investors to buy and renovate homes. improvement loans are used for home repairs such as roofing, plumbing, windows, doors, etc. These repairs will not only increase the value of the property, but also improve their functionality, safety and convenience.
In a home improvement loan and the FHA 203 (K), HUD consultant (usually a licensed contractor) inspects a property to create a working project (WWU). The WWU contains all necessary and eligible improvements. The required improvements include a critical need for health, safety and livability of the property all repairs. However, eligible improvements include items "lifting" that improve property values, such as painting, electrical, landscaping, kitchen and bathroom remodeling.
Why renew loans?
Often difficulty in properties are vacant and neglected, damaged by previous owners frustrated or angry or worse, stolen and destroyed. Like most lenders want to be safe, and functional properties, lenders are likely to shut down a process of buying regular loan if there are problems with structural damage, broken windows, faulty plumbing, etc.
The few loans approved to buy fixer properties need a construction loan separately. Both loans come with higher rates and shorter amortization. However, relatively new renovation loans allow the purchase of a home with rehabilitation costs in a funded loan. This means that the seller can sell it "as is" property without objection from the lender of the buyer. The renewal of the bridge loan between a seller can not sell a fixer and a buyer who can not afford one.
Other benefits Loan Renewal
Repair and renovation loans finance a property remodeling costs to increase property values. For a fin property (investor), the restored home increases its appeal and becomes lendable. This allows more buyers to bid on the property. It is a quadruple win - buyers get a movement in home loans, lenders get to sign an impeccable loan guarantee, the investor makes a profit and recover its initial investment and the previous owner (usually a bank) is rids Asset up!
Banks usually sell their non-performing assets at 70-80% of the fair market value of a cash buyer to download quickly. However, the bank can sell the property at a retail price to a buyer with a loan renewal. A renewal of the loan, such as the FHA 203 (k), is given up to 110% of the future, after repair value. The FHA even involved in aid programs for the payment. In addition, after the close of escrow, mortgage payments can be financed in a new loan to the buyer during the rehabilitation period. The lender realizes that the property can be uninhabitable for several months during the period of repair and realizes that it is a financial burden to pay the rent and the mortgage on a property uninhabitable simultaneously.
Disadvantages Loan Renewal
Disadvantages include loan renewal rule 91 days, the highest costs in books 1-4 unit requirement of residential property, owner occupancy requirement and lack of complete control of the rehabilitation of silver.
In 2003, HUD has introduced a 91-day rule that the seller must own the property for at least 91 days before a written offer to purchase a property with an FHA financing. HUD may sell one of its real estate owned (REO) in the same market before selling one of their own. In other words, the fins are not flood the market with immediate resales funded HUD properties. An oversupply of previously owned homes, it is difficult for HUD to upload your own inventory of bank owned.
In addition to the 91 day rule, rehabilitation funds increase the total amount of the purchase loan. Rehabilitation funds are released from escrow construction is done under the auspices of an inspector approved by HUD. Mortgage payments pre-financed increase the total loan amount, too. Then it's time to build and unexpected delays. The buyer is deprived of the enjoyment and use of their property for weeks or months ... while interest accrues. Ultimately, the property must be fully repaired or renovated in six months after the close of escrow. To make matters worse, the property must be owner occupied 1-4 unit residential property. The rent is not allowed.
Given these factors, the buyer must purchase the property at a lower price perfect condition of the property. It makes no sense to spend time, money and energy in setting a place where you can just buy a finished product less the first place!
Summary of loan renewal
• The buyer can buy a fixer rehabilitation, early repayment of the mortgage and even advance funds• The buyer can borrow only for 1-4 owner occupied residential property unit• The buyer has six months to complete rehabilitation• Under the direction of an inspector, the rehabilitation funds are distributed from the trust as construction progresses• Seller is discharged REO "as is" probably come at the end of the guarantee no lender surprise• The seller increases group of potential buyers rather than selling at 70-80% of the value for cash buyers• HUD prohibits the resale within 91 days, making it difficult for fins• the total loan amount increases as everything is financed into the loan - the purchase, rehabilitation and the prepayment of the mortgage. Transport costs have increased due to the rehabilitation period, too.• Conduct a cost-benefit analysis to see if a closure is worth your time, effort and money!
