For home owners or home buyers who are looking for additional finance over their mortgage for rehabilitating the old home that they are purchasing, Section 203K rehabilitation mortgage insurance offer a convenient option of a single long term assistance, thereby saving them the time involved in finding another lender.
Among the various government loans given out in the US, the Department
of Housing and Urban Development (HUD) has a specific financial
assistance that is offered to home owners or buyers to either refinance
the cost of rehabilitating, modifying or altering the house or to buy a
house. This form of financial assistance is called Section 203K
rehabilitation mortgage insurance and falls broadly under the category
of housing loans offered by the US Government.
When a home buyer wants to buy a house that is not new, there are often
repair and rehabilitation costs associated with the purchase. In most
cases, it becomes difficult for him to get additional finance at
reasonable rates for making improvements to the old building and Section
203K rehabilitation mortgage insurance is designed specifically to
assist with this situation. Under this loan program, HUD insures the
total amount incurred towards mortgage of the home and its
rehabilitation. Thus, the lender is assured of recovery of his money in
case of default of repayment while the home buyer gets the benefit of
just one long term loan with a predetermined fixed or adjustable
interest agreement, for the entire cost of the building and the
renovation. This type of housing loans assistance also saves the buyer
time as he does not have to find another lender for the additional loan
towards home rehabilitation.
Once the Section 203K rehabilitation mortgage insurance loan is
sanctioned, a part of the loan amount is given to the seller and the
remaining held in an escrow account until the repair and rehabilitation
work is complete. In the case of refinance, the earlier mortgage is paid
off and the remaining amount transferred to the escrow for release
after completion of rehabilitation work.
There are certain criteria to be met for a person to be eligible for
this category of the Government Loans program. Any individual who is
capable of making mortgage payments can apply for this assistance. The
valuation of the property must meet the guidelines set by FHA with
regard to the mortgage limit for that particular locality. The value is
usually computed as the lower value of either the original value of the
home and the cost of rehabilitation or 110% of the value of the
rehabilitated home. The estimate for rehabilitation costs should be a
minimum of $5,000. The home has to be at least one year old.
Applications for assistance under this housing loans program need to be
submitted through a lender on the approved list of FHA. For further
details on this financial assistance program, you can log on to the HUD
website and locate an approved lender in your local area. Besides this,
any further information about this loan program can be received from the
online FHA resource center.
Article Source: http://EzineArticles.com/5278619