In 1978, the U.S. Department of Housing and Urban Development (HUD), along with the Federal Housing Association (FHA), developed the 203k home improvement loans program to foster the rehabilitation of existing homes, also referred to as ?fixer-uppers.? These home improvement loans offer borrowers the option of both purchasing and renovating a home under the terms of a single loan, and in one monthly loan payment. The program continues to offer MN home improvement loans today.
?Streamline and Regular FHA Home Improvement Loans
?Under the terms of the 203k loan program, borrowers can choose between streamline and regular MN home improvement loans. A streamline loan is designed for those who need simpler, more cosmetic home repairs, and the amount of updates and repairs does not exceed $35,000. The regular FHA home improvement loans in Minnesota are geared toward more serious and extensive home rehabilitation. In fact, the FHA guidelines for 203k construction allow for the razing of much of a home?s exterior. The main rule is that the original foundation of the building must remain in tact and largely untouched.
?Residential and Commercial Housing
?The MN home improvement loans sponsored by the HUD and FHA are, for the most part, allocated to owner occupied ?homes (of no more than four units) that are used for residential purposes only. However, these MN home improvement loans can also be granted to individuals who reside in ?mixed-use? properties, which are buildings used for both residential and commercial purposes. The stipulations for the eligibility of these properties are somewhat strict, however: for example, within a single story building, only 25% of the property can be used for commercial purposes.
?FHA Home Improvement Loans Application Requirements
?The application requirements for the FHA MN home improvement loans are similar but not identical to those for loans offered by private lenders. Financial and employment information must be submitted to lenders, but eligibility qualifications are a bit more relaxed for FHA loans. Because these home improvement loans are guaranteed by the FHA, lenders feel safer in granting funds to individuals with lower income levels and credit scores. Therefore, lenders are less apt to dismiss an application with a low credit rating; rather, they will address and approve cases on an individual basis.
FHA Home Improvement Loans?Mortgage Payments
?All payments on the loan are deigned to fit into the applicant?s budget. The FHA caps the required monthly payments at 29% (or less) of a household?s overall income. Additionally, borrowers can opt to include some closing fees and several months of mortgage payments into the loan itself, which can be helpful if they need a bit of a ?buffer? before beginning the payment plan. Standard FHA down payments of 3.5% ?are also relatively low.
?Sustainable Living and Energy Savings
?Another benefit of these MN home improvement loans being government insured is that they are encompassed by government-sponsored energy and sustainability initiatives. All construction conducted with 203k home improvement loans in Minnesota must meet the FHA?s requirements for energy ratings, which means that all appliances installed will be up to the latest energy efficient standards. For homes undergoing major remodeling with a regular 203k loan, solar power systems may be recommended. Weatherproofing and insulation tasks may also be completed.
?Detailing the Construction Work
?One of the drawbacks of FHA MN home improvement loans is the amount of work that must go into detailing the necessary construction and repairs. If a homeowner needs a kitchen renovated, for example, it is not enough to simply list ?kitchen remodel? on the list of renovations. All of the materials, details, and estimated costs associated with that remodel must be itemized on the loan application, as this is how the overall loan amount is determined. Additionally, a contractor should go out to review the property as well, in order to verify the listed rehabilitations for the lender.
?FHA Home Improvement Loans Contractors and Scope of Work Contracts
?Once a home buyer or home owner decides to take advantage of a FHA MN home improvement loanthey will want to work with a 203k loan specialist to help them obtain approval for their financing. The contracting group selected should also be familiar with FHA home improvement loans. Contractors for Remodeling Minnesota Housing is one of these groups, and can help with 203k renovation projects in the greater Twin Cities area.
FHA MN home improvement loans have proven to be an excellent way to facilitate home purchases and renovations, particularly for those facing difficult economic situations. In the same vein, in the midst of the recent housing and credit crisis, this loan program has grown in popularity. MN residents who have questions about the process, or those who are ready to begin the FHA 203k loan process, should call Dave Sawicki at CRMH for details.
Source: http://203khomeremodelingmn.com/fha-home-improvement-loans-minnesota/
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