Few people realize that they have access to a potentially large number of different grants and loan schemes that can give them the funds they need to repair their home, or even to allow them to afford to purchase a home. There is a very large number of such schemes available to US residents, many of which are backed by federal agencies such as the Department of Housing and Urban Development (HUD).
Home Repair GrantsHome repair grants can be obtained in a number of different places, and are surprisingly easy to apply for-at www.grants.gov, for example, anyone can sign up and search a database of federal grants that they can apply for providing they meet the required criteria. The web site of the Catalog of Federal Domestic Assistance (http://12.46.245.173/cfda/cfda.html) also provides an extensive list of different types of housing grants and loan schemes for a wide variety of different purposes, and for different groups of people. Each has different eligibility criteria-some, for example, are open only to senior citizens, while others are open only to residents of rural areas, and still others are open to anyone who occupies the property they wish to apply for a grant for. Most people, therefore, will generally qualify for at least one type of home repair or other housing grant.
The HUD Section 203(k) Mortgage PlanThe US Federal Housing Association (FHA) currently administers several HUD home repair and rehabilitation schemes. These schemes are designed to help people and communities rehabilitate their homes, and are also intended as a way of increasing opportunities for home ownership.
The most extensive HUD rehabilitation program is known as Section 203(k), and is designed to provide families with a means of obtaining permanent financing for homes that require extensive rehabilitation. Lenders do not normally finance such homes, as the condition and value of such properties rarely matches up to the amount borrowed. In these situations, the borrower must get an interim loan, usually at a higher interest rate, to purchase the house, and then a second loan for money to do construction and rehabilitation work. Only when the house is complete can the borrower apply for a mortgage to pay off the existing loans.
Section 203(k) allows borrowers to get a mortgage that covers the costs of the purchase and the rehabilitation of a property at the time of purchase-before the rehabilitation work has even begun. Funds are provided both to purchase the property and for rehabilitation, based on the projected value of the home after the work has been completed. The mortgage is endorsed by HUD to reduce risk to the lender.
Is your Home Eligible?An eligible property must meet the following
criteria:
- A 1-4 family dwelling
- A property must require at least $5,000 worth of repairs (cosmetic repairs such as repainting by themselves are not acceptable, but can be included in the total)
- Construction has been complete for at least one year
- Property must conform to all local zoning requirements
- Homes that have been or will be demolished as part of the rehabilitation plan are eligible as long as at least part of the existing foundations will remain.
- Condominiums may qualify as long as the condo is owner-occupied, rehabilitation is limited to the interior, and the maximum amount borrowed does not exceed 100% of the value after rehabilitation.
- Refinancing a home you currently own with the intention of rehabilitating is also permitted.
There are also some rules as to how long rehabilitation may take. First, work on the property must begin within 30 days of the agreement being executed. Second, work on the property must not be stopped for more than 30 consecutive days. Third, the work must be completed in full within a specified time period (typically six months).
What Improvements are Eligible for Financing?
In general, any luxury improvements are not eligible for financing. Any improvements that are not part of the property are also prohibited. However, the money can be used to finance room additions, building decks and similar structures. In addition, all applicable improvements must meet certain energy conservation standards.
Energy-Efficient Mortgages
HUD also backs an energy-efficient mortgage program that helps home buyers or owners purchase an energy-efficient home, or refinance and remodel their existing home to become more energy-efficient. Almost anyone is eligible to apply for such a mortgage, providing they meet certain income requirements and can prove their ability to pay the loan. The improvements made must also meet eligibility criteria-the total cost of the improvements must be less than the value of the energy that the applicant will save by adding energy-efficient improvements to their home. There is also a limit on the amount of money that can be borrowed for energy-efficient improvements. This is the greater of $4,000 or 5% of the current value of the property.
