How to build repair costs into the home loan

When a homebuyer wants to purchase a house in need of repair or modernization, the homebuyer usually has to obtain financing first to purchase the dwelling; additional financing to do the rehabilitation construction; and a permanent mortgage when the work is completed to pay off the interim loans with a permanent mortgage. Often the interim financing (the acquisition and construction loans) involves relatively high interest rates and short amortization periods. The Section 203(k) program was designed to address this situation. The borrower can get just one mortgage loan, at a long-term fixed (or adjustable) rate, to finance both the acquisition and the rehabilitation of the property. To provide funds for the rehabilitation, the mortgage amount is based on the projected value of the property with the work completed, taking into account the cost of the work.

It’s a great program, especially when the home you are wanting to buy is not eligible for ‘regular’ financing due to repairs or missing elements (like a septic system)

Email me at melissa@nomesweethomes.com if you would like the names of the 3 lenders in Alaska who are qualified to process these types of loans or have general questions about the program.

 



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