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What is Rehabilitation Mortgage Insurance?
Section 203(k) insurance enables home buyers and homeowners to finance both the purchase (or refinancing) of a house and the cost of its rehabilitation through a single mortgage, or to finance the rehabilitation of their existing home. Section 203(k) fills a unique and important need for homebuyers. When buying a house that needs repair or modernization, homebuyers usually have to follow a complicated and costly process. The interim acquisition and improvement loans often have relatively high interest rates, short repayment terms and a balloon payment.
However, Section 203(k) offers a solution that helps both borrowers and lenders, insuring a single, long term, fixed or adjustable rate loan that covers both the acquisition and rehabilitation of a property. Section 203(k) insured loans save borrowers time and money. They also protect the lender by allowing them to have the loan insured even before the condition and value of the property may offer adequate security.
What does Rehabilitation Mortgage Insurance Cover?
HUD requires that properties financed under this program meet certain basic energy efficiency and structural standards, and the cost of construction to exceed $5,000:
- structural alterations and reconstruction
- modernization and improvements to the home's function
- elimination of health and safety hazards
- changes that improve appearance and eliminate obsolescence
- reconditioning or replacing plumbing; installing a well and/or septic system
- adding or replacing roofing, gutters, and downspouts
- adding or replacing floors and/or floor treatments
- major landscape work and site improvements
- enhancing accessibility for a disabled person
- making energy conservation improvements
What is a Renovation Consultant?
203(k) Consultant applicants must have a minimum of 3 years experience as a state licensed home inspector, remodeling contractor or general contractor and be approved by the U.S. Department of Housing and Urban Development (HUD). Approved candidates like Home Inspection Professionals - H.I.P. are placed on the Federal Housing Administration’s 203(k) Consultant Roster, which guarantees that the consultant has met the qualifications as prescribed by the FHA.
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