There are quite a few options when it comes to funding and finances. While there are plenty of conventional sources, one unconventional choice or option is rehab loans. These loans are characterized by:
- Being insured by a government agency
- dispersed through traditional lenders
- being used primarily for the rehabilitation of a neighborhood or even a building and
- its ability to be used even to buy property.
What is a rehab loan?
While a rehabilitation loan can come in handy to make improvements to buildings and neighborhoods, sometimes it is also used to make a property purchase. There are many rehabilitation loan programs and in the USA, it is known as the Housing and Urban Development 203 (k) loan program. It can be availed for a large range of home improvement projects and with a bit of knowledge about the criteria for such loan eligibility, almost any individual can avail the same in order to buy or improve his property.
Rehab loans are becoming rather popular because they allow an individual in not only purchasing a home but in renovating it as well. Of course, the loan program has been around for quite a bit of time but because it allows an individual to purchase and improve his investment, there have been a lot of takers for the same.
It is also true that rehab loans are becoming popular because, quite a few times, conventional loan agencies and lending institutions do not advance the necessary funds to people for property investments. On the other hand, governments would be interested in giving rehabilitation loans to people because it also goes a long way in helping improve a neighborhood.
For instance, if a house has been in the market for many years and has not found a buyer, it is quite likely that it is in a pretty rundown condition. So, if an individual is ready to buy and renovate the same, it means that the neighborhood gets to look good as well! And this is where rehab loans come into play.
The Federal loan structure
When it comes to the 203(k), it is available in 2 options:
- Streamline K and
- Consultant K.
The Consultant K is used for major renovations which cost at least $5000 and have no maximum. It will entail an inspector, approved by the FHA or Federal housing administration, making visits to the property. The Streamline K is for projects that cost less than $35,000. Depending on the type of property and the individual’s finances, either one of the options can be exercised.
One thing for sure, as useful as a rehab loan is, an individual must also be prepared for doing all the necessary paperwork and proving creditworthiness in order to avail the same. But, the effort would completely be worth it because at the end of a certain timeframe, this individual would have ownership of a property to call his own.
Thus, rehabilitation loans can indeed come in handy for an individual and the neighborhood at large. Whileconventional lenders may not always cover every kind of investment or renovation project, a rehab loan most certainly can.
To know more, please visit: http://www.val-chris.com