New Federal Incentives for Home Rehabs

By: Salina Greene, Outreach Coordinator, NHS of Baltimore

The sheer number of available renovation-ready rowhomes is skyrocketing in Baltimore. This is in response to the growing number of foreclosures, bank-owned and distressed properties. The government offers a loan program, with an excellent interest rate, for people interested in investing in a large home renovation project. It is called the Federal Housing Administration’s (FHA) Section 203(k) program. Homebuyers are only required to contribute a 3.5% down payment.

The added incentive is a single mortgage is combined with renovation costs. This simplification process is attractive to first-time homebuyers, as well as investors. In the wake of the recession, it is easier to purchase a rehab home at a cheaper rate, then to purchase a brand new and/or custom-built home. Many could not afford to purchase a home if it was not for this program, and the $8,000 tax credit.

Realtors are providing their clients with all the information they can about the program. They are trying to get them pre-qualified as there is a rise in short-sell properties. A number of short-sells require moderate to major repairs. Most of the time, the sellers are unwilling to invest money in the repairs. With the deteriorating condition of vacant homes on the rise in Baltimore, the 203(k) program is getting a lot more attention.

Another similar program is the 203(k) streamlined program. This allows the borrower to add up to $35,000 in renovation costs to their current mortgages. The standard program does not have a loan amount limit. The general requirement for both programs is the overseeing of all the renovation work by a HUD-approved consultant. They are responsible for giving you an estimated cost of repairs needed. Health and safety issues are also their highest priority. Make sure you pick a reputable home contractor for your repairs, to maximize your expenditures.