What’s the One Unbreakable Law of Real Estate?

“Perform due diligence!” is the one law you should never break in any kind of real estate deal – residential, multi-occupant, or commercial!

What is due diligence? It’s a common phrase for the evaluation of a property and its surrounding environment before you commit to buying it.

Due diligence has two objectives. First, you want to reduce or eliminate risk! Needless to say, you’ll be assuming a large loan and will want to know exactly what’s right or wrong with a property before you sink any money into it.

Two, due diligence allows you to uncover real bargains, especially for investors. On the surface, one property may look like a “loser,” but a closer inspection may reveal that the building is structurally sound and requires only minor and inexpensive maintenance and repairs.

One part of due diligence is what you’d expect – the physical inspection of the property and inspection of all documents and records concerning that specific property. The other part is the inspection of the documents and records concerning that property.

In this article, I’ll just talk about the physical inspection portion of due diligence.

Physical Inspection of Properties

Below, I’ve listed all the inspection tasks which should be performed by a professional inspector. Of course, you should visit the property as well. Many times, a quick “eyeballing” can reveal any obvious signs or poor maintenance or decay - a leaky roof, wet basement, foundation cracks, cracks in the walls, plumbing leaks, etc.. In those cases, you’ll know you don’t need to waste any further time on that property.

As I mentioned earlier, such an inspection may reveal that you’ve actually got a bargain on your hands instead of a “dog.” In such a case, you’ll want to purchase or invest in that property quickly.

What happens when you find problems in a property and still like it? Well, then, you can require that the seller correct those problems or reduce the price before you sign any contract.

In general, defects fall into two categories. One category contains the obvious defects – wet basements, peeling paint, broken windows, leaky plumbing, warped floors, etc.

The other category contains the more expensive and dangerous hidden defects. These can include corroded pipes in the walls, roof or window leaks that don’t show up until it rains or snows, subtle cracks in the foundation.

Obviously, you want to make sure these hazards are spotted before you ever sign a purchase agreement. They can cost you a lot of money in the long run, not to mention the fact that they can send your blood pressure through the roof!

What Do Professional Inspectors Look For?

Below are the items inspectors examine when they check a property:

• Overall structural integrity
• Property drainage/landscaping
• Walks and drives
• Foundation, footings, crawl space, basements, sub-flooring, decks
• Exterior walls, siding, trim
• Windows, doors, cabinets, counters
• Gutters, downspouts
• Roof, roof shingles, roof structures. chimneys, attic
• Floors, walls, ceilings, etc.
• HVAC systems
• Plumbing systems, (fixtures, supply lines, drains, water heating devices, etc.)
• Electrical system (wiring, service panel, devices, and service capacity
• Energy conservation/safety Items
• Insulation & ventilation
• Moisture intrusion/mold

And, of course, we can’t forget the voracious appetites of….bugs!

Pest Control Inspection

Depending on the area of the country in which you live, insects can cause a heckuva lot of damage to a property!

I’m talking about such bugs as termites, carpenter ants, powder post beetles, and any other insect that likes to munch on wood. Then, there’s fungus, in the form of “dry rot.” It can also cause a lot of destruction.
In such cases, you’ll need to hire the services of a specialist (pest control inspector) to examine the property.

If the operator identifies any problems, he or she should provide you with a diagram that pinpoints the location of the infestations. If serious problems exist, they need to be corrected immediately! The expense is usually paid for by the seller.

To protect yourself against any of the problems I mentioned above, ensure that the purchase contract provides for cancellation without penalty or loss of money if the physical condition of the property doesn’t meet standards.

So, there you have it – all the physical items you or an inspector should check on to meet the law of due diligence! Remember – never, ever break this law! To learn more about any special concerns for due diligence in our area, contact me today!

For Your Clients: Interpreting a Home Inspection Report

RISMEDIA, July 8, 2010—A home inspection report is an important document that a potential buyer will have that accurately describes the conditions that exist in the house they are considering buying. It is crucial that your client receive a well written and detailed home inspection report and working with your client to interpret the inspection report can help eliminate confusion and indecision. This article will attempt to give you some guidance to assist your buyers with interpreting a home inspection report.

There are many styles of home inspection reports used by property inspectors, including a hand written checklist, a digital checklist or a computer generated report. But the most important aspect within an inspection report is the descriptions given for each system or component.

A typical home inspection report will be divided up into systems that make up the building. Each system is identified and a report on the condition of each system is delivered to the client.

A system is a group components assembled together through building techniques that make it complete. For example, a roofing system might be made up of several components such as rafters, sheathing, roof covering and flashing. The inspection report will identify the visual components that make up the system and report on their condition.

If there is an issue with the condition of the system or any individual component, the inspection report will comment on the type of deficiency and provide the buyer with possible recommendations such as replacing, repairing, monitoring or even bringing in a professional for further evaluation.

Deficient or defective items: If an item is deemed deficient in the inspector’s opinion, then it is either not functioning as intended, has come to the end its useful life expectancy or has deteriorated to the point that replacement or repair is imminent. An example of a deficient item may be a roof covering with severely cracked and curled shingles, even if there is no sign of leaking. The inspector may report this as deficient because the condition of the system is nearing the end of its useful life and replacement in the very near future is imminent.

Safety issues: If the inspector finds safety issues in the home, the report will reflect the nature of the safety issue—where in the home the safety concern was found and a recommendation to correct the safety concern. Safety issues can be minor in expense but important to the safety of the occupants of the home. For example, a bathroom without a GFCI (ground fault circuit interrupter) may only be $15.00 to repair, but the potential danger it poses for the occupants of the home would necessitate the item being tagged as a safety issue.

Maintenance: If a maintenance item is in the report, the inspector has determined that some maintenance is needed to prevent a safety issue or the deterioration of another part of the home. For example: If the inspector finds the gutters are full of debris but are properly attached to the home and in good condition, they might put that in the report because during a rain storm, the gutters would overflow, dumping large amounts of water next to the foundation of the home and eventually begin to erode the soil around the foundation.

Common terms used in an inspection report

-Recommend: The inspectors’ opinion of how to guide the client to resolve noteworthy issues found during the inspection. Common recommendations would be to replace, repair, monitor or evaluate.

-Visual inspection: The general scope of the inspection is limited to a visual inspection which means that the inspector is not required to disassemble equipment.

-HVAC: Heating ventilation air condition system.

-Condensate line: The copper pipe that runs from the outside air conditioning condenser to the inside furnace (where the A/C coil is located).

-Ductwork: A system of distribution channels used to transmit heated or cooled air from a central system (HVAC) throughout a home.

-Damper: An air valve that regulates the flow of air inside the flue of a furnace or fireplace.

-Pilot light: A small, continuous flame (in a hot water heater, boiler or furnace) that ignites gas or oil burners when needed.

-Accessible: Can be approached or entered by the inspector safely, without difficulty or danger.

-Blow insulation: Fiber insulation in loose form used to insulate attics and existing walls where framing members are not exposed.

-Board and batten: A method of siding in which the joints between vertically placed boards or plywood are covered by narrow strips of wood.

-Buckling: The bending of a building material as a result of wear and tear or contact with a substance such as water.

-Cantilever: A projecting beam or other structure supported only at one end. Any part of a structure that projects beyond its main support and is balanced on it.

-Cast iron: Heavy metal formed by casting on molds. The metal is covered with a porcelain enamel coating to make fixtures such as cast iron tubs.

-Ceiling joist: One of a series of parallel framing members used to support ceiling loads and supported in turn by larger beams, girders or bearing walls. Also called roof joists.

-Cellulose insulation: Ground-up newspaper that is treated with a fire retardant.

-Celotex: A brand of black fibrous board that is used as exterior sheathing.

-Flashing: Material used around any angle in a roof or wall to prevent leaks.

-Earthquake strap: A metal strap used to secure gas hot water heaters to the framing or foundation of a house. It is intended to reduce the chances of having the water heater fall over in an earthquake and causing a gas leak.

-Sump: Pit or large plastic bucket/barrel inside the home designed to collect ground water from a perimeter drain system.

-Sump pump: A submersible pump in a sump pit that pumps any excess ground water to the outside of the home.

-Trap: A plumbing fitting that holds water to prevent air, gas and vermin from backing up into a fixture.

-Knob and tube wiring: A common form of electrical wiring used before World War II. When in good condition, it may still be functional for low amperage use.

-BX cable: Armored electrical cable wrapped in galvanized steel outer covering. A factory assembly of insulated conductors inside a flexible metallic covering.

-Circuit breaker: A protective device which automatically opens an electrical circuit when it is overloaded.

-Ground-fault circuit interrupter (GFCI): A device intended for the protection of personnel that functions to de-energize a circuit

-Grounded: Connected to earth or to some conducting body that serves in place of the earth.

For more information, visit www.hometeaminspection.com.

From: http://rismedia.com/2010-07-07/for-your-clients-interpreting-a-home-inspection-report/

7 Things All Borrowers Should Know About FHA Loans

RISMEDIA, July 3, 2010—FHA Pros, LLC, a national FHA condo approval service, has developed a list of facts speaking to the top misconceptions associated with FHA loans in order to help home buyers better navigate an already confusing market.

FHA loans are mortgages issued by qualified lenders and insured by the Federal Housing Administration (FHA).

“We have seen home buyer interest in FHA loans go from practically zero three years ago to upwards of 87% today,” said Christopher Gardner, founder and president of FHA Pros, LLC. “Despite this rapid rise in popularity, many buyers still do not fully understand the benefits of these loans, and we believe it’s time to change that.”

1. FHA loans are not only for lower-income borrowers. FHA loans are available to everyone. There is no maximum income restriction associated with FHA loans, but borrowers do need to substantiate income and assets by submitting proper documentation. This requirement ensures that borrowers are well-vetted and truly
able to afford their future homes.

2. FHA loans are not only for first-time buyers. Many people believe FHA loans are available only to first-time home buyers, but this is not the case. Whether borrowers are making their first home purchase or their fifth, they can look to FHA loans as a home financing option.

3. FHA loans are not just small loans; in fact, loan amounts can be as high as almost $800,000. The overnment recently raised the maximum loan amount from its original cap of $362,790 to $793,750 as a way to help stabilize the housing market. The amount a buyer can borrow varies from county to county though. Later this summer, condo buyers interested in FHA loans can visit www.checkfhaapproval.com to instantly identify FHA-approved condo associations and review maximum loan amounts for a given location.

4. FHA loans are not affiliated with the section 8 housing program. While both programs are administered by the U.S. Department of Housing and Urban Development (HUD), FHA loans have nothing to do with low-income subsidized housing. FHA loans are simply mortgages insured by FHA. This insurance provided by the federal government allows lenders to lend more freely by assuring them that they will be repaid in the event of default. Most traditional lenders, including Wells Fargo & Co., JP Morgan Chase and Citigroup are able to provide FHA loans to their customers.

5. FHA loans are often more affordable than conventional loans. While FHA loans typically offer the same interest rates as other loans, borrowers benefit from a much lower down payment of as low as 3.5%.

6. FHA-approved condo developments are more desirable to buyers. With 87% of home buyers indicating that they plan to use FHA loans, condo associations that are not FHA approved are missing out on a significant pool of prospective buyers. Under rules in place since February 2010, an entire condominium
development must now apply to HUD and be granted FHA approval before a buyer can purchase a unit in an association with an FHA loan or before an existing unit owner can refinance into an FHA loan.

Due to the general unwillingness of today’s lenders to extend credit with respect to conventional loans, many borrowers find that FHA is their best bet. Lenders don’t mind lending when the federal government (FHA) assures them of repayment. Homeowners associations (HOAs) should note that although FHA-insured mortgages might be easier to obtain, they are not “risky” loans, due in large part to the strict “full documentation” requirements placed on borrowers. Individual buyers or sellers can initiate the approval process or current owners can encourage their HOA to apply.

7. FHA loans are assumable. In addition to lower down-payment and credit-qualifying requirements as compared to conventional loans, FHA loans are assumable. This means that when a seller with an FHA loan sells his or her property, the loan and its financing terms (interest rate) can be transferred to the new buyer. This unique feature will certainly make a property more valuable in times of rising interest rates.

“Now, more than ever, buyers and sellers need to understand the options available to them when it comes time to buy a home,” continued Gardner. “At FHA Pros we have worked with countless HOAs, attorneys and individuals to easily and  efficiently navigate the historically tricky FHA-approval process.”

For more information, visit www.checkfhaapproval.com.

From: http://rismedia.com/2010-07-03/7-things-all-borrowers-should-know-about-fha-loans/

Investor – Do You Know the Seven Basic Principles of Real Estate Valuation?

With knowledge and mastery of the seven principles listed below, you’ll be able to valuate properties with an objective eye and sort out the good deals from the ones that are “money pits.”

Before we get to the principles, be aware that all of them relate to a fundamental maxim of real estate – “the highest and best use” of a property. In a legal sense, “highest and best use” is the use of a property that makes it the most valuable to a buyer or the market.

In a business sense, it means one single use will result in maximum profitability through the best and most efficient use of the property.


Okay, here are the seven principles:


Principle 1: Demand

In plain old English, do buyers want or need to own or possess a property and do they have the money to satisfy that need?

If, for example, you have a home (or rental property) in an upward-trending neighborhood, then you can anticipate a good-to-great demand that will allow you to charge accordingly!

Principle 2: Utility

The term “utility” refers to a property’s intended use; e.g., single-family home, rental property, retail function, industrial use, etc.

The gist of this principle is that you want a property to fulfill its intended purpose. That way, it’s in high demand in the right market.

Here’s an example of unfilled purpose: an upscale boutique stuck in a working-class neighborhood. Since the residents aren’t likely to have the money for luxury goods, this retail store would likely not have a great or profitable future. Clearly, this is not the “highest and best use.”

Principle 3: Scarcity

Put plainly, “scarcity” refers to the fact that the value of a particular property is set by comparing it to similar properties.

In technical real estate language, the “theory of substitution” states the following: “The value of a property replaceable in the market tends to be set by the cost of acquiring an equally desirable "substitute" property.”

Principle 4: Transferability

“Transferability” refers to the ease with which ownership rights are transferred from one owner to the next.

As you can imagine, investors love properties that are easily transferable (or relatively so). At the same time, they hate properties encumbered by liens, judgments, etc. because such legal issues eat up time and money and can ruin an otherwise good deal.


Principle 5: Regression

When a property’s value is negatively affected by surrounding properties, then you have a situation of “regression.”

The price of your property deteriorates when the nearby properties are of lower value, have inferior construction, or are just plain in lousy condition. Needless to say, you don’t want to buy the best property in a bad neighborhood. You’d simply be throwing your money away!

Principle 6: Progression

“Progression” is the opposite of regression. In this case, a property’s value rises upward because the surrounding properties have better quality, are in better condition, and possess a higher value.

Another way to spell progression is “opportunity!” In other words, you can purchase a sound but neglected/unmaintained property in a good neighborhood.

Then, by bringing the property up to neighborhood standards through repairs, maintenance and upgrades (“rehabbing”), you have the ability to gain great value at a very low cost.


Principle 7: Conformity

“Conformity” refers to the fact that property values are maximized when a property conforms to (is similar to) the properties surrounding it. Of course, the opposite is also true. If a property doesn’t mesh well with surrounding ones, its value decreases.

So, for example, if you buy a neglected property, you should renovate it to conform to neighborhood standards, but not over-improve it. Over-improvement can push that property into a higher cost bracket and limit your opportunities for selling or renting it!

In summary be aware that there many variables that can affect the highest and best use of a property. Zoning, re-zoning, the path of progress, etc. – all these factors can change the value of a property. That means, as an investor, you need to stay on top of the market!

Want to learn more about the fundamentals of the real estate market? If so, contact me right now at peg@maloney.com to discuss this matter or any other real estate matter of interest to you! I look forward to talking with you!

First-Time Home Buyers: Tips to Make Your House a Home

RISMEDIA, June 21, 2010—After getting the keys to their new homes, many first-time home buyers are excited about finally having the opportunity to personalize and furnish their new house. From coffee tables to lamps to lawnmowers, many previous renters leap into homeownership quickly realizing they need to do a lot of shopping to truly make their house a home.

“Whether you’ve been living in an apartment with roommates or at your parents’ house, many first-time home buyers do not think about all the items they need – and want – when moving into a house,” said Janice Jones, national vice president of merchandising for Centex. “With a little advance planning and budgeting, you won’t break the bank to make your new home a reflection of your personal style and showcase your pride of homeownership.”

A typical home buyer spends $7,400 on average on their home, with more than half of that spent in the first year after purchase, according to the National Association of Home Builders.

While many first-time home buyers may not have accounted for this level of spending, Jones offers advice on what types of items to purchase to not only properly maintain and live in the home, but also more importantly, items that help new homeowners feel like their house is a place to call home.

Furnishings

Many first-time home buyers no longer want their parents’ hand-me downs or their childhood bedroom set. From sofas to dining room sets to mattresses, many first-time home buyers take the opportunity to upgrade their furniture when moving into their new home. According to an NAHB study, furnishings take the biggest chunk of the budget, with home buyers spending about $5,300 on furnishings during the first year after buying a home. The biggest ticket item for all households is bedroom furnishings, including mattresses, followed by sofas.

Window coverings and linens

The median square footage of homes bought by first-time buyers is 1,500. So, you can only imagine the number of windows that need to be covered to ensure privacy and security in a home. According to Jones, many home buyers don’t account for this in their budget. Additionally, with the ability to now paint and decorate each room, new homeowners find that they want to purchase new bedroom and bathroom linens.

Garden tools

Since a first-time home buyer is likely to move into their home from an apartment, unless you plan on hiring a gardener, you’ll need to purchase a few basic gardening tools, including a lawnmower, garden hose, sprinkler and a shovel (for winter weather).

Flat screen TV

Let’s face it: many home buyers shop for their new home while taking into a consideration how a new, large, flat-screen television set will be situated in their new living space. So, it’s not a surprise that a hot item on the list is purchasing an entertainment system.

However, you’ll also need the basic appliances in your new home: a refrigerator, stove, and a washer/dryer. While many existing homes usually come with appliances, a home buyer needs to take inventory as to whether or not they will need to purchase these big ticket items before they purchase their new bedroom set.

Basic tool kit

Every home needs a well-stocked tool box. Many home improvement stores have sets you can purchase, but make sure it includes a hammer, screw drivers, pliers, wrenches, a tape measure and a staple gun.
“My biggest piece of advice for new home buyers is to be creative and tackle this room by room,” said Jones. “For example, after outfitting your home with the necessary items—like appliances and window coverings—move on to the kitchen and family room spaces. This area is the heart of your home where everyone gathers.

“Look for great values on the items you need that will be utilized most. Take your time and get the feel of how you want to use each space for both function and enjoyment. This strategy allows homeowners to stage their purchases and add new furnishings as the budget allows. Decorating your new home should be fun and a reflection of your personal style.”

For more information, visit www.centex.com.

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.

Five Ways To Keep Your Kid Safe This Summer

Five Ways to Keep Your Kids Safe This Summer

By Kristen Gerencher



RISMEDIA, June 9, 2010–(MCT)–As summer approaches, so does the prime injury season for children. Parents have different ideas about how to keep their kids safe, but their assumptions don’t always match up with some of the biggest known threats.

“By far, the leading cause of death in children is injuries, and there’s a lot we can do to prevent those injuries,” said Garry Gardner, a pediatrician in Darien, Ill., and chairman of the American Academy of Pediatrics’ committee on injury, violence and poison prevention. “Injuries, in general, cause more deaths in kids over a year of age than the next seven leading causes of death combined.”

Parents shouldn’t underestimate their role in keeping their kids out of harm’s way, said Alfred Sacchetti, an emergency physician at Our Lady of Lourdes Medical Center in Camden, N.J. “You are the No. 1 safety feature that comes with your child.”

Here are some of the biggest safety risks for children during the summer and otherwise — and what you can do to minimize them.

1. Suffocation and strangulation.

This pair is the leading cause of unintentional-injury deaths in children under age 1, according to the Centers for Disease Control and Prevention.

How to reduce the risk:

Make sure your infant has a sleeping environment free of pillows and soft bedding, and put him or her to sleep on his back in a crib, rather than in a bed with adults. Also position the baby far away from loose or hanging cords.

Parents should use cribs with four fixed sides, rather than those with sides that drop down. With the latter, parts can more easily break, deform or detach, opening up spaces where youngsters can become entrapped and suffocate, according to the Consumer Product Safety Commission and Consumer Reports. Drop-side cribs have been responsible for 32 infant and toddler deaths in the past nine years, according to the Consumer Product Safety Commission, which has recalled 7 million such cribs since 2005.

Parents who use a drop-side crib should check the plastic slides regularly and tighten the hardware if necessary, said Don Mays, senior director for product safety at Consumer Reports. “If there’s any missing or broken hardware, get rid of the crib,” he said. “Don’t try to fix it yourself.”

2. Drowning.

Among children ages 1 to 4, drowning is nearly tied with motor-vehicle accidents as the leading cause of death. Incidents frequently revolve around swimming pools and bathtubs.

How to reduce the risk:

Never leave a child unattended in a bathtub or allow a kid to swim without supervision. Avoid making or answering phone calls; that’s the biggest distraction for parents when children are in a bath or pool, sometimes with fatal results, Sacchetti said.

Home swimming pools should have a fence that wraps around all four sides of the pool instead of having one side open to the house, he said. Having four-sided fencing plus a separate pool-entrance gate can greatly reduce the likelihood of a child falling in and drowning.

Swimming lessons for kids over six months old can be fun, but parents shouldn’t get a false sense of security because there’s no such thing as drown-proofing your child, Gardner said. “I would recommend touch supervision under the age of three or four,” he said, which means you’re supervising your child in the pool or lake and they’re only a hand reach away.

3. Motor-vehicle crashes.

Car accidents are the leading cause of death among children over one year old, according to the CDC. And they account for as many as two-thirds of deaths among teenagers and young adults age 15 to 24.

How to reduce the risk:

Using age-appropriate car seats is critical to boosting a small child’s chances of surviving a crash, according to the National Highway Traffic Safety Administration.

Infants from birth to at least age 1 and 20 pounds should ride facing backward in a car seat placed in the back seat. After that, children should ride in the back seat using forward-facing toddler seats and then booster seats until regular seat belts fit properly—usually not until age 8 or when they’re 4 feet 9 inches tall, the NHTSA said.

Parents can have their car-seat installation checked by a professional for free. The NHTSA’s website lists car-safety experts by area.

4. Other car-related accidents.

Nearly 42 percent of the nontraffic fatalities in children under age 15 between 2004 and 2008 happened because drivers backed over kids, who often were in the vehicles’ blind spots, according to Kids and Cars, a nonprofit that tracks such accidents. More than 18 percent of nontraffic deaths occurred because children got heatstroke after being left in cars. Other risks include power-window strangulation, trunk entrapment and vehicles that are accidentally set in motion.

How to reduce the risk:

Teach children not to play in or around cars and supervise them carefully around vehicles. Make sure kids aren’t around before pressing the gas pedal.

It doesn’t take long for a child left in a car to overheat and die. So drivers should put a stuffed animal in the front seat or a briefcase or purse in the back seat so they don’t forget about the child in the back seat. “It can get very hot, lethally hot, very quickly, and children should never be allowed to be alone in a car ever, even for a moment,” Gardner said.

5. Head injuries.

Brain injuries remain among the most devastating for patients.

How to reduce the risk:

Always use the proper car seat or seat belts. Make sure kids wear sport-specific helmets when they’re playing sports or riding bicycles or skateboards. A child’s aversion to helmets is no excuse for not wearing them, Sacchetti said. “Your responsibility is to be their parent, not their friend,” he said. “The one thing you can’t do is sacrifice their safety to make them like you.”

(c) 2010, MarketWatch.com Inc.Distributed by McClatchy-Tribune Information Services.

FHA203K Rehab Loans

An FHA loan can provide a great deal of help to many families, but not everyone knows exactly what is and who it helps. To start, “FHA” stands for Federal Housing Association. This is the organization that administers the loan, and it is also a part of the Department of Housing and Urban Development (HUD.) Since the FHA doesn’t provide the loan directly, the borrower must contact a financial lending institution to receive the loan.

What is Required?

The FHA does, however, investigate the applicant and insures the lending institution against loss of principal, just in case the borrow does meet all the guidelines of terms of the mortgage. The borrower, who pays an insurance premium of one half of one percent on declining balances for the lender's protection, receives two benefits:

1. A careful appraisal by an FHA inspector.

2. A lower interest rate on the mortgage than the lender might have offered without the protection.

This federal assistance mortgage loan, secured by real property through the use of a mortgage note, can only be issued by federally qualified lenders. Other deciding elements of the application process include getting the house appraised and approval of the buyer’s credit.

The main mission of this kind of loan is to provide lower-income families with the resources to buy a home that they would otherwise not be able to purchase. The program started around the time of the Great Depression when foreclosures and defaults were on the rise. Nowadays, it strives to provide the same kind of assistance.

Insurance

You may be asking, “How does this program survive and where does it get its money?” Well, upon its entrance into the home-buying market, the loan was intended to provide lenders with enough insurance to make a profit. Today, it is fairly self-supporting thanks to the premiums that are paid to the lenders by borrowers.

While this loan program helps families in need maintain a home they would otherwise lose, it is more centrally focused on rehabilitation. The FHA 203(k) program could be categorized as a “home improvement” loan system. One of HUD’s main values is to open provide greater opportunity for homeowners to capitalize on their property, and this mission is carried out through the 203(k) program as well.


Lenders Won't Short You

Some lenders have been known to partner with nonprofit organization to assist with the revitalization of many homes, incorporating other housing assist services to give the borrower as many useful resources as possible.

Through their generous participation, lenders further their dedication to the Community Reinvestment Act (CRA), which was created in 1977 under the Housing and Community Development Act. The CRA is a federal law that encourages banks and other saving services to target and assist different segments of their respective communities with housing, especially lower income families.

What are All Its Uses?

The program isn’t always used directly by the lender. It can also provide money to rehabilitate property in three different ways:

- The loan can be used to purchase a dwelling on the land on which it resides, then restoring and reviving the property.

- The loan can be used to refinance current debt and refurbish a home (like most borrowers would use it for.)

- The loan can be used to buy a dwelling on a separate site and then move it to the land that has been mortgaged, then they can proceed to rehabilitate it in its new location.

No matter how you ended up with existing debt or a run-down home that you were unable to afford repairs for, the FHA 203(k) loan rehabilitation plan may be your light at the end of the tunnel. Lenders a generally rather generous and it can make an enormous impact in the life of you and your family.

For further comments of question, please feel free to contact me anytime by email, which is peg@maloney.com, or by phone at 402.598.3965.