Source: Hometown Living
Renovation loans such as the FHA 203(k) rehab loan offers homeowners as well as homebuyers the opportunity to refinance or finance a home along with a renovation. For example, instead of having to apply for two separate loans, a purchase-rehab loan allows homebuyers to purchase or refinance their primary home and renovate it with one convenient loan. A rehab loan takes away the anticipation homebuyers have while waiting to come up with the finances to renovate. In the past most banks would not grant a mortgage on a house that was in bad shape. Instead the fixer upper would have to be rehabbed before granting a mortgage. This rehab loan gives the opportunity for people to buy and renovate a home with the same loan. In Pittsburgh, the Pittsburgh Community Reinvestment Group (PCRG) offers a purchase-rehab mortgage loan called CARL. Its goal is to help in the revitalization of target neighborhoods in terms of increased property values, job creation, and a more robust tax base for the local economy. This financial strategy creates opportunity for homeownership while simultaneously allowing individuals and families to affordably make modern, energy-efficient repairs to create the home of their dreams.
This does not mean that anyone can take out one of these loans, one must find a home that needs cosmetic work done. The homebuyer must meet all lender requirements of the loan such as, minimum credit scores, debt-to-income ratios, and proof of income. After the loan is approved a date for closing will be set. The repairs must start 30 days after the closing and must be completed in six months.
Home Bridge Financial Services | What is a Rehab Loan?
PCRG | CARL Overview
Department of Housing and Urban Development | Paths to Homeownership for Low-Income and Minority Households
The Lenders Network | FHA 203k Loans: The Ultimate Guide [Updated for 2018]