| |
Most mortgage financing plans provide
only permanent financing. That is, the lender will not usually
close the loan and release the mortgage proceeds unless the
condition and value of the property provide adequate loan
security. When rehabilitation is involved, this means that a
lender typically requires the improvements to be finished before
a long-term mortgage is made.
When a homebuyer wants to purchase a house in need of repair or
modernization, the homebuyer usually has to obtain financing
first to purchase the dwelling; additional financing to do the
rehabilitation construction; and a permanent mortgage when the
work is completed to pay off the interim loans with a permanent
mortgage. Often the interim financing (the acquisition and
construction loans) involves relatively high interest rates and
relatively short amortization periods.
With the 203(k) through
American United, the borrower can get just one mortgage loan, at
a long-term fixed (or adjustable) rate, to finance both the
acquisition and the rehabilitation of the property. To provide
funds for the rehabilitation, the mortgage amount is based on
the projected value of the property with the work completed,
taking into account the cost of the work.
Here's a simplified
example: Let's say you located a home for sale in need of repair
or modernization. To purchase the home the seller was asking
$40,000.00. After further review, you and your home inspector or
contractor determine that there would be an additional
$60,000.00 needed for major repairs and upgrades. Therefore, the
total cost to purchase and repair the property would be
$100,000.00. Under normal loan programs, you would have to
complete all necessary repairs prior to closing with your own
funds or obtain costly construction loans. Under the 203(k)
program, American United would lend you 97% or $97,000.00 to
purchase and repair your new home. That means your down payment
expense in this example would only be $3000.00!! In addition, a
homebuyer is allowed to finance 97% of closing costs and
mortgage payments during construction.
|
