Monday, February 25, 2013

Fix what's broken and earn along the way

In light of the financial difficulties posed by the last decade’s economic crisis, the Federal Housing Administration’s (FHA) 203(k) program aims to help individuals repair and renovate homes and acquire income in the process.

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With the 203(k) program, an individual can fix his or her house and charge the costs to mortgage payable over 30 years. This applies to renovating single-family homes or multifamily structures with up to four units. The total loan amount is taken from the property’s appraised value, together with the repair costs. Borrowers are required to make a down payment of only 3.5 percent of the loan.

The loan does more than just help individuals fix their homes. It may also allow them to profit from the repair. By buying a property for a low price and choosing fairly inexpensive but high-quality renovation, a borrower has the chance to incur a sizable equity.

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However, there is one catch. The borrower must live in the building up for repair. Experts on the loan stated that borrowers typically buy a run-down multifamily house, repair it, and then live in it for a year. They then refinance the loan to turn it into a conventional loan, then move on to another house. Most borrowers do this because of the 203(k) program’s interest rate, which is higher than most conventional loans at 3.75 to 4 percent. Additionally, borrowers have to hire a consultant who will determine whether the repairs done on the house comply with the government’s health and safety standards—which can incur additional expenses.

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As the famous quote from Lucille Ball goes, luck is “realizing what is opportunity and what isn’t.” To an individual with the right know-how, the 203(k) program not only helps build a home, it also opens many windows of financial opportunities.

Network Capital Funding offers many types of loans which borrowers can choose from. The firm’s team of experts helps clients determine the type of loan that works best for them. This website offers more information about the company and its products.

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