About Federal Home Improvement Loan Programs
Federal Home Improvement Loans are offered by the Department of Housing and Urban Development (HUD) to low and medium income households to help them to pay for their home improvements. Private lenders administer the program, but it is subsidized by the federal government. In most cases, the loans are used to provide for critical infrastructural improvements, such as plumbing and electrical maintenance.
Significance
The Department of Housing and Urban Development generally administers this loan program through the various state housing administrations. The primary goal of the program is to assist in the renovation of run-down low income neighborhoods throughout the country. The majority of the recipients are landlords renovating properties for low income renters, but people of all sorts use these loans to finance improvements like garages, barns and more.
Function
The three main qualifications for a federal home improvement loan are: the property must be a one to four family dwelling; the home needs to be more than a year old; the loan cannot be more than 100% of the growth in home value caused by the improvement.
The program, called Section 203(k), must be requested from private lenders.
Features
Under certain conditions, a person who is leasing property can also qualify for a federal home improvement loan. The loan is also insured by the Department of Housing and Urban Development for $25,000 in case any problems involved in the improvement. The amount of the loan needs to be $5,000 or more, and the work it pays for needs to be more than minor cosmetic repairs.
Effects
In most cases, these loans pay for the repair of structural damage, modernization, eliminating health hazards such as toxic paint and asbestos, improving accessibility for the disabled, energy conservation improvement and major landscape work. One important thing to understand is that after taking out the loan, designated work needs to begin within 30 days. Work cannot be interrupted for more than 30 days and must be completed within six months.
Considerations
The 203(k) financing program mostly applies to home buyers who are looking to finance renovations without turning to expensive short term financing options from purely private lenders. Although private lenders administer the loans, the rates are set by HUD, and the financial institutions receive money from the government to help finance them. As long as you fulfill the requirements in the agreement, a low-interest federal home improvement loan can help you finance home renovations that greatly improve your living conditions and increase the equity you have in your home.
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