| Owning
Your Home - Fixer-Upper Loans
Are there gov't programs for rehab?
The U.S. Department of Housing and Urban Development's Section
203 (K) rehabilitation loan program is designed to facilitate
major structural rehabilitation of houses with one to four units
that are more than one year old. Condominiums are not eligible.
The 203(K) loan is usually done as a combination loan to purchase
a fixer-upper property "as is" and rehabilitate it,
or to refinance a temporary loan to buy the property and do the
rehabilitation. It can also be done as a rehabilitation-only loan.
Plans and specifications for the proposed work must be submitted
for architectural review and cost estimation. Mortgage proceeds
are advanced periodically during the rehabilitation period to
finance the construction costs. For a list of participating lenders,
call HUD at (202) 708-2720. If you are a veteran, loans from the
U.S. Department of Veterans Affairs also can be used to buy a
home, build a home, improve a home or to refinance an existing
loan. VA loans frequently offer lower interest rates than ordinarily
available with other kinds of loans. To qualify for a loan, the
first step is to apply for a Certificate of Eligibility. Another
program is the Federal Housing Administration's Title 1 FHA loan
program.
Resources:
* "Rehab a Home With HUD's 203(K)" brochure, U.S. Department
of Housing and Urban Development, 7th and and D streets S.W.,
Washington, DC 20410.
How do building codes
work?
Building codes are established by local authorities to set out
minimum public-safety standards for building design, construction,
quality, use and occupancy, location and maintenance. There are
specialized codes for plumbing, electrical and fire, which usually
involve separate inspections and inspectors. All buildings must
be issued a building permit and a certificate of occupancy before
it can be used. During construction, housing inspectors must make
checks at key points. Codes are usually enforced by denying permits,
occupancy certificates and by imposing fines. Building codes also
cover most remodeling projects. If you are buying a house that
has been significantly remodeled, ask for proof of the permits
involved before you purchase to avoid future liability for fines.
Resources:
* "The Ultimate Language of Real Estate," John Reilly,
Dearborn Financial Publishing, Chicago; 1993.
Can you deduct the cost
of home improvements?
What you spend on permanent home improvements, such as new windows,
can be added into your home's cost basis, or amount of money invested
in a home, which reduces capital gains when it comes time to sell.
Capital gains are determined by the difference in price from the
time a home is purchased and the time it is sold, minus the cost
of any permanent improvements. However, the 1997 tax changes virtually
eliminates the capital gains tax for most homeowners (the exemption
is $250,000 for single homeowners and $500,000 for married homeowners).
Still, it is worthwhile to save all receipts for permanent home
improvements just in case. They also can be useful documentation
when it comes to marketing your home when you sell.
Are there any special
tax breaks for historic rehab?
Qualified rehabilitated buildings and certified historic structures
currently enjoy a 20 percent investment tax credit for qualified
rehabilitation expenses. A historic structure is one listed in
the National Register of Historic Places or so designated by an
appropriate state or local historic district also certified by
the government. The tax code does not allow deductions for the
demolition or significant alternation of a historic structure.
Resources:
* National Trust for Historic Preservation, Washington, D.C.;
(202) 588-6000.
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