Rehab loans are mortgage loans designed to finance the costs of acquiring and rehabilitating real estate into some sort of usable form. Loans of this type are sometimes offered through private as well as commercial lenders. In some countries, rehab loan programs are also available through governmental agencies with a focus on neighborhoods that are targeted for revitalization. When attempting to identify and select the best possible rehab loan, it is important to look closely at the range of lenders available, the qualifications that must be met in order to be approved, and the interest rates and terms that apply.
One of the first considerations with a home rehabilitation loan is which lenders to consider. In some areas, loans of this type are provided mainly through local, state, or national government agencies that currently provide support with neighborhood revitalization in inner city communities and other locations in which renewing an older area is considered economically feasible. For homeowners or potential buyers who are willing to purchase property in one of these areas targeted for renewal, looking into rehab loan options through a government agency can be worthwhile.
When government-provided rehab loan programs are not available in the area, it is wise to turn attention to other sources, such as banks and similar lending institutions. There is also the possibility of being able to secure a loan of this type through a private lender who has a vested interest in helping to revitalize a declining neighborhood. Local chambers of commerce and realtor associations can often provide contact information for any entities that provide assistance with home rehabilitation efforts.
After identifying potential lenders, turn attention to the qualifications that each lender requires applicants to meet. As with many types of lending situations, there are usually minimum standards in terms of the monthly income of the applicant, as well as credit checks to determine the level of risk involved in extending the rehab loan. Most lenders will provide information up front about the minimum requirements, making it easier to determine if it’s worth the time and effort to fill out and submit an application.
Before actually submitting an application for any rehab loan, spend some time qualifying the loan program. Here, the goal is to examine the basic terms and conditions related to the loan agreement and make sure that it is possible to comply with them. Look for provisions that have to do with not only the rate of interest involved but how it is applied to the total amount of the loan. Also determine if there are any other fees or penalties within the terms, such as filing fees or penalties for early payoff. It is important to understand exactly how much the loan will cost over the years, and compare that total with the costs of other loan options.
