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) 708-1112.
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, Washington, D.C.; brochure
online.
Q:
Are
there any special tax breaks for historic
rehab?
A:
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,
1785 Massachusetts Ave, NW, Washington,
DC 20036-2117; (202) 588-6000, nationaltrust.org
Q:
Can
you deduct the cost of home improvements?
A:
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.
Q:
How
do building codes work?
A:
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.
