Rehabilitation loans or rehab loans are exclusively meant for the real estate investors so as to purchase homes which are in need
of repairs. These loans are specifically aimed at rebuilding, restoring or to improve the structure of the house. Rehab loans are also taken out
to repair the damages caused to the property due to any disaster or calamity. However, this type of loan is generally taken out to fund
home improvement plans. The investors then fix the property and resell the property for a profit. These loans are sometimes used to refinance a
property.
The rate of interest associated with mortgage rehab loans is comparatively high in comparison to other property loans. Usually, the
term of a rehab loans ranges from 3 to 12 months. The loan proceeds have various usages such as for improving energy efficiency, for new
roofing, replacing electrical wiring, addressing lead paint hazards in a home, for plumbing and septic works.
To become eligible for such a loan, you, the applicant must be occupying the home currently. To obtain a rehab loan, you are required to submit an application with the
lender. However, you need to ensure that the terms and conditions of the loan are reasonable enough in order to satisfy your requirements.
The lenders who issue such loans not only check the financial position of the lender but they also check the repayment capacity of the lender.
Once you fulfill eligibility criteria rehab loans are approved by the Housing and Urban Development (HUD) officials. These type of loans
require a lot of paperwork and involves huge closing costs. Despite these odds, rehab loans are preferred by many of you. Moreover,
the rate of interest associated with rehab loans vary according to the structure of the house. The house under consideration may be a
single residence or two or more unit dwellings. These loans are offered to you as a means of encouraging you to keep the ownership of the
house. These loans are indeed very useful for the people with limited financial resources. Without this loan, many of you would not have
otherwise been able to afford a house of your own.
Usually, you can not obtain rehab loans from traditional banks or credit unions. In most of the cases, these loans are offered by the
hard money lenders or the private money lenders. These loans are not like the traditional mortgage loans or the FHA loans. These are special type of loans and these loans focus on different areas. These loans
may focus on the commercial properties, raw land or on development projects. The qualifying criteria for rehab loans depends on several
factors such as credit score, job history, monthly payments, down payments, W-2 statements, bank statements, etc.
Guest Post by: Alpena Liebe 10/21/11