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©
2002 Ruth E. Campbell. |
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Frequently Asked Questions Owning
Your Home - Q & A Q: Are there gov't programs for rehab?
A: 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 D
streets S.W., Washington, DC 20410. 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. Resources: * "The Ultimate Language of Real Estate,"
John Reilly, Dearborn Financial Publishing, Chicago; 1993. 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, Washington,
D.C.; (202) 588-6000. |