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
Fedeal
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.
