Finance Aging-in-place Upgrades

Are you or a family member facing a health crisis that requires structural changes to your home to enable you to continue to live there? Have you heard about the 203k loan programs that can help you age in place or stay in your home after a health crisis requires modifications? The following tells you all about both the Standard and FHA versions of the program!

By Elyse Umlauf-Garneau

When Ginger Bell’s dad faced a health decline a few years ago, getting around the house in a wheelchair and doing daily tasks became a challenge for him.
Such a scenario is familiar to anyone with aging relatives.

Bell says her parents would’ve been ideal candidates for the Streamline FHA 203k Loan Program, which allows homeowners to refinance an existing mortgage and roll home improvement costs into a single loan. In other words, homeowners using the loan don’t have to save up cash or hunt down separate financing for their renovation projects.

“It provides an alternative when couples want to stay together in a home but when there’s declining health,” comments Bell, an education specialist with Go2Training, Portland, Ore., and who teaches mortgage professionals about the FHA’s 203(k) program.

The program features two types of 203k loans, and each lets homeowners accomplish different goals.

The Standard 203k (sometimes referred to as Full or Regular) is aimed at more comprehensive projects that require structural changes and additions, or, for example, at buying and fully overhauling a bank-owned property.

The FHA 203k Streamline (frequently referred to as the Streamlined K or Limited Repair Program) is intended for smaller jobs, such as aging-in-place projects, costing up to $35,000 that doesn’t entail structural modifications.

Unfortunately, Bell’s dad faced additional health hurdles and wasn’t able to use the loan to address any home upgrades.

That’s one reason to perform aging-in-place projects before you’re in a pinch.

Upgraded property, lower payments

So if you’re looking to just make cosmetic upgrades or incorporate universal design elements in your primary residence, the FHA Streamline203K loan could make the difference between your being able to age at home and needing to hunt down alternate housing, such as assisted living.

Upgrades also have the potential to increase a property’s value.

Bell offers this success story: “A Colorado couple used the 203K to refinance their existing home. They put in new windows and doors, upgraded their kitchen, and finished a room above the garage. And they decreased their monthly house payments,” she recalls.

Is my project covered?
There’s a tremendously long list of projects that can be financed with a Streamline 203k, including painting and new carpet or flooring, waterproofing basements, addressing deferred maintenance issues, and converting spare bedrooms into caretakers’ quarters.

Here are just three types of projects that you can fund to prepare your house for easier aging.

Universal design. Widen doorways, lower countertops, make bathing facilities accessible, and install ramps.
Healthier, greener environment. Eliminate health and safety hazards, such as lead paint, asbestos and mold; swap carpeting for bamboo flooring; and replace inefficient kitchen gear with Energy Star appliances.
Energy efficiency. Replace windows, doors, perform weatherization projects, and upgrade HVAC systems both to make a house more comfortable and efficient and cut energy bills.

For a full list of eligible projects, see www.fhainfo.com/fha203k-streamline.htm.

Know yourself and your consultants

The loan isn’t without stringent guidelines, however.

For one, repair costs with the Streamline 203k can’t exceed $35,000 (for projects over that amount, you can consider a Full 203k loan) and properties must be owner-occupied, meaning, for example, that such loans can’t be used to renovate investment properties.

And since the loan process deviates a bit from what people are used to, it’s important to understand the details and timeline and find experts, including loan officers, contractors, and other advisors, who are familiar with the loan.

Here are three considerations:

Smart lenders. Work with licensed loan originators who understand and can explain the wrinkles of 203k loans. Such experts will be able to assess whether you’re a good candidate for and qualify for such a loan. They also can outline other financing options and help you decide what’s best for your long- and short-term needs. To vet your loan expert and be sure he or she is properly licensed, see http://nmlsconsumeraccess.org.
Vet contractors. Call references and ask about contractors’ experience both with the 203k program and with home remodeling. And, says Gary Smith, someone with a cost estimating background is immensely helpful. Smith, a construction consultant in Ridgeland, Miss., has had a long career in the home industry and is a licensed professional home inspector, a remodeler, and a FHA 203K Consultant.
Sure, there are always change orders with construction jobs. But you don’t want a $6,000 project turning into a $15,000 one because the contractors’ estimates were a “little” off due to inexperience.
Know yourself. If you have limited patience and want your project done in a week, then maybe the 203k route isn’t for you, suggests Smith. “It’s not for everyone. There can be approval and construction delays and scheduling conflicts because there are quite a few players involved in the process.”

Resources:
Here are some online spots to learn more about FHA 203k loans: