|
Protect Your Housing Investment
Your
home is an investment in living as well as in savings. If neglected, it
will pay no dividends. If properly maintained and improved, it will pay
a high yield in comfort and usefulness for your family and in avoidance
of costly repair bills.
Home improvements also tend to raise neighborhood standards and, as a
result, property values. From an economic standpoint, home improvements
mean higher employment, increased markets for materials and home
products-and therefore a more flourishing community.
If You Do It Yourself
If you are handy with tools and have the experience, you can save money
by doing many jobs yourself. But unless you are skilled in wiring,
plumbing, installing heat systems, and cutting through walls, you should
rely on professionals for such work.
When you buy the required materials, it pays not to skimp. Good
materials are not necessarily the most expensive. What you need are
products that look good, are easy to maintain, and last a long time. Buy
only from reliable dealers.
If You Use a Contractor
If you plan to use the services of a dealer or contractor, take care to
choose one with a reputation for honesty and good workmanship. There are
several ways to check on a contractor:
 |
Consult your local Chamber of Commerce, the Better Business Bureau,
State Attorney General or Local Consumer Protection Agency.
|
|
|
Talk with people for whom he has done work. |
|
|
If your contractor is going to arrange for financing your loan, find
out which lender he uses. Call the lender and inquire as to his
record with the lender. |
|
|
Check his place of business to see that he is not a fly-by-night
operator. |
|
|
Find out, if you can, how he rates with known building-product
distributors and wholesale suppliers. |
|
|
Ask friends and relatives for names of firms that they could
recommend. |
Compare Contractor Offers
Before deciding on a contractor, you may want to get bids from two or
three different firms. Make sure that each bid is based on the same
specifications and the same grade of materials. If these bids vary
widely, find out why.
Many contractors offer package plans that cover the whole transaction.
Under such a plan the contractor provides all materials used, takes care
of all work involved, and arranges for your loan.
Your contractor can make the loan application for you, but you are the
one who must repay the loan, so you should see that the work is done
correctly.
Understand What You Sign
The contract that both you and the contractor sign should state clearly
the type and extent of improvements to be made and the materials to be
used. Before you sign, get the contractor to spell out for you in exact
terms:
|
|
How much the entire job will cost you. |
|
|
How much interest you will pay on the loan. |
|
|
How much you will pay in service charges. |
|
|
How many payments you must make to pay off the loan, and how much
each of these payments will be. |
After the entire job is finished in the manner set forth in your
contract, you sign a completion certificate. By signing this paper you
certify that you approve the work and materials and you authorize the
lender to pay the contractor the money you borrowed.
Beware of Fraud
Most dealers and contractors conscientiously try to give their customers
service equivalent to the full value of their money. Unfortunately, home
improvement rackets do exist. Here are a few common sense rules to
follow:
|
|
Read and understand every word of any contract or other paper before
you sign it. |
|
|
Never sign a contract with anyone who makes fantastic promises.
|
|
|
Reputable dealers are not running give-away businesses. |
|
|
Avoid wild bargains. The best bargain is a good job. |
|
|
Never consolidate existing loans through a home improvement
contractor. |
|
|
Do not let salespeople high-pressure you into signing up to buy
their materials or services. |
|
|
Be wary of salespeople who try to scare you into signing for repairs
that they say are urgent. Seek the advice of an expert as to how
urgent such repairs are. High-pressure and scare tactics are often
the mark of a phony deal. |
|
|
Avoid salespeople who offer you trial purchases or some form of
bonus, such as cash, for allowing them to use your house as a model
for any purpose. Such offers are well-known gimmicks of swindlers.
|
|
|
Never sign a completion certificate until all the work called for in
the contract has been completed to your satisfaction. Be careful not
to sign a completion certificate along with a sales order.
|
|
|
Proceed cautiously when the lender or contractor demands a lien on
your property. Most lenders do not require a lien if the loan amount
is less than $7,500. |
Financing Improvements
As a rule, the thriftiest way to finance improvements is to pay cash.
But if you lack the funds even for immediate repairs such as replacing a
worn-out roof or a broken-down furnace, you should weigh the cost of
borrowing against the cost of delaying the work. If you have to borrow,
you want to do it in the least expensive way. Use caution when using
credit card borrowing because of interest rates.
If you borrow money for the improvements, you should go to your bank or
other lender and apply for a loan. After checking to see if your credit
is satisfactory, the lender defines the terms of the loan and you must
agree to them before signing the note. Do not proceed with home
improvement plans until you understand all of the costs involved.
Today there are a number of good plans for financing home improvements
on reasonable terms. What kind of loan is best for you depends primarily
on the amount of money you need to borrow.
The Title I Property Improvement Loan Program
If the equity in your home is limited, the answer may be an FHA Title I
loan. Banks and other qualified lenders make these loans from their own
funds, and FHA insures the lender against a possible loss. This loan
insurance program is authorized by Title I of the National Housing Act.
FHA-insured Title I loans may be used for any improvements that will
make your home basically more livable and useful. You can use them even
for dishwashers, refrigerators, freezers, and ovens that are built into
the house and not free-standing. You cannot use them for certain
luxury-type items such as swimming pools or outdoor fireplaces, or to
pay for work already done.
Title I loans can also be used to make improvements for accessibility to
a disabled person such as remodeling kitchens and baths for wheelchair
access, lowering kitchen cabinets, installing wider doors and exterior
ramps, etc. Another use is energy conserving improvements or solar
energy systems.
Improvements can be handled on a do-it-yourself basis or through a
contractor or dealer. Your loan can be used to pay for the contractor's
materials and labor. If you do the work yourself, only the cost of
materials may be financed.
Some of the advantages of the Title I loan insurance program are:
|
|
You do not have to live in any particular area to get one of these
loans. |
|
|
You seldom need any security for loans under $7,500 other than your
signature on the note, and you need no cosigner. |
|
|
You do not have to disturb any mortgage or deed of trust you may
have on your home. |
|
|
To obtain a loan, you only need to own the property or have a
long-term lease on it; fill out a loan application that shows you
are a good credit risk; and execute a note agreeing to repay the
loan. |
|
|
Your loan can cover architectural and engineering costs, building
permit fees, title examination costs, appraisal fees, and inspection
fees. |
|
|
You are not hampered by a lot of red tape. Usually only the lender
has to approve your loan, and can give you an answer in a few days.
When the work is finished, you will need to furnish the lender with
a completion certificate. |
|
|
You receive some protection from the wrong kind of dealer, because
FHA requires that any dealer who arranges a loan for you must first
be approved by the lender. |
Title I Property Improvement Loan Program
Maximum Loan Amounts and Terms
HUD/FHA does not set the interest rate. Interest rates are negotiated
between the borrower and the lender.
The maximum amount for a Single Family property improvement loan for the
alteration, repair or improvement of an existing single family structure
is $25,000 and the maximum term is 20 years.
The maximum amount for a property improvement loan for the alteration,
repair or improvement of a Manufactured (Mobile) Home that qualifies as
real property is $17,500 and the maximum term is 15 years.
The maximum amount for a property improvement loan for the alteration,
repair, or improvement of an existing Manufactured (Mobile) Home
classified as Personal Property is $7,500 and the maximum term is 12
years.
The maximum amount for a Multifamily Property Improvement loan for the
alteration, repair, improvement or conversion of an existing structure
used or to be used as a dwelling for two or more families is $60,000,
but not more than $12,000 per dwelling unit and the maximum term is 15
years.
The maximum amount for a Nonresidential Property Improvement loan for
the construction of a new nonresidential structure, or the alteration,
repair, or improvement of an existing nonresidential structure is
$25,000 and the maximum term is 20 years.
Finding a Title I Lender
To find an FHA-approved lender in your area, call HUD's Customer Service
Center on our toll-free number: (800) 767-7468 (TTY: (800) 877-8339) for
a list of lenders in your State and additional copies of this brochure.
Complaints about contractor fraud under the Title I program can be made
by calling our toll-free telephone line: (800) 569-4287.
Equal Opportunity in Housing
The Fair Housing Act prohibits discrimination in housing and related
transactions--including mortgages and home improvement loans. Lenders
may not deny funds or offer less favorable terms and conditions in
lending on the basis of the borrower's race, color, religion, sex,
national origin, familial status (i.e., the presence or number of
children in a household) or disability. In addition, lending decisions
may not be based on the race, color, sex, religion, national origin,
familial status or disabilities of persons associated with the borrower
or with the area surrounding the property. If you believe you have been
the victim of discrimination in mortgage lending on one of the
prohibited bases, you may file a fair housing complaint by contacting a
local fair housing advocacy group, the Office of Human Rights for your
state or local government, or by calling the national Fair Housing
Hotline at (800) 669-9777 (TTY: (800) 927-9275).
|
