Region has most 203(k) loan users Program is ideal for buyers of homes that need repairs

March 17, 1996|By Daniel H. Barkin | Daniel H. Barkin,SUN STAFF

The Baltimore region is the nation's hottest market for a popular government-insured loan program that lets homebuyers combine rehabilitation and acquisition costs into one permanent mortgage.

The U.S. Department of Housing and Urban Development insured more 203(k) loans locally than anywhere else in the country in fiscal 1995, according to HUD's Baltimore office.

About 500 of the loans were insured here in the year that ended Sept. 30. Baltimore's HUD office, which includes all of Maryland except Montgomery and Prince George's counties, nosed out HUD's Richmond, Va., office, with 485, Boston, with 472, and Los Angeles, also with 472.

Nationally, HUD insured 8,426 203(k) loans last year.

The total of the 203(k) loans insured in fiscal 1995 by the Baltimore HUD office was $39,150,208, for an average mortgage of $78,300.

"We've had a great deal of success in this jurisdiction," said Sharon Farrow, acting chief of single-family production for the Baltimore HUD office.

Few lenders are willing to commit mortgage funds to a decaying home until repairs are completed.

"In order to get a mortgage, most banks want the property to be in good condition," Ms. Farrow said.

So these homes are off-limits to all but the most affluent investors. The 203(k) program addresses that problem by financing the repairs as part of the 30-year mortgage.

The program is ideal for first-time homebuyers who want to purchase a "fixer-upper," said Ms. Farrow, but don't have enough money for repairs.

Nearly 30 lenders in the Baltimore area participate in the 203(k) program, with Crossland Mortgage Co., Prosperity Mortgage Corp. and Baltimore American Savings Bank the most active locally, according to HUD.

This region is seen by HUD as a natural location for the program because of its abundance of aged and vacant homes, particularly in Baltimore.

More than 125,000 of the city's 303,000 homes were built before 1940, according to the most recent census.

About 27,000 housing units are vacant, the census found.

The Section 203(k) program lets a borrower purchase or refinance and rehabilitate a home at least one year old. Part of the loan proceeds are used to buy the property or pay off the existing mortgage. The remaining money from the loan is placed in an escrow account. The escrowed money is then released as rehabilitation proceeds. The loan can be no more than $155,000.

Repairs that can be financed through the program include additions, finished attics, kitchen and bath remodeling, new siding, roofing work, new carpeting and modernization of plumbing, electric and heating systems.

Also, new windows, insulation and major landscaping can be financed.

Inspection, consulting and permit fees can be included in the mortgage, and borrowers can finance the mortgage payments for up to six months if the property can't be occupied during rehabilitation.

The rehabilitation work must cost at least $5,000.

For more information about the 203(k) program, call HUD at (410) 962-2520.

203(k) loans

From Oct. 1, 1994, to Sept. 30, 1995, the top HUD offices in insuring 203(k) loans:

Office .. .. .. .. .. .. Loans

Baltimore .. .. .. .. .. .500

Richmond, Va. .. .. .. ...485

Boston .. .. .. .. .. .. .472

Los Angeles .. .. .. .. ..472

Seattle/Spokane .. .. .. .302

Orlando, Fla. .. .. .. ...275

Hartford, Conn. .. .. .. .259

Newark, N.J. .. .. .. .. .243

Tampa, Fla. .. .. .. .. ..226

Chicago .. .. .. .. .. . .223

Pub Date: 3/17/96

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