Rebirth is a wonderful concept that helps us understand that there is no such thing as death. We as people, the world we live in, and the things that we create may get old, they may wither, deteriorate and seemingly die but when we see them dying, their energy is just slowly transforming into another form of life. This happens with all things, even things that are man-made because everything we make is a comprised of earthly elements. We’ve learned to synthesize chemicals, split the atom and create nuclear energy and waste to complicate matters, but it’s all part of us understanding our limitations as human beings and unfortunately, going too far is a part of that process. Maybe we’re at the beginning stages of going “too far” but that doesn’t mean that all hope is lost or we’re supposed to give up, we just make our lives bearable and enjoyable if at all possible, as we continue down the road to our own inevitable deaths, no matter what form they come in. We all die, it’s not a depressing thought, because there is rebirth and the end of anything is only the beginning of something else. So, even in the cities that we dwell, we see deterioration and rebirth all of the time in the many communities and neighborhoods that were once vibrant, young and full of life. Investors and single family home-buyers sometimes feel a desire to rehabilitate dilapidated parts of cities all of the time, and they work in conjunction with local and state housing agencies as well as non-profits in order to bring dying neighborhoods back to life.
The US government formed the Federal Housing Administration (FHA) and the Department of Housing and Urban Development (HUD) to create home-buying opportunities for those without access to large amounts of money. An FHA loan allows someone from a low-income or lower-middle class background to get themselves into a home so they can start to create some real wealth for themselves, while also having a place to live and raise their families. In areas where home values are increasing, especially communities that are in a rehabilitation or revitalization phase, those who get involved can see the equity in their homes grow very quickly. Even at a reasonable rate, the appreciation of the property they buy can turn into twenty or thirty thousand dollars in a decade or less. Other common loans in these areas are 203K residential home loans that are designed to take homes that are in serious disrepair or no longer considered livable, and streamline the loan process for someone looking into making the repairs to revitalize the property.
Before the FHA 203K home loan was made available by the federal government, getting a loan for the property in the first place was step one, then securing another loan for the construction repairs and renovation was step two (both of which often have very high interest rates because they’re short-term loans), and then step three was the permanent, long-term mortgage loan. One loan can be complicated enough in terms of meeting all of the qualifications set by the lender, but three loans just to turn one property from a dying one into one that has undergone a rebirth, is overkill for the average person or investor trying to make a difference in the community. The 203K loan is administered by the FHA which means that the loan is backed by the federal government, thus the typical 10-25% bank lender-required down payment isn’t considered necessary. It’s important to understand that the FHA does not give the loan and they are not the lender, they are simply the government agency that guarantees the loan if it were to ever go into default status.
In a neighborhood that has seen better days and housing values have become stagnant or even decreased over the years, then there are often many opportunities to take advantage of. A 203K Loan can simplify the loan process and make it easier to see yourself in a home that is located in a low-income area. FHA-approved lenders that are willing to participate in these loaning programs do so because they have an incentive themselves. It reflects very favorably in these communities where people often have low opinions of banks. This is also a way for lenders to prove their commitment to low-income housing lending practices as a part of Community Reinvestment Act (CRA) as well. So, when you look at a community that looks like it’s dying, then understand that there are ways for you to be an instrumental part of it’s rebirth, you just have to put things into the right perspective.