Marc Savatsky is a member of the City of Boston’s ONEin3 Council, which focuses on connecting Boston’s young adult population with resources related to housing, professional development, financial health, entrepreneurship and civic engagement. He can be reached at @marcsavatsky
It’s no secret that demand for housing in Boston is continuing to surge.
During the summer of 2013, 54 percent of condos citywide sold for more than their asking price, with data indicating that between July and September, the median purchase price for a Boston condo climbed 8 percent to $525,000.
The Federal Reserve Bank of Cleveland recently distinguished Boston as the most rapidly gentrifying major American city – higher income households are moving increasingly toward neighborhoods traditionally populated with lower-income residents. This process often brings about increases in development and economic activity.
Interest in real estate has always been high, but home improvement and renovation focus has increased as of late, too, evidenced by the proliferation of home-related TV content such as “House Crashers,” “This Old House,” and, locally, “Flipping Boston.”
The increase in both home prices and reality show ratings is not coincidental. Chris Heller, managing broker with Penrose Realty, explains, “With fewer houses to choose from, savvy buyers are considering purchasing a fixer-upper home and undertaking renovation.”
That is precisely what many of Russ Smith’s customer’s at New England Building Supply are doing. “We’ve actually had to hire additional designers in our kitchen and bath department,” said Smith, who is a co-owner at NEBS.
Once you’ve done your homework and priced out the improvements, you’ll have to figure out how to pay for them. That, of course, you knew already.
What you might not have been aware of? There are a variety of loans geared toward buyers of older homes in need of renovation which can be purchased through most local banks or mortgage brokers.
Here are three of our favorite renovation mortgage products:
The The MassHousing Purchase and Rehab Loan
The Purchase and Rehab loan allows qualifying first time home buyers to purchase with as little as 3 percent down. The loan covers the purchase price as well as the cost of expected renovations. Another unique feature of the loan is that it allows you to roll in up to four months of mortgage payments if you are unable to live in the property during the renovation. If you want to take advantage of this loan you’ll have to complete an eight hour home buying class, which is offered at no cost through The Boston Home Center.
HomePath properties are homes that have been foreclosed and repossessed by mortgage provider Fannie Mae. Certain HomePath properties qualify for HomePath Renovation Financing, a loan that requires no appraisal at purchase and is available to any qualified buyer, even real estate investors or buyers of second homes.
One little known but valuable feature of an FHA loan is that it is assumable, meaning it allows the owner of a mortgage to transfer their remaining debt and interest rate to a potential buyer. “The assumption feature will increase in value over time if interest rates rise as many expect,” explained real estate attorney John Spino.
The Federal Housing Administration 203(K) Loan
The FHA 203(k) is a great loan for a fixer-upper. The loan is touted as a neighborhood revitalization tool to expand homeownership opportunities. As such, only those who intend to occupy a property are eligible. The program requires just 3.5 percent down and will allow homebuyers to finance up to $35,000 into their mortgage to repair or upgrade their home.
So, feeling better about your upcoming home purchase and renovation project yet?
These three loan programs not only make purchase and renovation more affordable, but they improve the supply and quality of urban housing while helping to maintain the charm and identity of our Boston neighborhoods.
