Rehabilitation Mortgage Loan Program
Program Overview
The Rehabilitation Mortgage Loan
Program offers home loans at
competitive interest rates for
people interested in purchasing or
refinancing a home that needs
repair. Loans under this program
include the cost of purchasing the
home, or refinancing the existing
mortgage, as well as the cost of
repairs. Homebuyers interested in
purchasing and repairing a home
under this program generally may not
have owned a home in the last three
years to qualify; but previous
homeowners may qualify if they
intend to purchase a home located in
a federally
targeted area that would
benefit from an increase in
homeownership. Homeowners
interested in refinancing under this
program must own a home that is at
least 20 years old and in need of
substantial repair.
CHFA is committed to
strengthening Connecticut's
communities by encouraging the
rehabilitation of existing housing
through affordable home purchase and
improvement loan programs. We value our
partnership with the qualified
lender for this program and
encourage prospective borrowers to
apply directly for a Rehabilitation
Mortgage Loan Program loan with
Savings Institute Bank and Trust.
Follow the links below for more information regarding the
Rehabilitation Mortgage Loan Program.
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Rehabilitation Mortgage Loan Program Interest Rates
Currently, the Rehabilitation
Mortgage Loan Program is providing mortgages at the
following rate:
** Please note, this rate is subject
to change and additional fees may apply.
Who can
apply for a Rehabilitation Mortgage
Loan Program
loan?
Primarily, the Rehabilitation
Mortgage Loan Program is intended to
benefit first-time homebuyers and
homeowners that meet minimum credit,
income, and employment standards.
People who have owned homes before may also qualify for a
purchase loan under this program if they plan to purchase a
home located in one of 18 designated areas in Connecticut
targeted for revitalization. (See,
Targeted Areas.)
- Who are considered first-time homebuyers?
First-time homebuyers are those who have never purchased
a home before or have not had an ownership interest in a
principal residence for the past three years.
- What are the income guidelines to qualify
for this loan?
An applicant’s annual, before-tax household income must
not exceed the CHFA
income limits that apply to the
geographic region where the applicant intends to
purchase or refinance a home. Household income is
calculated by combining the income of all people who
will be occupying the home.
The CHFA income limits do not apply for homes purchased
in
targeted areas, unless the applicant also borrows a
loan under the
Downpayment Assistance Program.
What
types of property can you purchase
with a Rehabilitation Mortgage Loan
Program
loan?
The Rehabilitation Mortgage Loan
Program requires that loan
applicants purchase or refinance
homes that meet specific property
and sales price guidelines.
- Property Guidelines:
In order to qualify for this
program, the borrower must use the loan to purchase and
repair or refinance and repair a home in which the
borrower will reside as a principal residence.
The
home must become the principal residence of the borrower
no later than one year from the closing of the loan.
The borrower may not use the loan to purchase
recreational, vacation, investment, commercial or rental
properties (unless the borrower is an owner-occupant of
an eligible multi-family residence); however, a loan
under this program will cover the cost of converting
commercial property to residential property. No part of
the purchased property may be designed for commercial
purposes.
In addition, the property must meet one of
the definitions listed below:
- Existing single-family home or
- Existing multi-unit dwelling to be converted
into a two- to four-family home
To qualify for a refinance loan, the property must
meet the following additional descriptions:
- At least 20 years old
- At least 75% of exterior walls must be retained
in the rehabilitation process
Please note: Condominiums and mobile homes are not
eligible for this program.
- Sales Price Guidelines:
In order to qualify for
this program, the total purchase cost (or refinance
cost) together with the cost of rehabilitating the home,
must not exceed the CHFA sales price limit established
for the specific city or town in the state where the
property is located. (See, the CHFA
sales price
limits.)
What
types of repairs are covered by a
Rehabilitation Mortgage Loan Program loan?
Improvements and repairs under
the Rehabilitation Mortgage Loan
Program must cost at least $5,000.
Any work done by the borrower or the
borrower’s family (“sweat equity”)
is not included in the cost of
rehabilitation. In addition, all
amounts spent by the borrower for
rehabilitation, whether or not
financed by the Rehabilitation
Mortgage loan, are included as
rehabilitation expenditures for the
purpose of determining the minimum
expenditure.
A Rehabilitation Mortgage loan (combining purchase/
refinance price with cost of repairs) can not be greater
than the
sales price limits applicable for where the home is
located. In the case of a refinance mortgage, the repairs
must represent a substantial percentage of the current appraised value of the home.
(Consult your lender for more details.)
Whenever the proposed renovation amount exceeds $15,000
or the renovations include structural repairs, the borrower
is required to hire an independent General Contractor.
The following are examples of rehabilitation work
eligible for this program.
- Structural alterations and repair of damage to the
home, including chimneys, walls, roofs, and ceilings.
- Repair of termite and water damage.
- Conversion of a single family home to a duplex; or a
six unit building to a three-family home.
- Installation of energy-efficient features to
plumbing, heating and electrical devices.
- Installation or replacement of wells, septic tanks,
windows and hot water systems.
- Repair of flooring, roofing, handrails, downspouts
and exterior siding that improves the general livability
of the home.
- Alterations to enable handicap accessibility.
How does the Rehabilitation Mortgage
Loan work?
A Rehabilitation Mortgage Loan
covers the cost of purchasing and
renovating the home. When used to
refinance a home, the Rehabilitation
Mortgage Loan amount includes the
funds to pay off the existing first
mortgage as well as the cost of the
repairs. In a refinance, the
rehabilitation costs must represent
a substantial percentage of the appraised value of the property.
(Consult your lender for more
details.)
After the loan closing, the funds for the home repairs
will be held by the lender in a separate escrow account.
Payment is made directly to the general contractor as repair
work is completed. All work must be done by a
state-licensed general contractor.
All contracts must be in writing, including any
subsequent changes and modifications. Contracts must
specifically describe performance and materials required for
the renovation and must include a schedule for completion
and payment terms.
What else should you know about
a Rehabilitation Mortgage Loan
Program loan?
The following additional considerations
and restrictions apply to
Rehabilitation Mortgage Loan Program loans.
- You may qualify for
help with your down payment and
closing costs.
For those who lack sufficient
funds to cover the upfront
expenses associated with
purchasing a home, assistance is
available statewide for
qualified borrowers through the
Downpayment Assistance Program
(DAP).
- Mortgage insurance
may be required.
The Participating Lender will
choose the mortgage insurance
program to insure the mortgage.
If the loan is privately insured
or uninsured, the lender will
follow the requirements of the
Fannie Mae Home Style Renovation
Mortgage program.
Private mortgage insurance is
permitted when a borrower makes
a 15% down payment on a home in
a
targeted area and the mortgage
exceeds
FHA loan limits but is
within the CHFA
sales price
limits of that area. In
addition, there are targeted
CHFA mortgage programs that are
eligible for PMI insurance.
(Your Participating Lender can
provide more detailed
information on these programs.)
Please note: No mortgage
insurance is required when a
borrower makes a down payment of
at least 20% of the total
purchase price on a newly
constructed home in a
targeted
area.
- You may be required to pay a
special federal tax if you sell
your home within nine years.
Under rare circumstances, CHFA
mortgage loans may be subject to
the Federal Recapture Tax at the
time the property is sold. The
tax might apply if a borrower
sells his or her home within
nine years of the purchase date,
makes a profit on the sale and
has an income that exceeds
federal recapture tax limits at
the time of the sale.
- You may be able to obtain an
extension of the one-year time
limit on the home becoming your
principal residence.
CHFA will approve the extension
of the one year period with a
written request from the
Participating Lender, only in
the event that extenuating
circumstances are beyond the
control of the borrower and
lender.
- You are required to have a
construction contract with the
builder or general contractor.
The builder or general
contractor must be registered
and/or licensed with Connecticut
Department of Consumer
Protection and must have
appropriate insurance. The
lender will review the
credentials of builders and
general contractors to ensure
they meet the required levels of
experience and expertise.
- Your interest rate could be
adjusted if you do not abide by
the terms of the loan.
CHFA has the option to increase
the interest rate on the loan if
the borrower does not complete
all of the approved
rehabilitation work or if the
borrower expends funds for
additional rehabilitation work
before the escrow account is
completely disbursed.
How do you apply for a
Rehabilitation Mortgage Loan Program loan?
To apply for a Rehabilitation
Mortgage loan, a prospective
borrower should contact the
Participating Lender for guidance
through the loan application
process.
At present,
Savings Institute Bank and Trust is currently
the only CHFA lender for this program, originating loans in
Windham, Tolland and New London County only.
Generally, the time from applying for the loan to closing
the sale of the property is six to eight weeks.
Questions? Contact CHFA.
Prospective borrowers should
first contact the lender for this
program for information on this loan
program. For additional assistance,
borrowers may contact CHFA’s Single
Family Underwriting department.
Mailing Address:
CHFA
Attn: Single Family Underwriting
999 West Street
Rocky Hill, CT 06067-4005
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Documents related to the
Rehabilitation Mortgage Loan Program
The following documents are
related to the Rehabilitation
Mortgage Loan Program. To open
and view the document, click on the
document title.
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