The Connecticut Home Mortgage Assistance Program (CHAMP) has many benefits and drawbacks. If you are in need of assistance with mortgage or credit repairs, you should find out if you are eligible to take advantage of this type of loan modification. You will be required to undergo credit checks as a part of the process. Many consumers get turned down for the standard 203k loans because of credit inquiries. If you have not made any finance applications in the past three months, your application could be turned down.
One of the most popular reasons that people refinance or renovate their homes is to raise equity. Equity is built up by the amount of money spent on renovations or repairs. You can borrow against this equity when you want, creating either a debt consolidation loan or a home renovation loan. A debt consolidation loan can lower your monthly payments and lower the interest rate.
If you make all your regular mortgage payments on time, you will have no reason to refinance. However, if you are having difficulty making your mortgage payments or you are having problems paying your other bills such as rent, food, utilities and taxes, it might make financial sense to refinance your existing loan. If you cannot make major repairs to fix or improve your property, it may not be worth it to buy another one-time investment. Minor repairs, on the other hand, can provide significant profit over time.
Before you obtain either a conventional loan or a CHAMP loan, there are several things to consider. Are you interested in making improvements to your property? Or are you simply looking to increase the value of the property? In many cases, it takes more than just one investment to increase the value of the property. Even small improvements, such as roofing, painting, landscaping, or major renovations can make a difference. A traditional mortgage often does not provide the flexibility needed to accommodate larger investments and/or substantial repairs.
On the flip side, if you are considering a single loan to pay for major improvements, such as a new roof, plumbing, or a new floor, you should be prepared for a somewhat higher closing cost. Additionally, you should prepare for paying an additional real estate appraisal fee because a traditional mortgage typically does not allow for this. Finally, you should be prepared to pay for extra steps that might increase the value of your property and reduce the closing cost. For example, if you are planning to renovate the basement or attic in order to gain extra living space, these steps will need to be paid for in addition to the cost of the actual renovation.
Fortunately, there are special programs available to homeowners with a good enough credit history to qualify for streamline 203k rehab loans. These programs enable homeowners who are planning to renovate their property to take advantage of lower interest rates and shorter terms. In fact, some of these programs may even be a good choice for very high-risk borrowers, since they are aimed at improving the borrower’s financial outlook for future payments.
To find out if you qualify for any of these programs, talk to your local lender. Typically, your lender will require a three-month supply of non-exempt funds. If you have had your current mortgage for more than six months, you will not be eligible for a streamline loan. Similarly, if you have been financing your home improvements using your existing loan, any structural changes (such as additions or expansions) and non-permitted repairs will also prevent you from obtaining funding under any of these programs.
While it is true that qualifying for streamline 203k loans may adversely affect your credit score, the effects do not usually reach the point of causing total failure. In fact, many successful borrowers have been able to refinance after having been hit by adverse events. In many cases, these events required little more than a few days of research and an expedient application. If you have a good track record of timely and on-time payments, you can almost certainly qualify for any of the programs designed to help homeowners with adjustable rate mortgages. In the end, the small amount of time and effort required to apply can translate into big savings on interest rates.