Rental Property Loan
Rental Property Loan
Loan financing for rental property rehabilitation is for the purposes of assisting the rehabilitation of substandard rental housing and providing standard quality rental housing that is affordable to low and moderate income persons, this particularly comes under the Rental property loan Program. The source of finances for the program comes from the Community Development Block Grant Program and the HOME Program. Both of these are federal programs for which funds are received by the City-Parish from the U.S. Department of Housing and Urban Development. The City-Parish Office of Community Development administers these programs.
The finance of these kinds of loans involves mortgage loans on the properties to be rehabilitated. Property and credit maintaining criteria apply to the evaluation of all loan applications. Applications are accepted or rejected on a competitive basis. The information contained within this program description remains to be an integral part of the application.
Generally these kinds of application and loan procedures are initiated and entertained by firms, which have viability of funds. Since this kind of a loan funding is done on availability basis, firms do preserve the sole right on the approval or rejection of any applicant as deemed to be in the best of its interest.
There do stand some limitations in this sector of loan financing, which are preserved, e.g only first and the second mortgage loans are considered, properties having at least half of their ownership by non-profit corporations may be eligible for no interest loans, the loan amortization terms up to a full 20 years, no application fees, loan origination nor discount points are charged to borrowers. All kinds of costs for closing the loan are those of the borrower, loan financing not to exceed 95% of eligible rehabilitation costs, the owner is required to invest at least a 5% of the rehabilitation costs, no interest is charged during the property rehabilitation period, for loan funds disbursed during the rehabilitation tenure, loan funds are disbursed on a loan draw basis, as costs are incurred, no prepayment penalty for early pay-out of the loan, property insurance stands mandatory. City-Parish is named as the mortgagee on the policy. Title insurance is absolutely necessity.
The requirements for the properties too are jotted clearly for the borrower to follow and comply wherein property has to residential and may be either single-family detached or with a multi-unit property of up to 5 rental units, property must be substandard according to the City-Parish code and must require no less than $1,000 per rental unit in repairs needed to meet code requirements, property rehabilitation must conform to City-Parish code requirements and HUD Housing Quality Standards; property can be vacant or occupied. If occupied, additional requirements governing tenant protections from involuntary displacement and relocation would be applied under federal program regulations and most importantly after-rehabilitation rents must be affordable to lower/moderate income households. It is mandatory that no rehabilitation work should commence prior to the closing of the loan. Projects started before loan closing are rendered as ineligible for financing. Since the HOME and CDBG Programs are the main sources of financing for these loans, they include requirements governing the rental of properties that are financially assisted. Approval, rejection may vary depending upon the source of funds made available for each loan. The source of funds for approved loans will be determined by OCD according to the particulars of each project, the availability of funds under each program, and its determination as to which loan source best meets the interests of the program.