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Milwaukee's community renewal program: Urban renewal techniques
(May 1964)

Appendix A : Financing home improvements,   pp. 43-48


Page 46

The interest rate is 5-1/4 per cent plus 1/2 per cent FHA insurance premium or a total of 5-3/4 per
cent. The amortization period can be extended to 40 years or 3/4 of the remaining economic life of the proper-
ty. This will enable the owner to keep his monthly payments down to an amount he can pay without undue hard-
ship.
FHA Section 203(b). This is the FHA section under which most of the new homes are built or purchased.
It can, however, be used to rehabilitate one to four-family dwellings. It must be kept in mind that the FHA
under Section 203(b) will not insure mortgages on homes which are in deteriorated neighborhoods or in neighbor-
hoods where there is mixed commercial and residential use. The property must also meet more severe standards
than those required by any other FHA section.
Under Section 203(b) an owner-occupant can obtain financing for 97 per cent of the appraised value up
to $15,000 plus 90 per cent of the value up to $20,000. The maximum amount insurable under this section is
$25,000 for a one-family, $27,000 for a two or three-family, and $35,000 for a four-family.
The interest rate is 5-1/4 per cent plus 1/2 per cent FHA insurance premium or a total of 5-3/4 per cent.
The term of the loan can. be 30 years or 3/4 of the remaining economic life of the property.
FHA Section 203(k) and 220(h). These are new types of FHA insured loans created by the Housing Act
of 1961. Section 220(h) is available to owners living in urban renewal areas; 203(k) is available to owners liv-
ing outside those areas. Under these sections, the FHA will insure rehabilitation loans on family dwellings
(apartments or homes in urban renewal areas, and one to four-family homes in other areas) in amounts up to
$10,000 per dwelling unit. The loan may have a maturity from 3 to 20 years, and may not run longer than 3/4
of the remaining economic life of the structure. It may bear a maximum rate of 6 per cent simple interest and
there is a 1/2 per cent FHA insurance premium. Security on these loans will be a recorded lien against the pro-
perty.
Under these sections the owner can make needed improvements without refinancing his present mortgage.
Since the payments can be extended over a 20 year period, the monthly payments can be kept low to fit the
owner's budget.
Open Account Credit. The people who sell the materials to accomplish the improvements may be inter-
ested in handling the financing for the owner. Many building firms are happy to extend Open Account Credit
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