Renovate & Repair Program
Frequently Asked Questions (FAQ)
FAQs for Borrowers (Homeowners & Homebuyers)
How much money do I have to pay to participate in this loan program?
Currently, all borrowers need to have cash on hand to pay for the cost of obtaining their three credit reports with scores. This will typically cost $75 or less and the money will be collected by the Local Program Administrator or the Lender when the borrower is underwritten for the loan.
[Just so you know – Borrowers are "underwritten" when a bank or other lender determines how much money it is willing to lend to you. Underwriting does NOT tell you how much you should borrow. How much debt you can handle is something you have to figure out for yourself by looking at the money that you earn compared to what you already owe and your living expenses. Don't forget to also budget for the unexpected and emergencies, too!]
PHFA will pay the following costs on behalf of borrowers who are at or below 50 percent of the county's allowable income for the Program. Check out the R&R Income Limits.
- Title/lien search.
- Appraisal or PHFA–approved valuation determination.
- Flood determination.
- Recording fee.
- Program participation fee.
- Document preparation fee.
- Assignment fee.
Borrowers above 50 percent of the county's allowable income for the Program will be responsible for paying the following fees:
- Title/lien search.
- Appraisal or PHFA–approved valuation determination.
- Flood determination.
- Recording fee.
These may cost approximately $425, depending on where you live, and can be financed into the loan.
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How does the R&R Loan Program work?
The short answer is that you will make contact with your Local Program Administrator and that organization will be your primary contact through getting the loan, deciding what to get done to your home, and making sure that all paperwork has its "i's dotted and t's crossed." The LPA may refer you to their Local Program Partners such as a Lender or a Housing Counseling Agency or another housing organization. Search for a Local Program Administrator in your area.
It really is important to understand all of the details when you are getting a loan. Here is some more information about how these steps will unfold.
When you first contact your LPA, they can tell you if what you want to do to your home is allowed with R&R funds, and they will ask you some pre-screening questions to see if you might qualify for a loan. The next step is underwriting, which is done by either the LPA or a Lender, to determine whether you qualify for an R&R loan and, if so, how much can be lent to you.
Underwriting involves documenting and analyzing the key indicators of your ability to pay for an R&R loan. The LPA or Lender will work with you to verify your income and debts, review your credit reports, order an appraisal of your home or otherwise estimate its market value, verify that your taxes are paid or you have been in a repayment plan for at least one year, check that you have property insurance, and if appropriate flood insurance. Two key R&R determinations are that, even with an R&R loan, your total monthly debts may not be more than 45 percent of your total monthly gross income and the total debt secured by your home may not exceed its market value by more than 120 percent.
Once you are approved for a loan and the maximum that you can borrow has been established, the LPA will send staff to your home to do a home evaluation. The goal of the home evaluation is to help you prioritize your spending between "wants" and home maintenance "needs" and to give you a sense of what it may cost to get the work you are considering done. This is a great time to learn about home maintenance, so ask questions if you have any. And as long as you are physically able, join the home evaluator as they go through your home. The information they give can keep a simple repair from becoming a costly replacement and can help you make your home safer and more comfortable.
The next step is getting a contractor to bid on the work you want to, and can afford to, have done. The LPA won't assign you a contractor, nor can they guarantee the contractor's work. They will give you help in finding one by making referrals to contractors that they have worked with before and providing you with information about "best practices" in hiring a contractor.
Once you have a contract with a building professional and you have your loan closing, where all the loan and legal documents get signed, then the repairs and improvements to your home can actually begin. In most cases, contracts must specify that work will be completed within 90 days of the loan closing.
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What is an LPA?
An LPA is a Local Program Administrator. They are the primary contact organization in each county or community for the R&R Program.
In some parts of the state, LPAs may have partnered with lenders, housing counselors, or other organizations to form a Local Program Partnership to administer the R&R Loan Program.
The LPA or the Lender will see if the borrowers can afford the R&R loan and, if so, how much of a loan, help them prioritize spending of these borrowed funds (the "home evaluation"), and assist in finding a contractor.
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Does my credit matter for this loan?
Yes. The borrower's middle FICO score must be at least 620, unless the borrower resides in Philadelphia county and has a household income equal to or less than $85,445. Then their credit score may be as low as 580.
If that doesn't really mean much to you, please keep reading. There are three credit reporting bureaus in the United States: Experian, TransUnion, and Equifax. They collect information about your debts and then use FICO scores to help other companies determine how risky it is to lend you money or sell you a product or service that you pay for over time.
Your FICO scores are calculated using a method developed by the Fair Isaac
Company (FICO) to provide standardized comparisons between people and their
debt management skills regardless of where they live or how much they earn.
Companies such as banks, car dealers, cell phone companies, and many others
are very likely to be concerned about your FICO score and look at your credit
reports and scores.
One way to know what your credit scores are before you apply for an R&R loan is to go to www.annualcreditreport.com and order your three credit reports with scores. If you haven't already done so this year, your credit reports will be free and the three credit scorers will cost between $5 to $7 per report…so about $20 total. If you want to learn more about credit and money management, check out www.moneysbestfriend.com, Pennsylvania's financial education Web site.
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Are condominiums and townhomes eligible for the R&R Program?
Yes, but only the portion of real estate owned by the applicant is eligible to be repaired/improved.
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Am I allowed to perform the renovations or repairs myself?
Any borrower can perform non-skilled labor such as painting. Borrowers who are qualified and licensed, if applicable, to work as a contractor or in a skilled trade may perform work for which they are qualified. Borrowers doing their own work will only be loaned money to pay for the cost of materials, not labor.
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What programs are available to help make my home more energy efficient?
For very low income households, there are Weatherization grants. Qualifying households have incomes at or below 125 percent of Federal Poverty Guidelines which is typically a little lower than 50 percent of Area Median Income (AMI) in most of Pennsylvania. The limit is based on family size with a family of four not being able to earn more than $26,500. Often these grants have very limited purposes; furnace repair or replacement, insulation, windows, and sometimes roofs. A local administrator can be found at this Web site: http://www.paweatherization.org/. The local administrator will also be able to determine if you qualify for this assistance.
There is another option for families with incomes above the Weatherization limit. The Pennsylvania Treasury Department and the Pennsylvania Housing Finance Agency are partnering their two programs, Keystone HELP and the Renovate & Repair Loan Program (R&R), to provide assistance to households regardless of income. The administrator of this program is AFC/First Bank and they can be reached at www.keystonehelp.com.
The HELP loan is an unsecured loan (i.e., no lien is placed against the property) providing up to $10,000 for energy efficiency purposes. There is no income limit for participation in HELP. The PHFA Renovate & Repair loan offers secured loans up to $35,000 for energy efficiency work, regardless of income.
The Renovate & Repair loan can be used for more than energy efficiency as well.
For families and individuals not seeking public financial assistance, there is a federal tax credit in 2007 for making energy efficiency improvements to their home. Check with a tax professional to find out more about the credit and to learn if it will be available in 2008 and beyond. To read more about the credit and how it helps make energy efficiency more affordable go to the Web site http://www.energystar.gov/ and then select the link "Tax Credits Under the Energy Bill" at the bottom of the page.
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FAQs for Local Program Administrators & Lenders
My organization would like to learn more about becoming an LPA or Lender. How do we do this?
Invitation to Participate trainings are held throughout the year; contact us at 1.800.822.1174 and let us know you are interested. We are especially looking for coverage where we do not have any LPAs now. Check the Local Program Administrator Web page to see if you are in an area with LPA coverage. More than one LPA in an area is also acceptable to PHFA.
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Why are there two ways to close the R&R loan?
PHFA offers two ways to close the loan to meet the needs of both LPAs and Lenders. The loans can be closed in PHFA's name with the LPA submitting the proper documents (Request for Funding) to PHFA the day the loan is closed. The loan can also be closed in the lender's name, allowing the lender to receive consideration for lending credit in their CRA exam. In this case, the mortgage must be assigned to PHFA and this assignment is recorded in the local recorder's office. The Note must be endorsed to PHFA by an authorized officer of the lender. Even if the loan is closed in PHFA's name, lenders can still request consideration for service credit in their CRA exam.
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Can Brokers and Third Party Originators participate in the R&R program?
Yes. However, the broker must partner with an organization or organizations that would ultimately fulfill all roles in a partnership at time of applications. These roles include Administrative, Customer Service, Finance, Home Evaluation, and Record-keeping functions.
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Are Lenders and LPAs compensated for participation?
Yes, there is $1,300 in compensation built in for LPAs and Lenders. Organizations may split this funding between them as they see fit. In addition, PHFA is paying for many underwriting costs for qualified borrowers, including title/lien search, valuation determinations, flood determinations, recording fee, program participation fee, document preparation fee, and assignment fee, making the lender "whole" more quickly than most loan programs which repay these fees from borrower payments over time.
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