The U.S. Department of Housing and Urban Development (HUD) Secretary Dr. Ben Carson announced the Federal Housing Administration will offer new incentives to borrowers interested in rehabilitating homes in Opportunity Zones.
The new incentives are part of the expansion of its Limited 203(k) Rehabilitation Mortgage Insurance Program for homes in Opportunity Zones.
Homebuyers seeking to purchase a home in an Opportunity Zone can use the program to finance rehabilitation costs up to $50,000 into the total mortgage amount—an increase of $15,000 over the amount allocated for homes not located in Opportunity Zones.
“Providing this opportunity means that the families seeking affordable homeownership or to improve their homes in distressed neighborhoods—where rehabilitation is needed the most—have a path to financing that makes it realistic to do the repairs and improvements that will uplift the entire community,” Carson said.
The program allows homebuyers and homeowners to finance rehabilitation costs into their mortgage to repair their homes, allowing them to use cash to pay for property repairs or improvements.
Improvements allowed in the program include connecting public water and sewage systems, repairing or replacing plumbing, heating, air conditioning or electrical systems, and covering lead-based paint stabilization costs.
FHA states that as of September 30, 2019, the agency had active insurance on more than 623,000 mortgages for eligible homes in Opportunity Zones. This is an 8% increase of FHA-insured mortgages nationwide.
HUD states that this incentive will be limited to the first 15,000 mortgage secured properties in Opportunity Zones in each calendar year. The incentive will expire on December 31, 2028.
A report by ATTOM Data Solutions found that half of the zones saw median-home prices rise more than the national average of 8.3% from Q3 2018 to Q3 2019.
The report also shows that 79% of the zones had median home prices in the third quarter of 2019 that were less than the national median of $270,000—almost the same percentage as in the second quarter of 2019. Some 46% of the zones had median prices of less than $150,000, also roughly the same as in the prior quarter.