Considering a rehab loan but concerned that you won’t be able to move in right away? Worried about making two payments at once? Well we’ve got you covered! Both Fannie Mae and FHA 203K standard loan allow you to finance six months’ payments. This means you don’t have make two housing payments during the construction process!
Escrowing Initial Mortgage Payments
At the borrower’s request, up to six mortgage payments (PITI)* that will become due during the renovation period may be included as part of the total renovation costs for a principal residence property if the property cannot be occupied during the renovation period. Funds are held in a renovation escrow accountAn escrow account is an account your mortgage lender maintains to collect and pay certain property-related expenses on your behalf. Each month, a portion of your mortgage payment is deposited into the account to cover items such as property taxes and homeowners... More and are applied to payments that come due during the period in which the property cannot be occupied.
*PITI = Principal & InterestInterest: the cost of borrowing money, charged as a percentage of the outstanding balance and paid in arrears (unlike rent, which is paid in advance). More (the amount required to repay the loan), 1/12th of the annual taxes due and 1/12th of any required insurances.
Note: The lender may set up a separate escrow accountAn escrow account is an account your mortgage lender maintains to collect and pay certain property-related expenses on your behalf. Each month, a portion of your mortgage payment is deposited into the account to cover items such as property taxes and homeowners... More for the mortgage payments in lieu of including the funds in the renovation escrow accountAn escrow account is an account your mortgage lender maintains to collect and pay certain property-related expenses on your behalf. Each month, a portion of your mortgage payment is deposited into the account to cover items such as property taxes and homeowners... More.