7 Things to Consider When Buying Your Historic Home on Cape Cod

1.  How tall are you?  Do you clamor for an early period home with an enormous hearth complete with beehive oven?  These early gems have wide pine floors, multi paned wavy glass windows, iron thumb latches and built in cupboards.  But what they usually don't have, is high ceilings.  Many late 17th century or early 18th century homes have low ceilings.  So if you are a contender for the NBA, you may want to look at a later period style home or a vintage 1940's reproduction.

2.  Basements.  Many of the antique homes on the Cape have what we affectionately refer to as a "Cape Cod" basement.  It is a circular pit lined with stone or, more commonly, brick.   At any given time it will fit your water heater, your boiler, your electrical panel, and if you don't weigh very much, you.  There will be no man cave, no movie theater, no basement tavern.

In this 1923 House Beautiful Kohler of Kohler Ad, the built in tub was a rare luxury!

3.  Bathrooms are a new fangled thing.  Some buyers will scoff at the little bathrooms that are shoe horned under the back stairs or into a closet off the kitchen.  But these are an improvement from the original "bathroom" which consisted of an outhouse, a chamber pot and a moveable tub placed in front of the kitchen hearth.  Sometimes kitchens and baths have been added to an ell off the older section of the house to accommodate those modern amenities.  If not, be prepared for more cozy bathrooms and kitchens- small in square footage but big on charm.

Early 20th century modern kitchen

A 21st century kitchen in an 18th century home

4.  Financing.  The condition of the home will be a consideration when choosing your financing options.  Some forms of financing may not work if the home has chipping lead paint or knob and tube wiring.  Never fear, there are financing options that work well for an antique home in need of some TLC (203k, HUD Title 1 Home improvement loan).

5.  Location.  Yes, you may still be able to find a lonely cottage down a long lane surrounded by the changing marsh.  But more likely, that historic home is going to be on Main St. surrounded by historic homes of different vintages and walking distance to a cup of coffee and the morning paper.  Also, ye old settlers shied away from building their homes on the ocean, though late 19th century homes appreciated the sea air.  If you want an earlier home that is waterfront, you may want to look to the rivers.

6.  Historic District approvals.  This, for some reason, strikes the greatest of fear.  What if I want to change the color of my door?  What if I need to re-roof?  Breathe, the process isn't as bad as it seems.  Even new houses in a historic district may be subject to architectural review.  But if you are an old house enthusiast, it is unlikely that you are going to want to change the exterior of your home to look like an airplane hanger.  And the historic district doesn't have purview on the interior.  The historic district protects the value of your home, preserves its setting, and is the reason that the Old King's Highway looks the way it does.

7.  Are you feint of heart?  The inspection for the purchase of your historic home is going to separate the sheep from the goats.  Be prepared to have a long laundry list that includes non functioning GFCI outlets, evidence of a previous powder post beetle infestation, and not-up-to-code tree trunks in the basement supporting the floor joists.  Don't panic, keep your eye on the prize.  It will be worth it!

Home Improvements using a HUD Title 1 Home Improvement Loan and Mass Save Energy loan

Our house being re-roofed

If you've purchased a home that needs a wee bit of work, but you don't have equity (umm, because you just purchased it), here is a nifty loan that can help.  In my case, we purchased our house at the height of the market, and the price still hasn't recovered to the point where we have enough equity to do an equity line of credit.  I had written a post previously about a 203k loan which bases the loan on the projected finished value of the home.  However, few homes have sold in my neighborhood and those that have needed A LOT of work (one was marketed as a tear down!).  On paper, the finished value of my house did not support the work that I wanted to do.  Whats a gal to do?

I searched for loans that do not require equity and stumbled upon the HUD Title 1 Home Improvement loan.  It sounded too good to be true.  The maximum loan on a single family house is $25,000 and can be used for building alterations, repairs and site improvements.  Now here is the best part, there is no home inspection or appraisal!  The loan is secured by your home (like a second mortgage) but they do not consider the equity that you have in your home.  The only catch is that you need good credit, and of course your income must be sufficient to support the loan.

The paperwork was so easy and streamlined that I honestly wondered during the process if it were some kind of scam.  I checked out the bank and could find nothing nefarious so we went ahead with the loan.  From the time we applied, to the time we closed, was 10 days.  10 DAYS I tell you.  And we were never asked for the same piece of information more than once. The attorney came to our house, at OUR convenience, to do the closing.  We have 6 months to make the repairs (or ask for an extension) before an inspector comes out to verify that the work was done.  Easy Peasy.  The loan officer we used is John Rodriguez, Admirals Bank, Office #401- 248-7267, Mobile #401-439-6236, 15 Park Row, West Providence, RI  02903.

I can't believe that more banks don't offer this.  In fact, many loan officers that I spoke with don't even know that the program exists.  We used it to finance a new roof, some work to our chimney and to fix rotted trim boards.

Is there a downside?  The rate is higher than a traditional refinance.  I'm not sure how it compares to a home equity loan though.  However, we combined this with a 0% long term loan from the Mass Save Energy program to get the rest of the work that we wanted done.

If you live in Massachusetts, I highly recommend getting a MassSave Energy Audit.  If for no other reason, you get free light bulbs.  Our audit revealed that our house was 10 TIMES more drafty than a modern house. It's no wonder we've been hemorrhaging money to pay for our oil heat.  They identified some easy, low cost ways to improve our energy loss, like insulation in cracks, door sweeps, and changing out light bulbs.  And they identified some more involved work like converting to gas and changing out windows (ours are NOT original, but are the result of a 1940's renovation).  

Click here for a pdf report by the National Trust 

for Historic Preservation

Preservation Green Lab Report

A note about windows, if you have original windows in your historic home - keep them if you can!  People are often worried about energy loss, but the truth is, studies show that you can get near to, or equal, the energy efficiency of modern insulated pane windows by adding good quality storms on the exterior or interior of the window.   And few things change the character of your house as quickly as removing the original windows.  For great information on energy efficiency of historic windows, click this link to a post by California's Office of Historic Preservation.  I am disappointed that the MassSave Energy program does not allow for a 0% loan if you are restoring your windows - only for replacement.

Sitting here with a light snow on the ground, it's hard to believe that within a couple of months, the daffodils will be poking their heads out of the ground accompanied by the sweet sound of buzzing saws and nail guns : )  

Older homes that need TLC and 203k loans

203k loans can help you purchase a home and do needed
repairs under the same mortgage.

Let's say, you have just spotted a charming antique cape cod cottage along a quiet tree lined street.  The sales price is loooooow, and if you squint, the house looks really good.  But, it needs a new roof and updated electrical.  You may be thinking, just move on by.  The price of the home, coupled with a second mortgage for the repairs, is out of your budget.

This is just the type of scenario where a 203k loan can come to the rescue.  There are two types of 203k loans, the streamlined 203k and the full blown 203k.  Both are designed for primary owner occupied dwellings and package the repairs and the cost of the house in the same fixed rate mortgage.  The appraisal on the house factors in the value after the repairs are done.  I recently sat down with Tom Murphy of Poli Mortgage group in Plymouth, MA who was kind enough to explain how this type of mortgage works.

Streamlined 203k loan:


The streamlined 203k is designed for repairs that do not exceed $35,000.  In fact, $30,000 may be a safer number to keep in mind since repairs sometimes run over budget.  The type of repairs that the streamlined 203k would cover includes kitchens, baths, electrical, heating, lead paint abatement, windows & doors, roofs, siding, and flooring.  These are repairs and updates to the existing structure and do not include structural repairs or newly framed additions.  The property can be a multi family as long as one unit is owner occupied.  Unlike the full blown 203k, the streamlined version does not require a FHA counselor.  The timing in order to close is not much longer than a conventional loan, about 60 days.

Full blown 203k loan:


Now we're looking at some major work.  The full blown 203k allows for more types of repairs including new additions, structural work, foundations, plus the types of improvements that a streamlined 203k would cover.  An FHA consultant is required to look over the plans and provide a  specification of repairs/work right up.  Basically, the consultant decides whether the work is feasible and whether the estimates are in line with the work to be done.  Sounds expensive, right?  Well, its not free.  The borrower pays for the consultant at a predetermined rate set by FHA depending on the estimated cost of repairs.  You may be looking at a charge in the $700 range.

Benefits:


The benefits to both 203k mortgages is that you can bundle the cost of repairs in with your mortgage allowing for the purchase and immediate repair of older homes.

This encourages the restoration of historic homes which is a benefit to the environment (in keeping with the motto: the greenest building is the one already built).

The rates are as low, or sometimes lower than other loans.  At the time of this post, the rate is under 4% and is 1/4% lower than conventional loans.

You can refinance with a 203k loan and include your improvements as well.

The timing (for a Streamlined 203k) is about the same as a conventional loan

Drawbacks:

With 203k loans, as with all FHA loans, you are required to pay PMI for 5 years.  After that time, if you have enough equity, you can petition the bank to allow you to drop the PMI.

With the full blown 203k, you will have the additional expense of the FHA consultant.

With the 203k, the timing will be a bit longer than a conventional loan.

Other Considerations:


Work must be completed within 6 months.

There is a maximum amount that may be borrowed.  This is determined not only by the projected finished value of your property, but also by the maximum loan amount which is determined by the county that you live in.  For Barnstable county it is $462,500 for a single family.  For Plymouth county it is $523,750 for a single family.  Multi families have higher maximum amounts.

For more information, visit HUD's 203k informational page or Streamlined 203K page.

Tom Murphy from Poli Mortgage group (MLO# 12318) is experienced with this type of mortgage and would be happy to answer questions: 508-274-2102.