Problem Solvers

Home Access: The Financial Factor

Home access can get expensive and it’s not funded for the most part. What are some financing options?

• By David Kopf
• Oct 01, 2013

There are many patient groups that need home access services. From mobility patients to bariatric patients to seniors, the needs can be simple, such as easy bath safety upgrades, or complex, such as a major portion of a home undergoing a complete overhaul in order to ensure a patient can access his or her home. When the home access solutions become expensive, financing becomes a crucial part of the process.

Medicare does not pay for these upgrades. Likewise, most insurance carriers don’t pay for any home access upgrades, either. This isn’t a problem for the various DME products and home upgrades that have low enough price tags to be retail transactions. However, remodeling, retrofitting and reconstruction projects do not come cheap, with construction costs as much as 12 percent higher for an accessible home as a standard home. This means patients need alternate funding. Fortunately, there are sources. Let’s take a look at some of them.

203(k) Loans

One choice would be a 203(k) loan. The Federal Housing Administration created the 203(k) loan program specifically to help homebuyers rehabilitate homes they wish to purchase to live in, but that are in disrepair. A 203(k) loan lets a qualified borrower not only finance the purchase price of the home, but also include the price of the necessary repairs to the home. And this includes home access upgrades.

There are two types of 203(k) loans, and the one that is right for your intended property depends on how much work needs to be done:

• A “streamlined” 203(k) loan is intended for a home that requires only non-structural repairs.
• A “regular” 203(k) loan is for properties that require structural repair, such as replacing the roof or a load-bearing wall.

A streamlined 203(k) provides up to $35,000 that can be added to the loan to cover the improvements, in addition to the purchase price of the home. For a regular 203(k), the homeowner can borrow the purchase price of the home, plus the price of the improvements, up to 110 percent of the home’s expected value after the improvements.

The money for the improvements is actually put into an escrow account that is used to pay for materials and the companies being contracted to do the home access work, such as the provider and its partners. Construction must begin within 30 days of the close of the loan and your work must be completed within six months. To ensure the patient still has a place to live, borrowers can finance up to six months’ mortgage payments in a 203(k) loan.

Low Income Alternatives

Moreover, it is important to note that many patients that need serious home access overhauls do not necessarily have the income to pay for such major projects. According to some studies, as many as one third of disabled patients live at or below the poverty line and might not qualify for home loans. In this case, there are special loan programs and other forms of funding that can help them attain the home access services they need to live.

The Fannie Mae Community HomeChoice is available to patients living on their own or someone living with a disabled family member to help them purchase an accessible home, or upgrade their existing home for home access. The loan is designed specifically for borrowers with low to moderate incomes, and offers flexibility in terms of loan-to-value ratios, down payment sources, qualifying ratios and the establishment of credit.

Another option would be state-level loan programs. Nearly every state in the union has created loan programs to help lower income borrowers with disabilities tap into lending options that offer agreeable terms at rates and terms well below traditional home loans. Many do this by providing taxexempt mortgage revenue bonds to local lenders, who then work with the patients needing financing. Make sure to study the programs offered by the state housing finance agencies and development agencies for the states where you provide services.

Additionally, there are special grants and other programs outside of true financing solutions. For instance, the Department of Veterans Affairs (VA) offers its Home Improvement and Structural Alterations and Special Home Adaptations grants for disabled veterans. Many state Medicaid programs offer home and community-based waivers that can help fund accessibility modifications.

Start Cataloging Options

Of course, these are just some of the major options. Providers offering home access services should strive to have an inside-and-out knowledge of local, state and national lending programs from commercial and government sources that are geared toward helping patients finance their home access modifications and construction.

Also, business- and solutions-minded providers should go the extra step and partner up with local lending professionals who can specialize in helping borrowers in need of home access financing solutions. (Loans such as 203(k) loans require much specialized knowledge, for instance.) These partners will not only help their patients and help generate the funding necessary to drive a home access project, but they can also become key referral partners that will use their marketing resources and their reputation to help drive business back to the provider.

This article originally appeared in the October 2013 issue of HME Business.