FHA 203K Loans for Repairs and Improvements
With so many bank owned properties and short sales that need repair being sold "as is", we have noticed a resurgence in the FHA 203K renovation loan. The program is a great tool to use when purchasing a home in need of repairs to make it habitable OR even better to finance improvements and upgrades including granite countertops, hardwood floors and more!
Why Use the Rehab 203K Loan?
1. Combine the mortgage and home improvement financing into one low rate mortgage
2. Eliminate a higher rate second mortgage or home improvement loan
3. Keep your cash liquid or apply it to the mortgage
4. Sellers of foreclosures and fixer-uppers prefer to sell as-is (they will not make repairs)
5. Bring that “diamond in the rough” into the 21st century with a new kitchen, updated bathrooms, landscaping, paint, carpet, hardwood flooring, modern light fixtures and plumbing fixtures, the latest kitchen appliances, energy efficient windows, granite counter tops, privacy fence, new roof, even room or bathroom additions. The home you choose doe not have to be a foreclosure to use 203k program.
How it works:
1. Buyer and realtor negotiate purchase price and execute contract.
2. Have a contractor provide an estimate for renovations
3. Have home appraised to determine the After Repaired Value (purchase price + renovations). Lender will complete this step
4. After the loan has been approved by Mortgage Company you will go to settlement.
5. Contractor begins renovation and is paid from repair escrow account held by the Lender as work is completed.
You can purchase a home for as little as 3.5% of the sales price + renovations.
Example $150,000 sale price + $50,000 renovations = $200,000
$200,000 @ 3.5% = $7000 this would be minimum amount from buyers own funds or funds can be gift from family member
The 203k program is not offered by all lenders. If you have an interest in using this program or would like additional information, I would recommend a pre-qualification with a lender that offers 203k loans. There are additional steps involved with a 203k loan, as a result it is important to talk with lender prior to making an offer on a property. The 203k loan has helped many homeowners purchase a property with potential and transform it into their dream home.
There are so many homebuyers who won't even consider "fixer upper" homes that your choice to use this program will allow you to negotiate even better deals on homes that someone else might overlook!
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