Rehabilitation Loan – FHA 203K To The Rescue!
How many of you have been looking for the right home, the perfect home? Only to find challenges with each property. It may be an older kitchen & bath(s), an unfinished basement, or in some cases, a complete renovation is needed to make the property habitable.
Through the FHA (Federal Housing Administration) you may be eligible to utilize the HUD 203K program. This mortgage instrument allows home buyers to purchase their “dream home” (even though it may not look like it, yet).
Consider this, you’ve found what appears to be an attractive home on a street that appeals to you. It has almost all that you want in a home, as you gaze upon it from the street with your agent. You then enter the home, only to realize, it requires serious updating; the electrical is older, kitchens & baths are dated and there’s only two bedrooms (you need three). If you could stay within your budget and make the necessary changes, would you consider purchasing it?
Example: You received a pre-approval letter indicating $500,000 purchasing power and the property lists for $425,000. You have a clever agent with good negotiation skills, you receive an accepted offer at $400,000. By using an FHA 203K loan, you could borrow more than the purchase price, and apply the additional funds to improve the property, prior to moving in.
This incredible FHA program works well with buyers purchasing short sale, distressed, foreclosure, fixer-uppers, etc., requiring updating or repair work prior to moving in. Home buyers must meet some requirements for this program. The property must be owner occupied, a primary residence and have minimum 640 FICO score among other criteria. The property being purchased can be almost completely removed, down to the foundation. However the initial foot-print of the property must remain intact and built upon.
Examples of Home Improvements Allowed:
- Kitchen and Bath(s) remodeled
- Windows and Doors (Energy Efficient)
- Weather Stripping, Gutters and Roofs
- Basement remodeling
- Room Additions
Meet with your mortgage professional for more information on this program; keep in mind that not all mortgage people are qualified to discuss this program. Please be sure to speak with the appropriate person to determine if you qualify. This program can make the difference for a home buyer not able to find the perfect home, but has the vision to improve upon an existing home, to meet one’s needs.
There can be reasons not buy a home; however with the use of the FHA/HUD 203K loan, individuals are seeing the opportunities in fixer-uppers.
by James C. Trano, REALTOR® – Century 21 Adams – 857.209.6060