FHA Says, “Fix It, We Have Options”
With the high incidences of foreclosures and REO homes for sale in today’s real estate market, many savvy borrowers would do well to take advantage of FHA’s rehabilitation loan programs. Although the programs have been available since 1978, many home buyers who could qualify for and benefit from these programs have past them by, probably without even knowing it.
So what can FHA do for a borrower looking to repair an existing home or purchase a fixer-upper? The answer is plenty, depending on the extent of repairs needed on the property. Following is a short summary of the two programs available for these types of properties.
For homes in need of more extensive or structural type repairs exceeding $35,000, the 203(k) Program is the loan of choice. While borrowers will need $5,000 to contribute towards repairs, as well as the 3.5% down payment, if they are purchasing a home to fix that is not in livable condition, they can finance up to 6 months of payments into the loan while repairing the home. The loan amount, however, may not exceed 110% of the final improved value of the home. Depending on where the property is located, maximum loan amounts of close to $730,000 are available.
If, however, a home needs less than $35,000 in repairs which are not structural in nature, (i.e.-no additions, foundation work) the 203(k) Streamline Program may be the better choice. Many home owners who are looking for cosmetic or minor repairs to their existing homes would do well to take advantage of this opportunity, as well as home buyers who may be buying a home in need of a “facelift”. Another great feature of this program is it puts less demands on the borrower, one of which is not requiring the use of an FHA-designated consultant to draft architectural plans or prepare reports on repairs. Most lenders will require the use of a licensed general contractor to disperse the repair funds, however, so be sure to check for this requirement with your loan specialist.
With FHA 203(k) rates today as low as 3.75%, this program may be an attractive option for a fixer-upper. If you are considering the purchase or refinance of a home in need of repair, please contact me at email@example.com today with any questions you might have. I would be happy to help you decide if this is the best choice for you.
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