The Little Known Loan That Could – The FHA 203K Rehab Loan
I love this loan, the FHA 203k Rehab loan. It is not commonly known, but let me tell you, it does exist and is a super choice for many distressed properties out there. I closed a Standard FHA 203k loan yesterday, on a bank foreclosure, from offer acceptance to closing, in 33 days!!! It was a team effort that made it happen and we have proof that it can be done.
What is the FHA 203k program all about?
The FHA 203k renovation loan program provides funds for both the purchase and renovation of a home packaged into one mortgage loan. Once the purchase of the home is closed, renovation funds are held in escrow to pay for pre-determined renovation work done by approved renovation contractors.
The purchase of a house that needs repair is often a catch-22 situation,
because the bank won’t lend the money to buy the house until the repairs are
complete, and the repairs can’t be done until the house has been purchased. We’ve
all seen this happen before, buyer is getting home for an unbelievable price but appraisers & home inspectors find things that need repaired, neither the seller or the buyer have the money to make the repairs. Or a buyer wants to buy an “as is” bank foreclosure but repairs need to be made, this was the case in my closing yesterday. An FHA 203K loan is a great solution.
HUD’s FHA 203k program enables the owner occupant borrower to borrow funds for the purchase or refinance of a home plus the cost of making the repairs and improvements in one mortgage.
Down payment, credit qualification, loan limits and other requirements are the same as standard FHA loans.
There are two types of FHA 203k loans available:
- The Streamlined 203k
is designed for less extensive improvements and for projects that will not
exceed a total of $35,000 in renovation and related expenses. This version
does not require the use of a consultant, architect, and engineer or as
many inspections as the Standard 203k. As a result, when applicable, the Streamlined 203k generally becomes the simpler, less costly option. Less paperwork. - The Standard 203k
is intended for more complicated projects or when the repairs are over the
streamlined limit of $35,000. The Standard 203k also covers structural
changes, such as room additions, exterior grading and landscaping, or
renovation that would prohibit you from occupying the residence. A
Standard 203k is also used if your project requires engineering or
architectural drawings and inspections,
It takes a great team to get the 203k loan done and for people to believe in it. I handle a great many bank owned REO properties and struggled to get bank sellers to understand & see that an FHA 203k loan, from the seller’s perspective, is the same as a cash buyer. I couldn’t understand why the banks wouldn’t consider it. Inspections are made but repairs are done post close. The buyer buys the home as is. Getting banks with foreclosure properties to consider accepting an FHA 203k buyer’s offer has been a challenge but I finally got one to accept, AND we closed in 33 days from offer acceptance to close. The bank was happy & the buyer was happy.
If you are thinking about using a 203k loan it is important that you work with people who understand and can help you through the process of making your home purchase a reality. A trained FHA 203k Specialist and 203k Lender are a must. Contact me to find out what you need to do to purchase a home using a FHA 203k loan.
Debra Beagle – Licensed Realtor & FHA 203k Specialist
A FHA 203k Specialist™ is trained to provide the expertise and support to help you find a great home at a great price that can be improved through the use of the FHA 203k program.
