Little-known home loan for fixer-uppers
Updated: Friday, 25 Feb 2011, 9:15 AM EST
Published : Thursday, 24 Feb 2011, 10:47 PM EST
(FOX 25 / MyFoxBoston.com) - Fixer-uppers, bank-owned or not, can be a real deal. But coming up with the cash to make those repairs or improvements can be tough. Sometimes the condition of the home can hold up your financing.
There is a little-known way to purchase a home and give you cash to make repairs or renovations, in one loan. It’s called a 203k Rehab loan . It’s an FHA mortgage that allows you to put as little as 3.5 percent down, and on closing gives you money for needed repairs.
If you’re patient and are willing to do a little extra work, you can roll some of the cost of those big ticket items into your mortgage including replacing a roof, a septic system, heating and plumbing or you can redo a kitchen.
TO QUALIFY:
- Must Be Your Primary Residence; No Investment Properties
- Needed Repairs
- Cosmetic Updates
- New Appliances
HOW MUCH CAN YOU BORROW?:
- There are Maximum Property Values in Each County
- 110% of What the Home Will Be Worth, Once Repairs are Completed
HOMEOWNERS MUST:
- Get a Contractor to Commit to a Fixed Contract Price to Do Work Before Closing
- Complete Work Within Six Months
- Pay Mortgage Insurance
“I think it’s one of the most under-utilized loans. It’s a terrific loan, especially for the first time home buyers because it gives them an opportunity to have money that they may not have saved up, because they were saving, primarily, for the down payment of the home,” says Rob Mitchell of Coastal Finance .
“I don’t think realtors like to tell their buyers about it as well, because it can take up to 46 to 60 days, where a typical purchase we can get done in 15 to 30 days,” Mitchell says.
Many say this loan is a short-term way to get added value in your home. “The value of the property has increased, because they’ve made those improvements, and the overwhelming majority of buyers, then continue on to refinance. Usually, they’re eligible for a conventional product, which means their rates go back down, they can drop their monthly mortgage insurance premiums, and they’ve already got equity in the property,” says Erika Hall of Hall Team Realtors .
APPROVED 203K LOAN ORIGINATORS
Web links:
http://www.hud.gov/offices/hsg/sfh/203k/203kabou.cfm
http://www.hallteamadvantage.com/
http://coastalfinance.com/
If you thought you couldn't buy a "fixer-upper", think again!
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