Purchase and Remodel a home with only 3.5% cash out of your pocket

Today I attended a class on the FHA 203 K loan.  It has always been one of those things that sounds really good but is practically impossible to get done.   But I met a team of peeps all working together and getting the FHA 203k loans closed and people into their beautiful homes.

One of the challenges in todays market is that so many of the homes (foreclosures and short sales) are in poor condition.  Having items and issues that need repair in order to get a loan on the property; and with both short sale and foreclosure properties being “As Is” transactions, and no repairs being completed by the seller, getting a loan approved, funded and closed can be like pulling teeth without any Novocain.

In comes the FHA 203K team!

Together, a lender who will complete this type of loan; the home inspector, termite inspector, general contractor, HUD inspector, and a handful of other people that together know what is required, are working in unison to help people purchase these distressed properties, make the needed repairs and do some remodeling and updating at the same time.

How does it work?

The home buyer finds out what they will qualify to purchase.  Working backwards from there, if you qualify for 200,000 and you are going to put 20-35,000 into repairs and remodeling; look for homes priced around 160,000.  At the same time you have the home inspection, also bring in the general contractor and maybe the HUD inspector too.  Find out the cost for what is needed to be repaired and what you would like to have remodeled.  The cost of repairs and remodeling are rolled into the final loan amount. At closing the general contractor gets in the house and makes the repairs and remodeling, a few weeks later the home owner gets to move into their beautiful newly re-done home.

This takes an experienced team, a well oiled machine and fantastic communication.  I am glad to know the players! and to have been invited to join the team and help a few more buyers get into their dream home.

FHA Rehab Loan 203k

There are lots of foreclosed homes that need more than just a little love.  They need work to be livable.  The standard FHA loan requires the property be livable, no broken windows, appliances in place, no bare cement floor etc. The FHA 203k loan allows for someone who has fallen in love with a house that needs work to still get a loan using the FHA guidelines. The FHA 203k loan is not new.  Some of the qualifications for it have changed making it easier to obtain today than in years past.  The 203k loan is part construction loan and part FHA.  It is designed to help with the purchase of a home that may need repairs or remodeling.  Here are a few improvements allowed.

  • room or garage additions
  • kitchen or bathroom remodels
  • roofing and landscaping
  • pool repair (up to $1500)
  • electrical upgrades

The cost of repairs are rolled into the loan amount, and the home is appraised as if the repairs have been complete.   The 203k allows for up to $35,000 in repairs with a min of $5,000 to qualify.  The total loan value including repairs can not exceed the FHA limit (346,250 in Maricopa County till the end of this year)

The Federal Housing Administration (FHA) is a division of the Department of Housing and Urban Development (HUD).  HUD was created to make affordable financing readily available to qualified buyers. Also check out HUD’s info on the 203k as well as the FHA site on the 203k.

A big thank you to Robyn Robertson for her sharing this with me.