I’ve had first time home buyer clients who are frustrated by how much distressed property there is in the market. They can’t afford a renovated home, but they can’t afford to fix up the property on their own.
Well, there is an answer.
The U.S. Department of Housing and Urban Development (HUD) offers homebuyers the opportunity to secure a loan known as a 203(k) loan. This loan is administered through the Federal Housing Administration (FHA) and gives homebuyers the necessary funds to rehabilitate a home.
Many times, a bank will be hesitant and may reject lending money when the home is not habitable. This is where the 203(k) loan comes into play and can help homebuyers obtain the necessary funds to not only buy the home but to purchase the necessary upgrades to make it habitable.
This loan is an incredible opportunity and is coming into play more now than ever since the housing market took a dive. With many people facing foreclosure, they stripped their house of everything that wasn’t, or was, bolted down leaving the house a complete disaster. This loan gives homebuyers the chance to come in and fix up the house.
This does two things: 1) increases the value of the home and surrounding area and 2) boosts the economy of the community by having another family living and buying in the area.
My friend Jeannie Bolger, of Nova Home Loans is well versed in helping you get these “fixer-upper” loans. Jeannie has been trained to help guide clients through the entire process.
But as with any mortgage, there are some criteria both the homebuyer and the home must meet:
1) The homebuyer must meet FHA financing guidelines which means a FICO score of 640 or more and a debt to income ratio of 31/43 (see FHA for more info)
2) The home must be the primary residence
3) For the home to qualify, it must be existing for more than one year
4) The work must be completed by a Licensed General Contractor – sorry do-it-yourselfers
5) Work starts after you close on the home and must be completed within 6 months
There are also two types of 203(k)s that homeowners can choose from depending on the extent of the work required:
1) Streamline 203(k) – this includes uncomplicated repairs and improvements to home up to $35,000 and no more than 2 subcontractors needed for entire project
2) Standard 203K – this is for major repairs and improvements along with structural improvements to property exceeding $35,000 – up to 6 months PITI (principle, interest, taxes and insurance) can be included in mortgage if property cannot be occupied during construction. A Licensed General Contractor is needed if layered work is involved
These 203(k) loans are a great way to get our housing market back up and running. With a wide selection of homes in the Central Phoenix area, there is something for everyone.
And don’t forget, the Realtor, Lender, HUD Consultant and Contractor will hold your hand throughout the WHOLE process.
If you would like more information on the 203(k) loan, or just on homes in CenPho, give me a call today at 602-456-9388.