Did you know the government will give you the money to renovate a FHA home? One of the most overlooked FHA programs, the 203(k) loan, can help if buying a home that needs work using a FHA loan.
203(k) loans are the Department of Housing and Urban Development’s (HUD’s) primary program for the rehabilitation and repair of single family properties, up to four attached units per property. The program operates only through FHA approved lending institutions.
It involves a loan, which must be a first lien on the property, to purchase a dwelling and the land on which the dwelling is located, and for a certain amount of funds to rehabilitate it. The 203(k) loan rolls the renovation costs into the loan, where they are repaid at today’s very low interest rates.
It is no different than any other loan program in many respects, as the lender submits an application to have the property appraised and have the buyer’s credit approved. What is different is the involvement of an FHA consultant, which must inspect the property, review the plans, and inspect the improvements as-built.
There even a Streamlined version of the 203(k) program, which permits home buyers to finance up to $35,000 into their mortgage to renovate or upgrade their home.
The best feature of this loan is that it is rolled into the mortgage, negating the necessity of having a pot of cash to pay for the work that needs to be done before move-in. And you do not have to be a first-time buyer, and you can even do the work yourself!
You would think that lots of people would take advantage of this program, but even though it has been available for years, 203(k) loans haven’t been very popular. For example, in 2010, the FHA only closed about 4,000 of these loans in the entire USA.
Why? The FHA hasn’t exactly promoted the 203(k) loan program. Besides, few lenders participate in the program, and most real estate agents don’t know about it. Of course there are paperwork and bureaucratic hurdles to complete and overcome that discourage its use.
But there are agents, lenders, contractors and renovation specialists who are familiar with the 203(k) loan program. And we at SimplySOLD are one of few brokerages who have closed a 203(k) loan. So if you want to buy a home and take advantage of this program, contact Lisa or Mark at 480 675-0112 or email at firstname.lastname@example.org or email@example.com. We look forward to hearing from you!
– N. Mark Kramoltz © 2015