It is almost impossible to finance the purchase (and repair) of homes needing excessive work. This article provides a solution by introducing the FHA 203K program, a loan for both the purchase and repair of homes needing work.
“I couldn’t believe the kitchen was completely torn out,” said Kara Sanders. The house was perfect for her family otherwise. “It’s was the location we’d wanted – but we couldn’t get financing.”
Bad roofs, missing fixtures, holes in walls, all typical for foreclosed properties. Even buyers willing to fix houses have a problem – getting the financing to close, and paying for needed improvements.
“We didn’t have an extra $20,000 to pay for all the work.”
FHA’s 203K program provides one loan to finance the purchase and the improvements. Escrow can close even if the property’s in bad condition.
Here’s an example:
$ 180,000 sales price of home
$ 40,000 cost of work to be completed
$ 220,000 total amount that financing is based on
With this example, the buyer would put $7,700 and finance $212,300. The 40,000 held for improvements would be paid out as work was completed.
“By the time we were finished, our house was worth over $300,000,” added Kara. “It’s better than any house we could have afforded to buy.”
What’s your first step? Get pre-approved for FHA Financing. When you find a house, you’ll have to get contractor estimates, then estimates from a HUD approved estimator. Be sure that the house will be worth what you’re paying for it, plus the improvements.
Once you’ve got contractor estimates, a HUD approved estimator reviews the estimates. Then, an appraisal is obtained, indicating what the value of the property will be after improvements are completed, and indicating the present “as is” value. In certain circumstances, when the total improvements are less than $35,000, the HUD estimator is not required.
Many buyers in today’s market are being outbid, or are losing out on certain homes due to multiple offers from other purchasers. Using the FHA 203K program often improves buyer’s negotiating position by putting them back in the position of being “the only buyer.”
Keep in mind the program isn’t only for items needing repair. It can be used for adding a bathroom or a bedroom, or making certain other improvements.
Kara Sanders was amazed. “I didn’t even know this program existed. Now I’m telling everyone about it!”
A Loan on Half A House?
Informs reader and describes how a loan can be made to an owner of a partial interest, say, a 50% owner of a property, WITHOUT the signature of the other owners. Reader will learn that a loan can be made to the owner of a partial interest, when this might be useful and what the limitations and pitfalls are.
Title Insurance Checklist
Describes important considerations for lenders with respect to their title insurance coverage. Provides lenders with best practices for ordering title insurance coverage, but more important, for MAINTAINING the coverage during the life of the loan. Gives specific mistakes for lenders to avoid and steps lenders can take to prevent denial of coverage by title insurer.
Avoiding the $475,000 Mistake – Entering the Credit Bid
Article is for lenders, performing the foreclosure function in collecting on a loan. Article explains procedures for entering lender’s minimum “credit bid” or required minimum bid at the trustee’s sale. Article instructs reader on how to avoid the common mistake of entering a full credit bid, resulting in loss of certain type of insurance coverage, or loss of ability to pursue debtor.
