Money Pit or Bargain? The 203k Loan May Help
As promised, we would like to discuss the FHA 203K (rehab) loan a bit today.
There are many houses available but a lot of them it seems need some work, or are missing appliances or something. How are buyers going to be able to bring their 3.5% down payment to closing and still be able to have money to fix what is wrong with these homes? Answer: the 203K loan.
The first step is to identify a home and negotiate a purchase agreement with the owner (oftentimes a bank). Next, an inspection is usually done. A contractor is then found to go into the property and a repair/wish list is prepared. An appraisal is performed then which will indicate what the home will be worth once these repairs/additions are completed. The lender will then require a 3.5% down payment based on this "fixed up" value. After closing the contractor arranges for all these repairs to be completed or appliances added and is paid by the lender as the work is done. In the end, the buyer ends up with a great home and a mortgage of 96.5% of the fixed up value.
It is a little more complicated than I am making it sound and there are inspections, paperwork, etc. that must be dealt with. Mark is certified to help with all of that so don't let any of that scare you off.
So, if a fixer upper or handyman special intrigues you - we can help make it happen!