Housing Rehab Made Easy

Posted by Steve Vincent on Jul 13, 2015 10:24:48 AM

In Buyers, FHA 203k, financing repairs, fixer upper, rehab loan

Do you like old houses?  Does the thought of buying something a little worn around the edges and fixing it up entice you?  Was 'This Old House' one of your favorite shows back in the day?

Well, you may not realize it, but there's a great financing program for you!

FHA has a program - the 203K - that enables lenders to loan buyers the purchase price of the property they want PLUS the cost of rehab.  Basically, you find a great fixer-upper, nail down a price with the seller, estimate your repairs and rehab, and apply for a loan covering the total:  acquisition cost plus repairs.

hammerTerms are the same as any other FHA mortgage, meaning you still have to qualify and they will expect a minimum down payment of 3 1/2 %, but you end up financing the cost of your rehab for the full term of the loan at the same low interest rate as the mortgage.  The maximum loan amount can be 110% of the property's anticipated value after rehab is complete.  It's a great program!

Without this program, you probably would have had to buy the house and then finance the repairs in a second mortgage for a shorter term, a higher interest rate and a much larger payment!

So, let's do a little dreaming, shall we?  Let's assume you find a great old home in a fine neighborhood.  Nothing has been updated for 50 years, which means the kitchen is impossible, the baths are terrible, the floorplan could stand some modernizing.  If the home were modernized, it would likely bring $200,000.  But in its current state it's only worth $165,000.  You and your contractor figure it will take $45,000 to put it in top shape, so you apply for an FHA 203K with minimum down on a purchase price of $210,000 ($165,000 purchase price + $45,000 in repairs).

But wait! We said the property would be worth about $200,000 when repairs are complete, and we're coming in with a purchase price of $210,000.  Remember:  FHA will loan up to 110% of the appraised value of the property after repairs and rehab are complete, and that would be $220,000; so we're ok.

Your downpayment would be $7,350 and of course there will be some closing costs and prepaids to consider and/or negotiate.  The resulting payment at today's rates would be about $1,250 per month, including principal and interest, FHA mortgage insurance and an estimated payment for taxes and homeowners insurance.

Best of all, you'd be living in a great home you actually created for yourself! You decided what needed to be done, what materials would be used and how the final product would look and live! I can't imagine anything better!

The FHA 203K is just one of many special financing packages available to home buyers in the Triad.  There really is something for almost everybody, no matter what your special needs might be.  Unfortunately, the mortgage landscape is a complicated thing and most people simply don't know what's available.  At The Vincent Group and GreatNest, WE DO!  Bring your real estate problem to us and let us help you find a finance program that will bring your dreams to life!

GreatNest and The Vincent Group is a full service real estate company charging a low set fee instead of a percentage commission. We serve buyers and sellers in Greensboro, High Point, Winston-Salem , Summerfield, Oak Ridge, Jamestown and surrounding areas. You can reach us at (336) 790-5210 or by emailing Steve Vincent. Visit our website: greatnest.com.