Buy Fixer Upper Homes for Sale with 203(k) FHA Loans
Buy fixer upper homes for sale using 203(k) loans from the Federal Housing Administration, so you can make repairs immediately without worrying where to get the money for materials and labor.
The 203(k) program of the FHA has been available for borrowers since 1978, but it is only now that homebuyers and realtors are getting interested in the program because of the high number of fixer uppers available for sale.
In the past, homebuyers are largely interested in new homes and existing homes that are functional and ready for occupancy. Additionally, some people have assumed the program has already expired.
Under the 203(k) loan program, a homebuyer can add the total costs of repairs to the total home loan amount guaranteed by the FHA. For instance, an approved home loan amount of $300,000 can be increased to $400,000 if the total cost of repairs needed amounts to $100,000.
Kristine Marr, a home loan officer at Prospect Mortgage, affirmed that the loan program is not new and she is expecting more homebuyers to avail of the program because of the record numbers of fixer upper homes for sale with great prospects of being turned into great homes.
She added that the program is timely because it is now difficult for homebuyers to find entities that lend them money for repairs.
Luis Munoz, a remodeling loan specialist at Mason-McDuffie Mortgage Corporation, is a witness to the usefulness of the 203(k) program. He even presents the program at the homeownership workshops that he handles for the nonprofit Unity Council in Oakland, California.
Munoz cited the program as an effective way to encourage the purchase of fixer uppers and to help buyers make quality renovations and repairs.
There are, however, requirements and rules that 203(k) borrowers need to carry out or comply with. They need to complete the repairs within 6 months after closing and the repairs must meet certain safety and health standards. Needed repairs must also be identified during inspection before escrow closing.
Funds for the repairs are put in escrow and are given to the contractor as work progresses. Contractors are not required for repair work that costs below $15,000, as borrowers are allowed to do the repair work provided they are qualified.
As pointed out by housing market participants, the 203(k) loan is a big help to cash-buyers dreaming of turning fixer upper homes for sale into beautiful dwellings and to neighborhoods suffering from broken-down properties.
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