It has been around for years, but it is making a strong comeback. It is the FHA 203K renovation loan, and it is helping home buyers to take advantage of distressed "fixer upper" properties that only investors could previously purchase. With this loan, you can borrow the amount needed to purchase the home and make all necessary repairs. Basically, if you have a home that can be bought for $70,000 and it needs $20,000 in repairs, you can borrow the total $90,000. You will be required to make a down payment of 3.5% of the total purchase price and repairs ($90,000). Contractors will then be paid for the repairs out of the escrow account once you own the home.
Have you ever been told that you cannot get an FHA loan on a bank foreclosure because utilities will not be turned on for appraisal? This loan can provide a contingency escrow that can allow you to buy these properties with only 3.5% down without the need to have the water or electric turned on for appraisal.
This loan does take a lot more effort on the part of the buyer, the loan officer, and the real estate agent. Many loan officers say that they can offer this program, but very few can actually get it to the closing table. There is a lengthy process of inspections, appraisal, and obtaining bids for the work that needs to be completed making this a 45-60 day process. For this reason, my team is partnering with a lender right here in Cincinnati that specializes in FHA 203K and renovation financing. Her expertise helps us to guide our clients through this process with ease.
If you are interested in taking advantage of the "fixer upper" deals that are giving our buyer clients tremendous equity in their home purchase, then call or email our office for more details on the FHA 203K renovation loan.