I wanted to give this loan a mention because I happen to have three different buyers looking at homes with this program in mind for their financing needs.What exactly is a FHA 203(k) Rehab loan?
FHA's Streamlined 203(k) program permits homebuyers to finance up to an additional $35,000 into their mortgage to improve or upgrade their home before move-in. With this product, homebuyers can quickly and easily tap into cash to pay for property repairs or improvements, such as those identified by a home inspector or FHA appraisers.
This program is great if you are looking for a home, and the price range you are in is not yielding the properties you were wishing for. Perhaps the homes you are looking at need some work? New roof? Kitchen needs remodeling? Carpet needs replacing? Maybe you simply need some free standing appliances? Washer/Dryer? Stove/Refrigerator/Microwave? This loan will allow for those items also.
The buyers I am working with today have found a home that was in the process of being remodeled. The original owners ran out of money, and left the home with lots of unfinished, but necessary work to be done. Kitchen remodel not finished. Flooring removed but not replaced yet. Light fixtures missing and not replaced. A few other items as well.
The bank took back possession of this home and now has it listed. This work needs to be done to secure traditional financing. The bank isn’t going to pay to finish the job. Thus the 203(k) rehab loan is a perfect option for them to get this home at a great price, and have a professional finish the needed work.
How does it work?
First you need to go through traditional pre-qualifying steps for an FHA loan.
Once this is done, you find a home that “needs some work” similar to the above mentioned stories. The work that needs done to the home needs to be bid by a professional contractor for the job. He/she must be licensed, bonded, 2 letters of reference, etc.
A bid for the work to be completed, with a break down of parts, materials, and labor is submitted and subject to approval by the FHA underwriters. There is more steps involved, including appraising the homes value in the beginning, and determining the expected value after the improvements. (This is just brief description of the process.)
Once the loan funds, the work must be started within 30 days, and completed with 6 months. The 203(k) files I am currently working on will have a draw for 50% of the funds to do the work immediately, and the final 50% disbursement once the work is completed. Honestly this a great program for buying a fixer-upper or for the person wanting to refinance their home to do that much wanted remodeling.
I think many loan officers are hesitant to work on this type of program due to the extra paperwork and time involved, but don’t let that sway you from finding that “diamond in the rough” home in today’s buyers market! The 203(k) is not as challenging as many think. It just takes a little patience and the ability to see that finished product in your mind.
Call or email me today for more details and thanks for reading.
Bryan Husen
Email: Bhusen@Sunsetmortgageco.com
Direct 503-594-1131 or Toll Free 800-921-2636
