Little Known Program Helping to Move Foreclosed Homes
Shea and Michelle Carlin recently had their eye on a two-story home with an expansive balcony outside Brooksville. As is often the case with foreclosures, the prior owners pilfered the entire kitchen and all the light fixtures. The Carlins couldn’t afford the $46,000 in repairs, and banks wouldn’t lend them the money to buy the house until the repairs were completed — a catch-22 common in the foreclosure market. Their dream home could have slipped away. Then they heard from their Realtor about a government program that would allow them to buy the house without needing bundles of money in advance. It let them roll the repairs into their total mortgage. The little known and once seldom used program backed by the Federal Housing Administration has caught fire as of late. In 2006, just two people used the program to buy property in the Tampa Bay area. Last year, the number jumped to 135. Nationally, the numbers increased nearly 700 percent. [Source: St. Petersburg Times]
FHA 203K is the program. It’s considered a construction loan on top of your original FHA mortgage. You can only get a 203K loan on an FHA mortgage (Sorry VA). Traditionally, the interest rates can be about .5% higher, but can be refinanced upon lender qualifications down the road.
So why don’t many people take 203K or ask for it? Well, the process takes a little bit longer for closing. There is additional underwriting guidelines that must be met. Such as, an estimate of repairs costs by a licensed contractor must be submitted. Also, the amount of the loan plus repair costs must equal or less than what the projected appraised value will be. So example above with the kitchen, say the home was purchased for $100,000, the loan amount is $96,500 (3.5% down). Repair costs equals $12,000. The home must appraise at or above $108,500. The biggest issue is with short sales. When the seller’s lender approves the short sale, closing is usually expedited to 30 days or less. A 203K process can take 45 – 60 days. Sometimes the seller’s lender will not budge on the closing date.
In this economy, many homes are being appraised at sales price. Most modifcations will not net you more money in a declining market. So its a little harder to find the great buy, easy/moderate fixer, and get FHA 203K but IT IS POSSIBLE! I have several lenders I work with that specialize in 203K loans.
If you would like to purchase a home, get more information on FHA 203K or find out more information about buying a home, please email me for a Homebuyer Brochure that I can email or mail to you. Email me at RebeccaTheRealtor@live.com or call my office at 727-216-9253.
Rebecca Paone
Keller Williams Gulfside Realty
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