203k Loans
Well, the buyer credits expired on April 30, 2010 but it is still a great time to be buying a home. Interest rates are still near record lows and even more important is that prices are still extremely affordable. With the Toledo market depressed in general, we are seeing more short sales come on the market. There are some very good prices on these. This means you can buy more home for less money. While prices are low in general, foreclosures offer a terrific bargain for buyers. The problem with foreclosures is that even though they generally provide a good price value proposition most will need some repairs or improvements and most first time homebuyers do not have the cash to make the repairs. However, the Federal Housing Administration (FHA) has a solution that will help you buy the home you want and allow you to finance the repairs needed into one payment. The program is called the Section 203(k) program.
Homes requiring repairs generally will not qualify for standard FHA financing. 203(k) loans fill a unique and important need for homebuyers. When buying a house that needs repair or modernization, homebuyers usually have to follow a complicated and costly process. The acquisition and improvement loans often have relatively high interest rates, short repayment terms and a balloon payment. However, the 203(k) loan offers a solution that helps both borrowers and lenders, allowing a single, long term, fixed or adjustable rate loan that covers both the purchase of the home and the rehabilitation or update to the home.
The total cost of the rehabilitation must be at least $5,000 and the extent of the rehabilitation may range from relatively minor (still has to exceed $5,000 in cost) to virtual reconstruction. The types of improvements that a purchaser may make using Section 203(k) financing include:
- Structural alterations and reconstruction
- Modernization and improvements to the home’s function
- Elimination of health and safety hazards
- Changes that improve appearance and eliminate obsolescence
- Reconditioning or replacing plumbing or HVAC
- Adding or replacing floors and/or floor treatments
- Major landscape work and site improvements
- Making energy conservation improvements
Properties financed under the program must meet certain basic energy efficiency and structural standards. Our 203(k) lenders can give more detail and guidance once you have found the home you wish to purchase.