September 23, 2011

I Love the House...BUT... by Guest Author: Chris Reshetar

As a buyer in today’s housing market, one needs to be knowledgeable about distressed properties with so many short sales & foreclosures for sale.  These houses come in all shapes and sizes, and typically come in below the current market value.   Buyers are often looking for a good deal.  However, we in the housing industry often hear “I love the house, BUT....”.  It can sometimes be difficult for the buyer to see beyond the needed repairs.   

Renovation loans to the rescue.  

A renovation loan is a mortgage that allows the borrower to secure funds to repair or upgrade a property by financing the repair costs in.  The home is appraised at the “future value” based on the sales price of the home plus the costs of repairs per the agreed upon contractors bid.  The loan closes in its current unrepaired state.  Immediately after the loan closing the borrower and contractor can begin the renovation work on the home. 

There are 3 main types of renovation loans:
  • FHA 203K Streamline Renovation loan (limited repair)
  • FHA 203K Standard Renovation loan
  • Conventional Renovation loan
The 203K Streamline program allows for repairs up to $35,000 with FHA specific allowable repairs.  No structural repairs permitted on the streamlined program.  

The FHA 203K Standard program has no minimum repair amount but is limited to the FHA loan limit for your area like all FHA loans.  However, a Standard FHA 203K loan can be used for more extensive repairs such a structural remediation.  This loan does required an FHA certified inspector to evaluate and approval all repaired items prior to occupancy.

These 2 FHA Renovation programs allow for the standard 3.5% down payment minimum and follow the traditional underwriting parameters as a regular 203B FHA loan.  The standard Upfront Mortgage Insurance Premiums apply (1%) as well as the monthly premiums.  This loan requires the buyer to occupy the property as their primary residence. 

414 Park Avenue ~  203K loan opportunity!
Here are just a few of the allowable repairs under this program:
·         Interior or exterior paint
·         New flooring
·         New appliances
·         Replace or repair siding and roofing
·         Replace or repair windows
·         Upgrade Kitchen and Bath cabinets and counter tops
·         Finish a basement, attic, or room above garage

The Conventional Renovation loan functions much like the FHA 203K loan, however this program can be used for both owner-occupied properties as well as investor owned.  Fewer lenders offer this program but it can be a great option in lieu of the 203K.
 
To find out more about the Renovation loan programs, please feel free to contact Chris Reshetar at chris@themortgagegenius.com or call 704-277-4463.  www.themortgagegenius.com

To learn how you can apply the Renovation Loan Programs to a home in Salisbury~Rowan County, contact Greg Rapp @ 704.213. 6846.