"Secret" FHA Rehab Loan Program Makes Silicon Valley Homes Needing Work Affordable
By Michelle C. Carr-Crowe
Did you know that besides traditional Federal Housing Administration (FHA) loans, which offer great benefits including lower interest rates, higher credit ratios and allowing lower FICO scores, there is a "Secret" FHA Rehab Loan that makes Santa Clara, Saratoga, San Jose and Cupertino homes needing work affordable for today's buyers?
Known as FHA 203(k) or FHA Rehab, it allows up $35,000 for repairs and minor improvements to be funded in addition to the loan amount. That means for someone putting the minimum 3.5 percent down on a home like 2180 Cheryl Way in the Willow Glen area of San Jose, Calif. (~$21,525), for just ~$3,500 more, or a total of $26,025, they could finance items like re-doing the bathroom, kitchen or changing the roof.
Of course, it's not a blank check. The program requires obtaining and submitting bids for the work beforehand as part of the loan process. The contractor(s) must be chosen and approved in advance as well.
The funds are set up into a special rehab account just for this purpose (usually at the same bank or institution making the loan, such as Bank of America and Wells Fargo.) Invoices must be submitted as work is completed, and then paid direct to the vendor/contractor from the designated account. Work must usually be completed within three to six months of inception.
"While the approval process may take longer, for buyers seeking a great value, FHA Rehab loans can make a home in a great neighborhood with some specific repair needs both possible and affordable," explains senior loan officer Abdi Ghavi of JP Morgan Chase. "Not only would the money correct outstanding issues, together the buyer and lender would have improved the value of the home as well."
For example, if properly budgeted, that $35,000 could cover a copper re-pipe (~$10,000), basic new kitchen with appliances (~$15,000) and basic bathrooms ($5,000 each). Or it could cover changes such as new flooring and carpet as well as interior and exterior paint.
Ghavi, who's helped borrowers purchase homes with FHA loans for over 30 years, says he's surprised at the number of agents and qualified buyers who either don't know about the FHA 203(k) program or never even explore it as an option with their lenders.
"It takes more time and paperwork to obtain an FHA Rehab loan as compared to the traditional FHA loan," says senior loan consultant, Jeanine DeLeon, another member of Ghavi's team. "However, it makes Santa Clara County homes that need some specific work or changes affordable and within reasonable financial reach of today's borrowers."
To request a brochure and learn more about whether FHA loan options may work for you, send an email message to fha@michellejudycarr.com.
Michelle C. Carr-Crowe is a Silicon Valley-based Multi-Million Dollar real estate consultant and an internationally-published freelance writer with over 1,000 articles in print and online. Visit her online at www.michellejudycarr.com or www.lynbrookhighhomes.com. For RE$ult$ ... Just Call ... (408) 252-8900
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