They're all over these days. Bad roofs. Stolen appliances. Dry rot. How the heck do you buy one of these homes if you don't have Fort Knox in your backyard... ie an all-cash purchase?
After all, even with 20% down a regular loan won't be approved if the roof is shot.
But there is an easy way. It's name is not easy - but the process is. It's called an FHA 203K Streamline loan. (told you it was a mouth full!)
I just closed two escrows with this streamlined loan, with escrow of about 45 days. Here's how they work. You pick your home and get into contract with the 203K Streamline loan stipulated. You say "repairs to be determined". Then you get bids from a contractor (who, by the way, must be licensed and have liability insurance). You can go up to $35K in borrowed funds with some restrictions. Once approved, the amount is then tacked onto your loan. The down side is your interest will be slightly larger on the entire loan amount, and you are bound by the contractor's bid. The appraiser will want to see the completion of what was promised, without changes.
When escrow closes, half of the amount borrowed goes directly to your contractor who has 6 months to complete the work. Once the work is completed, your original appraiser must confirm the work was done. Then your contractor gets the balance of the money. You can't go moving walls, or doing remodeling which requires engineering. You can't do landscaping... and yes, other small print does apply, but it's a pretty slick program!
Easy peasey! Laura has just installed all new appliances, new doors, and is getting ready to paint the exterior, correct all the pest repairs, and install a new roof. Oh, and a new water heater, to boot!
Rebecca is just finishing the installation of her new kitchen, and new hardwood floors in a few rooms.
If your lender doesn't understand this loan, it's not for the feint of heart. But if you have a good lender, who understands the paperwork, they're slicker than... well... goose grease, to quote my Dad!
Flickr photo by A&A Design Build Remodelling
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