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How to buy a fixer with an FHA loan.

By
Real Estate Agent with Lyon Real Estate, Fair Oaks CA (Sacramento Area) DRE# 00809499

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!)

Get a beautiful new kitchen with FHA loanI 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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Your Fair Oaks Realtor for homes for sale in Fair Oaks and the Sacramento Area of California.... I'm your gal (Sally Dunbar). I'm occasionally knowledgable, periodically humorous, and always willing to tell you everything I know.  What more could you ask for?

Here are the newest listings for Fair Oaks, Orangevale, Citrus Heights, Folsom, Carmichael, Gold River, and Roseville - all CA, of course.

More Blog posts by Sally Dunbar at www.FairOaksHomesAndMore.comSally's Website at www.sallydunbar.com to search for all homes in the MLS, and for tons of information for buyers and sellers.  You'll find schools information, market statistics... you name it, I got it!  Come visit me.

 

 

 

Sally Dunbar, 35 year Broker Associate, Lyon Real Estate, Fair Oaks, CA (916) 524-1548, SDunbar@GoLyon.com "Your Fair Oaks Realtor"

Jeremy K. Frost
Keller Williams Realty - Dripping Springs, TX
Associate Broker, ABR,CNE,CRS,ePro,PSA,RENE,SRS
 

Thanks for sharing this valuable information. It's posts like this that make active rain great!

Apr 16, 2010 10:34 AM
Rodney Mason, VP of Mtg Lending
Guaranteed Rate NMLS# 2611 - Atlanta, GA
AL,AR,AZ,CA,CO,FL,GA,IN,MI,MS,NC,NV,SC,TN,TX,VA,WA

Great post.  Don't forget that the Consultant 203K for repairs over $35K.  The 203K program is a great way to get distressed properties sold.

Apr 16, 2010 12:38 PM
Aaron Poling
Long & Foster - Martinsburg, WV
Working to get YOU the BEST Deal!

Thanks This info can really help me out with one of my listings!

Apr 16, 2010 03:31 PM
Andrea Swiedler
Berkshire Hathaway HomeServices New England Properties - New Milford, CT
Realtor, Southern Litchfield County CT

Sally, it is a great product, I have my eye on it. As more foreclosures hit the market that are beat up, have no kitchen, more problems that you can shake a stick at it makes the only buyer possible one with cash.

 

Apr 17, 2010 12:49 AM
Irene Kennedy Realtor® in Northwestern NJ
Weichert - Lopatcong, NJ

Sally - We do a great number of these. Buyers can get a great deal and not live in a dump!

Apr 17, 2010 01:41 AM
Gary Meek
Living in Sacramento Team - Roseville, CA
(916) 995-9385

You are right it is a great loan.  Don't forget about the 203B with an escrow hold back of $5000.  One of my agents just closed one of these on a HUD home.  Easy to do, and even easier on HUD homes.

Apr 21, 2010 02:14 AM
Sally Dunbar
Lyon Real Estate, Fair Oaks CA (Sacramento Area) - Fair Oaks, CA
Fair Oaks Realtor - Fair Oaks Homes for Sale

Andrea - It's a pretty cool loan, although today the EPA lead paint program goes into effect where their contractor must be EPA lead paint certified. That's a monkey in the wringer for sure.

Apr 22, 2010 01:56 AM
Sally Dunbar
Lyon Real Estate, Fair Oaks CA (Sacramento Area) - Fair Oaks, CA
Fair Oaks Realtor - Fair Oaks Homes for Sale

Irene - have you run into any problems with previously undiscovered problems?

Apr 22, 2010 01:57 AM
Donne Knudsen
Los Angeles & Ventura Counties in CA - Simi Valley, CA
CalState Realty Services

Sally - While many of my clients really like these loans, the challenge down here in LA & Ventura counties is that so many of the LA's refuse to accept these offers, especially when they have a handfull of all cash buyers.  But I have done a few of them in the past couple of years and for certain properties, it's the only option.

Jun 09, 2010 11:21 AM
Brent Kluge
Senior Vice President, Secured Funding Corporation - Rockville, MD
I do mortgages REALLY well and I WON'T RIP YOU OFF

It is the best vehicle available for buying a property AS-IS today... :)

 

Nice Post!

 

b

Jun 21, 2010 12:15 AM