I just received a message this am from a new client asking for what to do next.
She said she just heard her offer was accepted on a foreclosure and she thinks the house
is eligible for the FHA 203k Financing.
This is NOT an uncommon statement and even misnomer. Let me explain...
MOST ANY HOUSE IS ELIGIBLE FOR FHA203K FINANCING... (so long as you and IT fit the program guidelines, ie. Owner occupant, 1-4 unit, LTV items, mixed use, etc...)
By and large, ALL residential homes on the foreclosure inventory are eligible for this renovation loan. You might have a home that actually passes an appraisal As-IS, however, you can STILL use the 203k to freshen it up and make it yours, should you choose to do so. It is typically NOT the home to makes the "limits" eligibility, rather the buyers circumstance.
* Owner Occupant Only
* 3.5% of Sales Price (minimum statutory investment)
* Meet standard FHA credit qualifying guidelines
If you have a home and you would like to either do a minor renovation ( mold remediation, new kitchen/bath, new carpet or paint, new roof, some windows, etc..) OR a MAJOR PROJECT ( complete gut job, DEMO HOME AND BUILD A NEW ONE ON THE FOUNDATION, for instance), then its all about the LTV (loan-to-value). As long as you have the required 110% when the project is finished, more than likely you will be good to go.
110% of what??? Your FINAL VALUE (purchase price + renovation total essentially can NOT exceed the appraised value by more than 10%)!
You might want to re-read that last sentence again.
YOU CAN ACTUALLY OVER IMPROVE BY 10%!!! Crazy huh? (course why would you want to???).
Anywho, Don't worry about the property "Being Eligible". Call a lending professional and start there with your eligibility and ASK about the property. There are too many caveats to diagnose these things yourself.
Go out, Buy Houses, Make Equity and enjoy your Life!
La Vida es Corta!
Kluge Out!
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