Tell me if this sounds familiar:
You're ready to buy your first home. You've done your mortgage homework and have a prequalification. You've got a fantastic real estate agent. You are super pumped about this new and exciting chapter in your life. You can't wait to get out there and find your dream home!
You are a couple of weeks into your search, and becoming a tad discouraged. You just can't seem to find everything on your wish list, at least not in your price range. A few were close, but just not quite home. That home on Maple Street, uggh! It was so perfect, except that 70's kitchen. The one on Main, that's your favorite little neighborhood - but after all this time renting, you had your heart set on a garage. You've saved up all your hard earned cash for your down payment, you just can't afford to shell out more to make it just right.
What to do... what to do...
I'm going to tell you about what I think is absolutely the most underutilized mortgage program out there: Its called a 203K. Quite simply, it is a loan that you can use to purchase (or refinance) a home AND finance the cost of all the repairs and/or renovation. So, think of it like this: you find a home that you adore, except you just can't cope with those window units, you need central air. And while you're at it, those carpets have seen better days and the roof its on its last leg. The house is listed at $200,000, but you'll need $12,000 to make it perfect. Your mortgage amount will be based off of $212,000.
Sounds like a perfect solution, what's the catch?
Personally, I don't think there is a catch. But, I'll give you some bullet points about requirements and qualification for this loan type:
- There is a minimum 3.5% down payment
- This is an FHA government insured loan
- There is up to 6% of allowable seller assistance (this means you can negotiate for the seller to pay your closing costs)
- The fico score requirements are less stringent than a conventional mortgage
- The debt to income requirements are less stringent than a conventional mortgage
- You must have a licensed and insured contractor with whom you have no relation, to complete your renovation project
- It is for use on any home in any condition including condos, townhomes, mixed-use, multi-family and single family homes
- It can be used on short sales, bank owned properties, HUD REO and Fannie Mae or Freddie Mac owned properties
- No repairs are required prior to the purchase of the home
- The seller is not responsible for any repairs; this makes your offer stronger as a buyer
- You can not do any luxury items such as installing a swimming pool, hot tub, etc.
- You can do repairs of an existing pool up to $1500
Want to get the REAL feel? Watch this video:
I hope this information helps you create your dream home.
P.S. one of my favorite things to do is mortgage myth busting, so please don't be shy and ask me anything!