I wanted to pass along a "short-cut" that may help to avoid having to utilize an FHA 203k.

If your buyer has a contract on a home that requires some minor repair, there is a way to finance the cost of the repair through an old fashioned escrow holdback.  FHA will allow a buyer to finance in the cost of a repair (so long as it is related to Minimum Property Standards - MPS) up to the amount of $5,000.  In order to do this, the appraiser must note that the requested or desired repair is related to and a functional part of one of the homes "systems."  The cost of the repair is then added to the buyers final loan amount and the amount for the repair is held back at Escrow.  The allowance is not for upgrades.  The allowance is permitted when dealing with a repair related to the following examples to name a few:
 
1. Cooling system
2. Heating system
3. Electric system
4. Plumbing system

Utilizing this program when possible will allow clients to avoid the higher interest rates and the extra work that comes with the 203K program.  Using this program does not involve any renegotiations with the seller.  We simply submit the contract between the buyer and the contractor (who will be doing the repair) to our underwriting department.  All repairs are subject to approval by our secondary market.  In general this is not a difficult process and most repairs are approved without any extra contingency funds such as 150% of the cost of the repair you may have seen in the past with holdbacks.

When using this program, minimum down payment requirements do NOT change (3% now and 3.5% on January 1, 2009).

Please let me know if you have any questions or if anyone you know now could benefit from this program.

The Phoenix Real Estate Advisor

Jay Otlewski

Contact info- Jay@valleyREadvisor.com or 623.271.4234