You are interested in a property that needs a little work. Well, maybe it needs a lot of work. What do you do?

Unless you have the wherewithal to purchase the property “as is” and pay for the “fix up” from your own money, you may want to consider the FHA 203(k) loan.

FHA offers two variations of the 203(k) program; the traditional and streamline. Both are designed to assist with the repair/rehabilitation of an owner occupied property. Both have a minimum repair limit of $5,000.00.

The FHA 203(k) Streamline provides for a maximum repair allowance of $35,000.00. The traditional program can accommodate repairs above $35,000.00. Both programs are subject to the statutory loan limits for the county in which the property is located.

Once you have located a property and performed a feasibility analysis with your real estate professionals, you may consider executing a contract.

Your contract should state you are seeking a 203(k) loan and is contingent on loan approval based on the additional required repairs by FHA and/or the lender.

Note of caution: when seeking pre-approval prior to making your offer your FHA 203(k) lender will be considering your request for both the amount you intend to offer for the property and the required/desired repairs.

I have been receiving calls from prospective clients wanting to buy distressed properties and requesting pre-approval. Yet, they have not prepared a detailed proposal for the scope of the work to be performed.

If you have not prepared your proposal for repairs you are not ready to seek pre-approval!

To real estate agents, this is a great time to team up with a local builder and assist your clients.

Watch for upcoming posts

Required improvements

Eligible improvements

Ineligible improvements

Previous posts on the 203(k) program

FHA 203(k) A Loan Program Poised For Revival

Related posts for FHA

FHA Minimum Investment Requirements Changing January 1

Buy and Bail FHA Style

FHA Guideline Changes-Effective January 1, 2009-Are You Ready?

Jay Williams

www.myhomeloanwithjay.com

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