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Don’t Forget about FHA Renovation Loans for Those “Challenging” Properties

By
Mortgage and Lending with WealthWise Mortgage Planning, a Division of American Pacific Mortgage Corporation NMLS #1850 NMLS 244226

Don’t Forget about FHA Renovation Loans for Those “Challenging” Properties

As a Roseville mortgage originator, I cringe a little when I see "property to be sold as is" in a listing.  We all know this means the property holder, typically a bank or government entity, will not pay for any repairs to the property.  That's fine, as long as you get a cash buyer; lenders do not want to finance properties with "issues", particularly Section 1s.  So a distressed property will languish on the market because there are no cash buyers and no bank will finance it.

Or...

Building booms in decades past translates to a large volume of homes needing updating.  Let's say a home from the 70s is for sale in a city with a large volume of homes that are fairly new.  Buyers will most often gravitate toward the newer homes.  The older homes become difficult to sell. 

roseville mortgageDon't forget about the FHA 203k Streamline loan. 

Recap--the 203k Streamline combines the purchase of an owner-occupied home along with the costs of the improvements and repairs into a single loan.  The loan amount is based on the value of the home AFTER improvements.   

Items that can be included in a 203k include: roofs, gutters, downspouts, heating and air conditioning, flooring, plumbing, electrical, paint (including lead abatement), appliances, windows, doors, accessibility for disabled persons, basement waterproofing, mold abatement, termite infestation treatment, connection to public water or sewer, and septic or well systems.

This loan cannot be used for swimming pools, driveways, sidewalks, landscaping, structural damage, room additions, or major remodeling.

One of the benefits of this program is that the buyer gets to renovate the home according to their preferences.

Very few buyers know about the renovation loan so be sure to educate them about this option!

Here is a brief overview of the 203(k) Streamline program!

Comments(7)

Terrie Leighton
Ferrari-Lund Real Estate - Reno, NV
Reno Real Estate Agent ~ Selling Homes in Reno

Thanks Ed! I get lots of questions regarding the "sold as is" homes. I always show them to my buyers because I know the FHA 203k program is great for those kinds of properties. I am surprised that many agents don't realize the benefits of this renovation loan.

Sep 27, 2010 05:17 PM
First Priority Financial
First Priority Financial - Apex, NC
Mortgage Loans

Ed - This is such a great program that is certainly underutilized.  usually it is due to long turn times but it's the only true reno loan I know of other than Homepath.  Great topic!

Sep 27, 2010 05:17 PM
Sherilyn M. Whistler
ERA Herman Group Real Estate-NoCo - Loveland, CO
Need a Referral, Call Me !

Thank you for reminding us about these renovation loans. I have seen these beat up homes that have great bones to them but have been totally brutalized. First time home buyers are hit the hardest because these trashed up homes are generally in the newbies price range. Not all is lost if they find their perfect home and the carpet stinks, the gutter is loose and the range is gone.

Sep 27, 2010 05:19 PM
Ed Gillespie
WealthWise Mortgage Planning, a Division of American Pacific Mortgage Corporation NMLS #1850 - Folsom, CA

Terrie-Very true.  I have found that agents have either not heard of the 203k or only know vaguely about it. 

Sherilyn-In a way, it's about having a vision of what the home might look like and seeing a chance to get it fixed to your preferences!  Do you find that most of your FTHBs catch the vision?

Oct 09, 2010 02:15 PM
Tim Lorenz
TIM LORENZ - Elite Home Sales Team - Mission Viejo, CA
949 874-2247

It is interesting you blogged this topic.  My son ask if I knew of the 203 program today and I did.

Jun 29, 2011 06:41 PM
Phil Leng
Retired - Kirkland, WA
Phil Leng - Retired

Hi Ed.

What a perfect solution for all the bank owned properties that are a little rough, and are also sold "as is"

The buyer gets a great deal on a house, and gets to have it fixed up to their taste before moving in.

Great!

Thanks

Phil

Jun 29, 2011 06:47 PM
Ed Gillespie
WealthWise Mortgage Planning, a Division of American Pacific Mortgage Corporation NMLS #1850 - Folsom, CA

Ha, Tim!  Great timing! I talked to an agent last weekend that lost a deal because he didn't know about 203(k).  It bears repeating!

You got it, Phil

Thanks to both of you for stopping by!

Jun 29, 2011 07:31 PM