Using FHA's 203(k) to Get More Business

Real Estate Broker/Owner with M.S.WOODS REAL ESTATE, LLC

If you're a cental Indiana real estate agent who's not tapping into the market for fixer-uppers then you are missing out on one of the true niches of today's market. With all the repos and foreclosures that are steadily making their way to the market, there are some real deals to be had. Of course, many of these homes are need of some serious TLC. This would normally present an obstacle for most buyers, since most loan programs won't finance properties in need of significant repair. Instead, buyers ust first obtain financing to purchase the property in as-is condition. Next the buyer must obtain a construction loan to repair the property. Only after the repairs are complete can the construction loan be converted into a standard mortgage. This is where FHA can help.

Enter FHA.

The FHA 203(k) loan program provides a way to finance needed repairs in the form of a single-close purchase money loan. Under the guidelines of this program, the amount loaned is based on the future value of the home, based on the completed repairs. Under this program, your buyer can get just a single mortgage loan with standard mortgage terms, such as a fixed rate and 30-year term. The loan proceeds can be used to buy AND fix up the home. Lenders like this loan program because the loans they make are fully insurable by FHA as soon as the loan proceeds are disbursed, not after the rehab is complete. 

The subject property, to be eligible under the 203(k) program, must not exceed 4 units. In addition, construction of the property must have been completed at 1 year ago.

Some Carmel homes for sale fall into the category of fixer-uppers, albeity not many. Now you can reassure buyers that the financing doesn't have to be complicated, so long as they qualify for the loan. This allows deals to be put together that would otherwise not be possible or practical for most buyers. The FHA 203(k) could be just the ticket for tapping into an exploding niche.

Paul Welden
203k Contractor Program - Tempe, AZ

Mike - 

I definitely believe that the FHA 203k Loan can revitalize entire communities, but because the 203k can be just a tad bit more complex compared to other mortgage loan options, all participants need to be as knowledgeable as possible. This includes the Realtor (write the appropriate verbiage in the contract), lender (acts as the quarterback) and the contractor (needs to know HUD guidelines, time lines, processes, paperwork, etc).

The 203k Contractor Program provides an online directory of the Certified 203k Contractors and educates other contractors on the intracies of the 203k. Go to 

Jul 15, 2011 05:39 AM