Is there a renovation loan like the FHA 203k for investors?

Home Inspector with, covering the USA S0289

Short answer is YES there is. While investors used to be able to use the 203K loan program, that had a feature called the escrow commitment procedure, it is no longer available to investors.  The escrow commitment procedure allowed an investor to purchase a property and put the after improved value loan in place at the time of the purchase of the property.  Example: purchase price of $200,000, construction costs $100,000, after improved value based on an appraisal subject to the work being completed Mike a minute $400,000.  The escrow commitment procedure would allow 96 1/2% of the $400,000 to be placed in escrow.  They construction money of $100,000 would be set aside and paid out as the work was completed similar to a standard 203K loan now.

*The escrow commitment procedure, and the ability for investors to purchase under the FHA 203K loan program are currently not available to investors.

On that case is there any loan program for renovation that an investor might use?

Yes, there is.  It's called the Fannie Mae Homestyle loan program which allows investors to purchase property and get the money to renovate them all in one low interest loan with a 30 year fixed interest rate.  That is huge, if an investor is looking to purchase and keep as rental units, they have a 30 year fixed-rate loan in place.  If they're looking to purchase renovate and resale.  That's entirely possible as well.

Typical scenario for an investor purchase might look like this: purchase price $100,000, renovation cost $200,000, after improved value $400,000.  Down payment is based on the purchase price and renovation cost of 300,000 and is 5% or $15,000.  That's better than most investor loans that are available today.  Does this work on 1 to 4 family units currently it works on single family only, but wait, May 1.  It's available on 2-4 units as well.

Who is the largest Homestyle lender in the nation?  It is our friends at Prospect Mortgage.  Click the link if you need more information and ask for Tom Huntley, who is the California renovation manager for Prospect mortgage.

Posted by

Mike Young, 203k Team Leader    Mike ready for your 203k order

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Pamela Seley
West Coast Realty Division - Murrieta, CA
Residential Real Estate Agent serving SW RivCo CA

Mike, thank you for bringing to our attention there is a loan like 203K for investors. Investors may want to know. Thanks for your post today,

Apr 19, 2013 01:43 PM #1
William Betancourt
Homes Of Valor - Miami, FL
Providing Support to Combat Service Veterans

thanks for the post I was looking into 203k programs. Helpful!

Apr 19, 2013 01:44 PM #2
Mike Young, covering the USA - Las Vegas, NV
FHA 203k Consultant 916-758-1809

Pamela and William, thanks for stopping by, we appreciate it.

Apr 19, 2013 02:08 PM #3
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