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.