How the Government Can Help You Buy a 'Fixer-Upper' Home

By
Real Estate Agent with REMAX Advance Realty II 3233262
Government to the rescue
Luckily, the US government has recognized the catch-22 situation this presents to a potential homebuyer, and has established a loan program through the Department of Housing and Urban Development (HUD) that can help you.
The loan program grants a 203(k) loan, which is insured by the Federal Housing Administration (FHA), a department of HUD. The 203(k) offers borrowers the money to purchase or refinance a property and allows them the option of including the cost of home repairs in the initial loan itself. The buyer further benefits from an FHA-insured loan by enjoying low down payments, low closing costs and relaxed qualification rules.
Where do I start?
After you've chosen the fixer-upper you want to purchase, you will need to contact an approved 203(k) mortgage lender to begin the approval process. You can find a comprehensive list of lenders who offer the 203(k) loan program at www.hud.gov.
What will I need to provide in order to qualify?
As with any type of mortgage, you will need to fill out a lengthy application disclosing your financial information and credit history. A property appraisal will need to be performed. When applying for a loan for a fixer-upper, the lender will also require a detailed, itemized list of the repair work to be done along with a cost estimate.
How much will I get?
The 203(k) covers the purchase or refinance of the property, the repair costs and most of the closing costs. The loan will also include an extra 10 to 20 percent of the total repair costs to be held on contingency, in case any additional, unexpected repair work crops up that was not included in the original proposal.
Do I get the full sum at once?
No. At the closing, the lender will pay the property seller the agreed sale price of the home. The remaining money will be set aside in escrow to pay the contractor for the home repairs as they are completed. If the borrower will not be able to live in the home while it is being renovated, the 203(k) offers an added benefit. The loan allows for up to six months of mortgage payments to be rolled into the cost of the repairs, so the new homeowner will not have to pay a mortgage out of pocket until he is comfortably settled into his new, improved home.
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Jose Francisco Sanchez

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