203k Renovation Financing, the cure for ugly houses!
Categories: Foreclosures, Homestead, Mortgage News, Real Estate News, Smart Living
hiAs I was reading the article about how affordable housing is again in the Miami Herald last Sunday, I found myself talking back to the newspaper like a crazy person. How can they write this article and state that the only way to buy the “ugly” houses is cash!. That’s not true! I sent off an email to the reporter, that the research was lacking and that they should have mentioned the 203K loan that is available for just this type of situation.
So, I am spreading the word to all!… Yes, Virginia you can buy that ugly house and make it beautiful!.
First of all, what is a renovation loan in the first place? The renovation loan is a process that allows someone to purchase a property and include required repairs or cosmetic renovations in the financing. The beauty of this loan is that all the work takes place after closing and there are no repair conditions from the bank! This loan is available for both FHA buyers and conventional buyers.
What type of property can be bought with this loan? Any single family property, regardless of condition, violations, code noncompliance or any other factor, as long as the house is not sitting on a toxic waste dump! FHA approved condominiums are also eligible. However, condominiums will be subject to the current market restrictions in our area and will require at least a 20% down payment.
OK, sounds good, but how much money do I really need? Well, if we are talking about the FHA version, you must have the 3.5% minimum required down payment and be qualified for an FHA loan. The Conventional version will require a minimum of 10% down payment for a single family and 20% for a condominium. The seller can pay up to 6% towards buyers closing costs.
How much can I borrow? The amount that one can borrower is limited to the limits set by FHA and FNMA. For the 203K FHA loan that would be $345,000.00 and for FNMA that would be 417,000.00. This represent the maximum loan amount, not the maximum sales price.
It is important to remember that when standard financing, whether FHA or Conventional, is not available or declined due to the condition of the property, that a borrower know that there are other options to a cash purchase.
If you are interested in learning more about renovation loans, please visit my website and download the renovation guide for home buyers.
