Many homebuyers are looking at foreclosure properties that need some work. One way to do that is by using a rehab loan such as an FHA 203K. This loan allows you to purchase the home and do the repairs up to about $30,000.
Once you locate a property that needs repairs, you would determine the repairs needed and schedule an inspection with a contractor. The contractor will give you a list of improvements and prepare a bid package with cost estimates. The appraiser will use that information to determine the improved value and you can use a maximum loan of 110% of the appraised value. You need to have a down payment of 3.5%.
All work must be done within 6 months of purchase and the home has to be your primary residence. The work must be done by a licensed contractor. The repairs can be things like repair or replacing the roof, new windows, new appliances, repair or replace flooring, plumbing and electrical systems. Ineligible improvements are replace or repair a septic system or well, major structural repairs, landscaping or driveway repairs. You can not use the loan for new construction including room additions.
This loan is designed to help homebuyers with properties that need some repairs but the home is livable within 30 days of purchase. It is a 30 yr fixed rate mortgage. It can be used on foreclosures or other properties that need some work.
Leslie Vanderwerf, Advisors Mortgage - lvanderwerf@advisorsmtg.com – Website
