Too Much Rehab Brain Damage – I’ll Pass
How many times have you walked out of a property viewing promptly after seeing how much work was needed on the floors, kitchen, bathrooms or some other deferred maintenance? There is a good chance the Seller has way less interest in renovating than you do – especially because they are about to move out.
But Sellers know how much work is required. They probably already had quotes and were sick about what it would take to upgrade before listing their property. Therein lies the opportunity! Make an offer subject to obtaining two things:
- An acceptable quote from a contractor to complete the work, and
- A pre-qualification letter from a lender who has extensive FHA 203(k) loan experience.
FHA 203(k) Rehab Program
As a home-buyer or a real estate agent, you could save the deal and put money in your pocket by knowing the 203(k) rules. Buyers can acquire and renovate their new home without dipping into personal savings – because the costs for the purchase plus the required capital expenditures (to fully renovate the property) can be combined into one 30-year fixed rate mortgage. After purchasing the property using the loan, you simply tap into a loan reserve that is set aside by the lender at closing.
The mortgage amount is based on 96.5% of the lesser of: (i) the combined “as-is” value and cost of improvements, or (ii) 110% of the “after improved” market value. And, the 3.5% down payment can even be borrowed from a family member.