Wednesday, November 30, 2011

How Can I Use a FHA 203k Renovation Loan?

In a recent article I showed you how quick and easy the FHA 203K Loan process was and how it can benefit you and your family in their search for the perfect home. We talked about how you can purchase or refinance and get the money to buy or to pay off your current mortgage alongl with an escrow account for repairs all in one simple loan process at great FHA rates. Now I want to outline some of the common and not so common uses of FHA 203K Loans; from making a property handicapped-accessible to waterproofing a home to simply upgrading appiances in poor condition, the FHA 203K loan program gets the job done. So, how can you use the program?

1. New Freestanding Appliances

2. Complete Bathroom Remodel

3. Adding a New Master Bathroom

4. Upgrading Heating & Cooling Systems

5. Well & Septic

6. New Hardiplank Siding

7. Fresh Paint Inside or Out

8. Attic Build-Outs

9. Waterproofing the Basement

10. Finishing the Basement

11. Making the House Handicapped Accessible

12. Complete & Total Renovation

13. Adding a 2nd Floor

14. Adding a Bedroom

15. Moving a Historic House to New Location

16. New Deck & Outdoor Kitchen Area

17. Repairing Water Damage

18. New Hardwood Flooring or New Carpet

19. New Lighting Fixtures

20. New Windows & Doors

21. Upgrading Plumbing & Electrical Systems

22. New Fixtures for Tubs, Bathrooms and Kitchens

23. Opening Up a Floorplan

24. New Kitchen Counters

25. Vaulting Your Ceilings

26. Making Your House More Energy Efficient

27. Going Green with Solar Panels

28. Getting a Condo Ready for Your New College Student

29. Much, Much More

There are thousands of reason why people need to renovate and I couldn't possibly list them all here. FHA allows for nearly anything you can think of so long as the value of your renovation supports the new loan amount. I am getting more and more requests to help provide financing so green conscience homeowners can add new energy efficient features, including solar panels, to their homes and save on rapidly rising energy prices. Not to mention FHA will allow your debt to income ratios to be higher if you include energy efficient improvements to your renovation. So whether your renovation idea made the list or not, it is always good to check into FHA 203K Renovation loans before you finance your next home improvement or new home purchase.

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Saturday, November 26, 2011

Why Use An FHA 203k Mortgage

The FHA 203k mortgage program has helped many to home ownership. With increase in foreclosures this program has helped a great deal. Learn why this program is a great one to use especially if your home purchase is in need of repairs.

Over the years, FHA has helped so many to navigate their first home purchase. They give practical home loan rates for those of the middle class and those with a meager income by making it affordable to purchase a home instead of renting. One way they have done this by creating a program so individuals can finance a home that may need improvements. This program is called the FHA 203k mortgage.

Another reason to use this type of program is the down payment is only 3.5 percent. So individuals who are still going to school or are newly married can realize their dream of home ownership. Most conventional mortgages require up to 20% for the down payment. For some this is just too steep so they give up on buying a home. But FHA makes that possible by requiring a lower down payment.

The FHA 203k mortgage is among the most favorite FHA home loans. It allows people to borrow anywhere up to 96.5 percent of their entire mortgage loan and it is a fixed rate loan. Thus a lower down payment and lower closing costs.

There is a requirement that you need to take into consideration. You have to meet the minimum income guidelines. Be sure you meet this minimum before applying for the FHA 203k loan.

The debt ratios can be very specific, based solely upon the state the individual resides in. What makes the FHA 203K mortgage so cool is you can purchase a house in need of repairs and simply have the repairs added into the mortgage. This can be very useful when you are looking at a foreclosure. Many times these type of homes have been damaged by the previous owner or they badly need upgrades. It is possible to finance these too.

You can even use the FHA 203k mortgage to improve a condominium. There are some restrictions but the possibility to rehab a condo is there. There is even the prospect of using this loan product to rehab a mixed-use residential property. The versatility of this product is amazing.

Many hear that only a first time home buyer can use the FHA loan products. So what is the definition of a first time home buyer? It is an individual who has not owned a home during the three years prior to their application. This would include their spouse.

You have to meet a minimum amount of rehabilitation to use the FHA 203k mortgage. That minimum requirement is $5,000 for eligible improvements on the existing structure. It is true minor repairs are unacceptable, but it is possible to include them once you meet the $5000.

Now there are some restrictions. You have to begin the work within 30 days of signing the agreement and the work must not stop for no more than 30 days. You also must stick to the original budgeted amounts. You cannot ask for an increase in your mortgage just because the costs went up. So make sure you get your estimates in writing and that the contractor will honor his estimates.

Of course you can be your own general contractor if you are actually qualified to do the work. You still have to complete the work in the specified time frame. But you cannot be paid for your labor. Only can be reimbursed for the materials.

So, if you are looking at a foreclosure and are wondering if you can finance the repairs, then consider the FHA 203k mortgage. It may be a perfect fit for you!

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Wednesday, November 23, 2011

Become Part Of A 203k Team

I've always looked at the 203k as a team sport, even when I first got involved with it. When we put out our audio tapes in 1998 we even discussed it.

You are only as good as your 'team' in any case. If your consultant can't write a good report, the lender won't have much to work with and on the other hand if the lender can't get the loan closed it doesn't matter how good the 203k consultant writes the report.

This is true of the rest of the team as well. Your teams each should have a Lender that can close an FHA loan, even a 203b quickly.

Our trained 203k consultants will provide 100% of the 203k portion so the lenders can take our MMW and use it to help them fill out their form... it is their responsibility but we try to make it easier for them.

If we all do our part of the project and then pass the baton to the next team member this frees us up to get the next project started.

Example: A 203k loan may begin anywhere by any one of the team members. We quite often get calls from our websites or the HUD website from a borrower... we immediately asses the situation and more than likely we'll send them to a lender to get that process started.

They may already have a property, that is okay, we still need to get that lender take on the borrower to be sure they are credit worthy. Not wanting to waste time or the borrower's money we need to verify they have the ability to get the 203k loan going.

If they don't have a property then we suggest a realtor or agent to help them find one in a neighborhood of their choosing.

We may actually start consulting to determine what type property they might want. There are several possibilities in this realm.

Once they locate a property suitable for their needs we set up a 203k consultation and inspect the property to create the 203k bid specifications.

Once those 203k specs are complete the borrower should look them over to be sure everything looks like they want it. Then they go to the lender.

The lender takes the 203k specs and provides that information to the appraiser and the appraisal is completed with an 'after improved' value. Once we reach this point the loan should close within a week or so typically.

Once the loan closes the borrower needs to get that information to the contractor so they can get that project in their schedule.

This is an important step as this is the only way the contractor has of learning the loan has closed.

They have up to 30 days to get their first draw inspection but in most cases they will have someone start long before that. In many cases they will start within a few days of your closing the loan.

We look forward to helping you build your 203k business.

Know that this is much more than just 203k, you will be trained in all renovation loan products that you can also consult on.

You will have access to our marketing materials and power point presentations to increase your "Referral Partner" Base too.

We have referral partners that provide a considerable amount of work for us in the FHA 203k loan program.

We'll show you a way to finance 80% of the pool repairs or even add a swimming pool to a home that doesn't have one.

To place an order go to 
Mike Young, 203k Consultant
Cell phone 1.704.451.1599

We now have offices in

Charlotte, NC
Columbia, SC
Charleston, SC
Denver, CO
Detroit, MI
New York, NY
Los Angeles, CA
Santa Barbara, CA
Austin, TX
Dallas, TX
And we are growing our business!

Saturday, November 19, 2011

Asset Managers: Move Your Listings FASTER!

Why not move your listings faster than your competition?

That is the name of the game isn't it?

Actually it all comes down to KNOWING what it will cost to make the repairs in THIS home. If you have a "fixer" you are trying to sell and you have identified the cost to cure or make the necessary repairs then you have a salable home again.

No one wants to step into the unknown particularly a "first time home buyer" get your bank to cut loose with a little money to have us do a "feasibility analysis" which will identify the cost to make the repairs

1) to bring this home up to the Minimum Property Standards and

2) a second feasibility analysis to bring this this home to a "typical" upgraded condition.

By doing these two feasibility analysis I can assure you that your "hard to sell" homes will be easier to sell, will sell faster, and the buyers will have more information about YOUR listing than any of the other asset managers properties and therefore Yours sell faster.

I know most of you are selling 500-1,000 homes per year but as greedy as you can be, wouldn't you like to sell another 250-500 on top of that? By the way, you would be doing your employer a service by getting the "hard to sell" properties off their books faster as well. Everyone wins !

Who can do a feasibility analysis? That is easy, every FHA 203k consultant can do them. They don't all want to do them but FHA says if you are a consultant you MUST offer that service.

What does it cost for this service? I can't speak for other consultants on this issue but we have a set fee of $300 for the first unit on a project & $50 each for units 2-4. If you order both at the same time, a bare bones feasibility for a "first time home buyer" who may be on a very tight budget then that is all you need.

Then if you order the "fully updated" feasibility at the same time we will do both of them for a flat $500 for the two for a SFR plus $75 for units 2-4. YOU save your client $200.

Some of the agents who handle lots of REOs for asset managers are finding that even if they pay the fee they move many more houses and that is what they are supposed to do.

Wednesday, November 16, 2011

I'm A Contractor, Why Should I Learn About The FHA 203k Program?

If you have all the work you need already then maybe you don’t need to know about the FHA 203k loan program but there are allot of you out there that have been buying my eBook “Contractors and the 203k” indicating that many of you are becoming aware of this program. Why is that? Simply put “more business” than you can handle.

When I take on a new contractor into our “203k Team” we ask one thing of them “Stop us before you get too much work from this program”. The last thing any of us want is for you to get a bad reputation for not being able to get these projects to completion in a timely manner and we have had some that don’t know when enough is enough until we start getting bad service. So… please just pull back a little when the time comes and then open the spigot again when it appears you are about 3-4 weeks from needing more work.

There are two types of FHA 203k loans. I will describe the differences below and YOU need to know them and choose the right one for your circumstances:

1) Full or Original 203k (started in 1961)

This program uses a 203k Consultant to create a bid specification. That specification is sent to you, the contractor for your bid. It is typically a blind bid situation. In some cases the contractor has already put in a bid for the work they think will be required but in many cases they aren’t aware of the HUD Guidelines so they may miss a few things but overall this seems to cut down on the time it takes to close the loan so it isn’t all bad. If the borrower has several clients come out and bid the project prior to seeing us to create the “scope of work” it can be a mess. As much as the client tries to have them bid the same project if you don’t write it down each contractor will have their impression of what they thought you said and each bid will be slightly different and the client will not have a clear bid that they can use.

I prefer to be the first one on the job to create the specification of repairs. I also will bid the job (never will do the work, just bid it) so the client has an expectation and we all know this project is still viable.

There is no “up front money” for this program. The contractor must be well healed and have credit or money or both to get the project started. Since each draw must be no more than 30 days from the prior one the contractor should have enough money to carry his/her business, materials and labor for that period of time plus whatever they need to run the rest of their business. This program allows for interim draws and you can get partial payments for anything that is partially complete but only for completed work. Some lenders will follow the guideline and let you get money for cabinets and finished flooring up having it delivered and stored on site. Some lenders will advance 50% of the window and cabinet materials money only when they are custom sizes and the check may be made out directly to the cabinet maker or window manufacturer.

This has been and can be a difficult situation for a small contractor or a contractor growing too fast. They need, heck, we all need “cash flow” which is the life blood of every business.

2) Streamlined “k” (started in 2005)

This program was intended to make the program easier to use for the majority of the lighter renovation projects. The significant thing with this one is that it cannot have any “structural” component. It is intended for smaller projects and though the maximum construction costs are limited to $35,000 per the Guideline in reality it is only $30,000-34,200. If you come up with Streamlined “k” loans where the work is $35,000 and your lender only does the Streamlined “k” you will be disappointed most of the time. The $35,000 must include the costs and fees associated with it. The $30,000 figure is due to the requirement of many lenders to maintain a 10% contingency reserved which takes a $30,000 right to $33,000 immediately.

The big thing here is that there is “up front” money for the contractor of 35-50% of the construction cost. The project must be completed in no more than 60 days, and there is only one final draw at the completion. No other interim draws.

Mike Young, 203k Team Leader Mike ready for your 203k order

With offices coast to coast and HQ now at 
1351 Oliver Road, Fairfield, CA 94534 

Saturday, November 12, 2011

FHA 203(k) Loan Program Provides Money For Home Repairs and Renovations

Thinking about buying a fixer-upper, but worried about coming up with the money to pay for the construction costs? Or are you wanting to renovate your existing home but just don't have the available time or money? If so, the FHA may have a program to solve your problems. The section 203(k) program administered by the FHA provides funds to prospective and current homeowners to make repairs and/or do renovation work. A 203(k) loan combines a home's purchase price and cost of repairs into one FHA mortgage, with only a 3.5% down payment.
A growing number of people are taking advantage of this program, a reflection of the large housing inventory caused, in large part, by foreclosures resulting from the recent economic turmoil. The FHA reports that the number of 203(k) loans taken out in 2008 nearly doubled from the previous year, with 2009 experiencing a 40% year over year increase. Potential homebuyers, attracted by relatively low market prices on foreclosed properties, are often left to contemplate how (and when!) they are going to be able to pay for the repairs once they purchase the house. This is not an uncommon scenario as foreclosed homes, which are often left abandoned, typically need extensive repairs. The 203(k) loan program solves this problem by enabling homebuyers to finance the construction work and start repairs on the home immediately after a loan closing. All residential properties, not just foreclosed homes, are potential candidates for the 203(k) loan program.
What is the FHA 203(k) Program?
The FHA 203(k) program is a home rehabilitation and repair program, designed to revitalize neighborhoods and spur homeownership. It can be used by people who are looking to purchase a new home, or by existing homeowners wanting to do repair or renovation work on their current home. What consumers end up with is a single FHA insured mortgage - the loan amount consisting of the home's purchase price (or current loan balance in the case of an existing homeowner) plus the estimated costs of the construction work.
Normally, someone purchasing a home that is in need of repairs has to first obtain interim financing for the rehab repairs and then additional financing to purchase the home. In this scenario - once the repairs are complete the homeowner must then take out a new mortgage to combine the two loans. With the 203(k) program, on the other hand, a borrower need only obtain one mortgage, which covers the home purchase and the property rehab.
The 203(k) program comes in two flavors; a standard version and a streamlined version. With the standard program, the construction costs must be at least $35,000. The maximum construction costs are limited only by the estimated "as-improved" value of the house (i.e., the value an appraiser estimates the property will be after repairs/renovations are completed). All FHA mortgages, with or without a 203(k) loan, are subject to mortgage loan limits. The mortgage amount can range from $271,050 to $729,750, dependent on where the home buyer resides. The total mortgage amount, which would include any cost of repairs, cannot exceed 110% of the "as-improved" home value. The streamlined 203(k) program is used for situations where the construction costs are under $35,000.
To be eligible, properties must be one to four family structures that are at least one year old. Condominiums may qualify, though there are some added restrictions and limitations. Additionally, FHA allows "mixed use" properties (i.e., properties with both residential and commercial use) to be eligible for the program.
A partial list of what you could use a 203(k) loan for include; replace a roof, add a room, remodel kitchen or bathroom, landscaping, update appliances, repair termite or water damage, update electrical and/or HVAC systems. It's also important to keep in mind that the program requires certain repairs (if needed) to be made. These mandatory repairs deal specifically with bringing the energy efficiency of the property up to code.
The FHA 203(k) loan does not come without some added costs and other potentially negative factors. Consumers need to carefully weigh the pros and cons in order to decide if this program is right for them.
o Homebuyer will incur fees up and beyond the normal mortgage closing costs. A supplemental origination fee - which is the greater of $350 or 1.5% of the portion of the mortgage that is being used for rehab purposes - is required. Additionally, a fee consultant (who is HUD approved) must visit the site prior to the appraisal to ensure compliance with program requirements. Expect to pay $100-$200 for this service.
o Takes longer time to close on mortgage loan - up to 4 weeks longs than a normal conventional mortgage
o Have to use an FHA approved lender. Though many such lenders exist- not all lenders will participate in the 203(k) program.
o Some lenders may prefer to deal with a home buyer who is able to pay cash for a home (versus someone using the 203(k) program) due to getting a quicker loan closing turnaround.
o Expect more paperwork than a normal conventional or FHA loan
o Access to funds needed to complete repairs and/or renovations
o Convenience - homebuyer does not have to find separate financing for construction, plus construction begins immediately after loan closing
o Speed of construction - the process of completing construction work is typically quicker than if the homeowner were to conduct renovations on their own
o The 3.5% down payment - conventional mortgages typically call for 10-20% down payments.
o Ability to finance up to six monthly mortgage payments.
The 203(k) Loan Process Step by Step
The 203(k) process has more paperwork and steps than one would experience in a conventional mortgage process. The steps are as follows:
  1. Borrower finds a home to purchase and repair/rehab (or seeks to repair/rehab current residence)
  2. Borrower and their real estate agent completes a preliminary feasibility analysis to determine the extent of work required, along with an approximate estimate of the cost and expected market value of the home once all work is completed
  3. Sales contract is executed
  4. borrower selects and works with a FHA-approved lender
  5. Borrower, contractor, and an FHA-approved consultant meet at the property to determine "required" vs. "desired" improvements
  6. The fee consultant prepares the write-up
  7. Home buyer enlists contractors to make bids - then selects a contractor
  8. Lender gives the construction plan to FHA-approved appraiser to determine "as-improved" value
  9. Lender determines maximum insurable mortgage amount for the property based on the "as-improved" property value
  10. Loan is underwritten by lender- if approved lender issues a "firm commitment" and a loan closing is scheduled
  11. Loan is closed. Funds are set aside in escrow accounts. The loan is FHA insured after loan closing
  12. The work begins. Contractors are paid in draws as FHA fee consultant approves each phase of completed work. Homeowner has six months in which to complete the entire work
  13. After work is completed - and the borrower states that all work has been completed to their satisfaction, a HUD inspector conducts a final inspection. If the inspection proves OK - the lender pays the remaining draw to the contractor. A final 10% may be held back for up to 35 days to ensure no liens are placed on the property
It should be apparent that the FHA 203(k) program offers a viable solution for some home buyers seeking funds for home repairs or renovation. Each individual needs to consider the pros and con's and apply it to their own unique situation.

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Wednesday, November 9, 2011

203K Loans - The Quicker Fixer Upper!

203K loans ROCK! If Fannie Mae and Freddie Mac could do what FHA is doing, and has been doing for many years, then maybe they wouldn't be in so much trouble! So many of the homes on the market right now that are foreclosed or a short-sale need lots of fixing up. Okay, well maybe not a LOT, but they at least need some new carpet, a fresh coat of paint, and some appliances in the kitchen! Welcome the 203K Home Improvement Loan from FHA.

Some may think this is a new program, but in fact it has been around for many years. It lost it's popularity for some time, especially during the housing boom. Many lenders are finally bringing it back...even though it never went away.

There are two kinds of 203K loans: the regular and the streamline. The streamline is the most common right now. It allows up to $35 thousand in extra funds after closing to fix up the home that you are buying. There are only a few conditions: The home must appraise in the "after improved value" and the funds cannot be used to make structural fixes or changes. The funds can be used for items like new carpet, new paint, new appliances, new windows, fix/install HVAC, fix/install lighting, and so much more!

So now when you are looking at a house that has "good bones," picture it with all the fixings. The loan only takes a few extra steps, but well worth the extra effort to be able to make your new house your new home!

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Saturday, November 5, 2011

How Can I Get the Best Deal on a Foreclosed Home?

As the foreclosure inventory increases, more an more homes across America sit vacant and dilapidated. The longer they sit the harder it becomes to obtain traditional financing because lenders don't want to lend on collateral in disrepair. As they continue to sit the price continues to drop until an opportunistic investor, with cash in his pockets, usually ends up purchasing the home, renovating it and selling it to you at a huge mark-up. What I want to illustrate to you in this article is that investor, the MIDDLEMAN, and his eventual mark-up is unnecessary. YOU can do what he is doing and you can secure yourself a fortune in equity in the process and you can do it with almost NO MONEY DOWN.

What that investor doesn't want you to know is that renovation products for people wishing to renovate a primary residence are available at fantastic fixed rates through an American staple since 1965, the Federal Housing Administration (FHA). FHA offers a product designed for you to help rebuild American homes and revitalize neighborhoods across the USA, the FHA 203K program. In the process you get you get to create a home designed to your specifications and secure yourself thousands in equity in the process. Have you always wanted to sculpt a house into exactly what you wanted for you and your family? No problem, with FHA 203K loans you can create that dream home, you can buy it for next to nothing and YOU can reap the rewards that real estate investors have been reaping for years.

Here's how it works:

1.) Home Buyer contacts FHA approved 203K Lender for pre-approval. Always get pre-approval before searching for a home. Realtors are busy people too and it isn't fair to them to have them shuttle around unqualified home buyers. Now, FHA 203K lenders are hard to find, it isn't a very well-known program and it takes highly specialized knowledge so it may take some searching to find a lender who does them. I will assume since you found this article that you can make use of all your tools on the internet to locate someone qualified. If not call me and I will direct you.

2.) Home Buyer locates a distressed property priced well below value in a neighborhood they want to live. In other words look for the ugliest house in the best neighborhood. Remember, condition of the property is not important as the appraisal and the loan are based on AFTER REPAIR VALUE. HUD foreclosures are often some of the best deals, but any distressed property will do.

3.) Home Buyer contacts his Realtor (always use a Realtor when purchasing foreclosures) and gets them to make an offer 20%+ below list price. Please note that 20% is not the magic number, but it is a good starting point. Much of what you will offer will depend on time on the market and other factors. This is what the Realtor is for, use their talents to help guide you on the offer. Make sure that the contract states you will be getting FHA 203K or Fannie Mae Homestyle renovation loan. Also make sure it includes closing costs as these loans are slightly more expensive than traditional loans.

4.) Offer is accepted! Congratulations, you have a beat up dilapidated eyesore of a home. Don't worry though, this is where it gets fun.

5.) Home Inspection -- Always get a home inspection! I don't care if the property was built last year. Just do it! The home inspection is the first step because he will tell you what needs to be fixed to bring the house to code and to make it acceptable to the lender. Once he has told you what HAS to be fixed now you get to decide all your extras and upgrades.

5b.) Meeting with the FHA 203K Consultant -- Some FHA loans require a consultant to help with the draw requests and coordinate everything with the lender and the contractors. They are required for any renovation over $35,000 and some under. Talk to your lender to see if you need a consultant, but if you do need one then getting one involved at the same time as the home inspector is a good idea.

6.) Contractor Walkthrough -- This is the step where you get to begin painting the picture for the home you have always wanted to live in. Call three contractors and walk through the house letting each know what you want done. They will prepare bids so we know the scope and cost of the repair. Don't always go with the lowest bid. Go with the person you feel most comfortable with.

7.) Home buyer and lender will package loan for submission. This is the boring part, luckily your lender will handle most of the dirty work. Make sure you stick to their time lines and get documents when they request them.

8.) APPROVAL! You are know the proud owner of an ugly house. Again, don't worry because this ugly duckling will soon be a swan.

9.) Contractor begins work on the home. This is where you see the transformation from ugly home into dream home. Depending on the scope of the work expect this process to take anywhere from a week to 6 months. Draws will be issued to pay the contractor throughout the process and for his completed work.

10.) Final draw and loan close-out -- Appraiser reinspects the house to make sure it meets FHA 203K specifications and title is updated to reflect final close-out.

Now you have a custom home purchased at an amazing discount with thousands of dollars of built in equity from DAY ONE. How does it feel to have only put 3% down, but to own a home with 30% equity from the day you move in? I know for a fact that it feels great to accomplish a goal that could secure your future with minimal investment and minimal work. You could have let an investor do it for you, but instead you did it yourself and saved his mark-up. Congratulations, enjoy being the envy of the neighborhood.

Now get out there and find your ugly duckling!

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Wednesday, November 2, 2011

Have Bad Credit? How to Use FHA 203k to Purchase Distressed Real Estate

A hot topic is distressed real estate. With all of the foreclosures and REO (real estate owned) properties on the market for sale, there are good deals to be had. The FHA 203k loan, sometimes called energy efficient mortgage or EEM for short, is a program that is available to help you purchase a distressed property and rehabilitate with energy-efficient "green" improvements.

It's no secret that many of the foreclosures or REO properties have deferred maintenance. So it's possible the electrical system does not work as it should, the hot water heater could leak, the air conditioner may need to be serviced or replaced with an energy efficient unit. Maybe the paint is dull and needs to be freshened up. All of these updates or repairs (and many more!) can be added into the cost of your mortgage, making your home more energy efficient and helping you to reduce your carbon footprint. Although there are tight lending guidelines that banks and lenders are required to follow, luckily enough there are still funds available to lend and bring these distressed properties back up to modern living standards with the FHA 203k loan. Even if you have less than perfect credit, FHA is on your side to help make your home ownership dream come true!

FHA loans are flexible when it comes to bad credit. If you have premature credit, FHA can approve a loan based on a single trade line and a single credit score, whereas conventional lending requires no less than two of the three credit scores. FHA is also great for first time home buyers who may have limited funds in the bank. The FHA 203k program allows buyers to put as little as 3.5 percent as a down payment (even though it's a good idea to put down more). Another bonus of FHA is that you may still qualify whether or not you can demonstrate consistent work history over the previous two consecutive years. FHA loans are really forgiving.

Even prospective borrowers with more seriously damaged credit still have hope. Those with judgments, liens, collections, foreclosures or bankruptcies, who are interested in taking advantage of the distressed real estate market may still reach home ownership dreams. Here are some guidelines to follow:

--Collections - Not all collection accounts will be required to be paid prior to closing. Each collection trade line will be reviewed on a case-by-case base. If the collection still shows on your credit report, satisfaction might be requested in order to remove the negative trade lines prior to closing.

--Bankruptcy - Chapter 7 discharge of bankruptcy should be two of more years from loan application and show reestablished credit on all recent trade lines. Chapter 13 must show at least 1 year of payments to the courts after the restructure. No late payments are allowed since the bankruptcy started.

--Foreclosure - Foreclosures will not disqualify you from obtaining a FHA loan. However, buyers must typically wait a minimum of three years from the foreclosure date prior to purchasing (possibly less if you have extenuating circumstances and have established good credit).

--Liens - Federal liens are not eligible, such as a tax lien. Liens must be paid off or at minimum, a repayment plan must be established. Federal loans, such as student loans cannot be delinquent and must be brought current prior to application.

So, if you have been daydreaming about taking advantage of a good deal in the real estate market, chances are that you might be in a better position than you think. You don't need to be a bench warmer. You can play too!

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