Some might say, "Why buy a fixer upper with a rehab loan?"
1) Have you found a beautiful home in a great neighborhood, however, you did not have the needed funds to repair it?
2) It gives you the chance to find a great property when inventory levels are tight.
3) You now have the chance to work on a rehab project.
4) Investors/Contractors finally have a flexible and workable program for them to purchase now to save a lot of cash being tied up for the long run.
5) Low interest rates for construction type financing.
6) Most of the homes for sale are distressed and this will allow financing.
FHA is the ticket to housing success either way you look at it today! The Federal Housing Administration (FHA), which is part of the Department of Housing and Urban Development (HUD), administers various single family mortgage insurance programs. These programs operate through FHA-approved lending institutions which submit applications to have the property appraised and have the buyer's credit approved. These lenders fund the loans which the Department insures. FHA and HUD do not make direct loans to help people buy homes. It allows the money to be insured so that the Lender can now sell it to the secondary mortgage market which is FNMA and other quasi-government entities.
Lenders have successfully used the FHA 203k loan program in partnership with state and local housing agencies and nonprofit organizations to rehabilitate properties. These lenders, along with Federal, State and Local government agencies, have found ways to combine the FHA 203k loan with other financial resources, such as HUD's HOME, HOPE, and Community Development Block Grant Programs, to assist borrowers. If you really want to see other means of using this program, remember that several well known state housing finance agencies have designed programs tailored specifically for use with FHA 203k loans. Buyer's will also be able to draw on the expertise of local housing agencies and nonprofit organizations to help manage the rehabilitation processing.
Here's a quick rundown of how FHA 203K loan can be used:
This program can be used to accomplish rehabilitation and/or improvement of an existing one-to-four unit dwelling in one of three ways:
- To purchase a dwelling and the land on which the dwelling is located and rehabilitate it.
- To purchase a dwelling on another site, move it onto a new foundation on the mortgaged property and rehabilitate it.
- To refinance existing indebtedness and rehabilitate a dwelling;
To purchase a dwelling and the land on which the dwelling is located and rehabilitate it, and to refinance existing indebtedness and rehabilitate such a dwelling, the mortgage must be a first lien on the property and the loan proceeds (other than rehabilitation funds) must be available before the rehabilitation begins.
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