203K Loans

Imagine this. You are looking for a home to buy and you find one with the perfect location. It's close to the right school, close to work, close to friends and family. But, there is one big problem. You can only purchase by going FHA because you do not have the money to put down to go conventional and this house that is in the perfect location is a wreck and will never pass FHA guidelines in its current state.

That situation is a common dilema with a lot of home buyers right now. Most would, on the advice of their REALTOR, look for another home or wait until something else pops up on the market. But, I have a solution (which is why you should use me as your REALTOR). It's called a 203k loan. It is a FHA loan that will allow you to roll into your loan the repairs that are needed. And it is available on both purchases and refinances. There are 2 types of 203k loans that are available- Streamline and Regular.

A streamline 203k loan can be used for things such as new carpet, paint, appliances, furnace, ac, water heater, windows, siding or even a kitchen or bath remodel. Projects that typically "fix up" the house and have a cost between $10,000 to $25,000. These projects must be completed by a licensed approved contractor within 6 months of the purchase or refinance. The money is held in an escrow account and paid out to the contractors when the work is completed.

A Regular 203k loan works the same way that the streamline does, but it is for larger issues like foundation work or adding a room onto the house.

The benefits of doing the renovations at the time of purchase is that you only have one closing, one set of closing costs, one payment, and you get to see the house transform before your eyes into a home or your own. The appraisal at the time of purchase is based upon the completed work and added value. All work estimates must be done before the appraisal happens. The estimates are then given to the appraisor so the repairs will be taken into consideration when doing the appraisal.

There are only a couple of lenders in the Michiana area that have a proven track record for 203k loans. One of them is Michelle Zarobinski of Wells Fargo who helped contribute to the information in this blog post. If you would like to contact Michelle to discuss your options, you can contact her at 574-252-4017. Please tell her that you read about her on my blog.