I Guess I really can’t say this enough, today’s market is prime and ripe for the first time homebuyer. There is a surplus of homes on the market due to the overwhelming “down pour” of foreclosures. Included in that surplus are a lot of great deals, particularly “fixer uppers”. The FHA 203(k) Rehab loan could prove most advantageous for those who thought that home ownership was out of reach. There are many reasons to utilize this particular loan; however, we thought that we’d give you the top five.
1. Money for Rehabilitation
Under most standard loan programs, to buy a “fixer upper” the purchaser would be required to obtain a loan to purchase the home, and a separate loan or use personal funds to cover the cost of repairs. In some cases the lender will not close the loan and release the mortgage proceeds unless the value and condition of the home provide adequate loan security (repairs made first). With the 203(k) loan the borrower will benefit from a loan that covers both the purchase price and the rehabilitation costs under one low interest mortgage.
2. Low Down Payment
Another very significant feature to this loan is that it is cost effective in terms of upfront costs. The down payment is lower than a standard loan and only requires 3.5 percent of the purchase price.
3. Interest Rate
The interest rate is also substantially lower than a standard loan which means the purchaser will pay a lower monthly mortgage payment. (For current interest rates consult a qualified FHA lender)
4. Lenient Credit Requirements
Another benefit of securing a government insured loan is that those good people with “bruised credit” may also qualify with a lower FICO score. Also for buyers who previously filed bankruptcy the waiting period is only two years after the date the bankruptcy was filed. The waiting period of a foreclosure is three (3) years.
5. Loan Uses
This loan can be used for one (1) to four (4)-unit dwellings, single-family homes, condominiums and site condos (units in developments that look like single-family communities but are structured as condos), manufactured homes, homes moved from one site to another, “mixed use dwellings, and refinancing an existing loan up to 97% of the homes appraised value. Phew! The catch is that they must be owner occupied dwellings, not investment properties. The great thing about purchasing a multi-unit dwelling is that you can live in one unit and rent the others to decrease your monthly expenses.
Requirements
>No Investors Allowed! Must be owner occupied primary residence of purchaser.
>Borrower eligibility determined by HUD with a minimum income requirement.
>Debt ratios may be specific, depending upon the state.
>Minimum of $5,000 in eligible repairs (Maximum mortgage differs by state).
Disadvantages
>Past reputation for longer processing time and a few more hoops to jump through, than a
conventional loan. However with the current market and tighter lender requirements the gap
between a conventional loan and FHA loan processing period is narrowing.
>Due to the negative view that some real estate agents have towards FHA loans, getting an offer
accepted may in some cases be challenging.
For a list of FHA approved lenders contact your local HUD field office. You may also visit:
www.hud.gov for further qualifying and program and details.
To Find out more about how My First Michigan Home can help you qualify for your 203 k loan please feel free to go to www.myfirstmichiganhome.com or www.floridapropertyvirgins.com
Christopher Shaw is a seasoned Real Estate Investor, with over 12 years of experience and has a passion for working with First Time Home Buyers, Mr Shaw has an ambitious goal of helping 1000 new First Time Buyers become home owners of the next 36 months. In addition to the 1000 new home owners he expects to create over the next 36 months wants to leverage each transaction to adopt up to 1000 families through Volunteers of America's Adopt a family Program.