Ok… you are shopping for a home and you found a steal.  Maybe it is a foreclosure that has some damage through neglect or vandalism, or an older home that just needs some updating. You’ve heard that now is the perfect time to buy, (you have heard right), and you don’t want to miss out.  Most loans won’t let you buy a home in disrepair, so what is one to do?  Consider using an FHA 203(k) loan.

This is a loan that allows you to get money for renovations or repairs, and the best part is- all the work can be done after closing.  You can get money available for minor repairs such as carpet & paint… you can remodel bathrooms and kitchens… fix or upgrade air conditioning… add appliances, new windows and siding, a new roof – you can even add an addition.  For the most part, if it is attached to the home and adds value and is not considered a luxury item, you can pretty much use this loan to take care of it.

Since this is an FHA loan, this is for primary residences only  and will be subject to FHA’s loan limit (varies by county, Guilford County is $271,050).  FHA purchase loans require a 3.5% down payment, and on a 203(k) loan the 3.5% is based on the sale price + the cost of renovation.  Interest rates are slightly higher than a ‘normal’ FHA loan, but considerably less than construction loans.  They are based on a normal 30 year fixed term, so you won’t have to worry about payments increasing down the road.

Procedurally, you will need to make your wish list of all the items you want to repair or improve in the home.  Next a licensed and insured contractor will create a bid to do the work, and then you are ready to move forward. (Certain renovations may require a HUD inspector to review the contractor’s bid to ensure it is in line with FHA guidelines, most basic renovations do not require this).  It is a good idea to get your home inspection and all program required inspections completed (termite, well & septic) within the 1st week of going under contract so if there are any hidden defects to the home, they can be addressed by your contractor.

Don’t miss out on an opportunity just because the home is not quite the way you want it – fix it up and make it your own, you will be glad you did.

This guest post is provided by Mortgage Loan Originator, Scott Shubert of Benchmark.  Check him out at  www.TeamShubert.com