Many homebuyers want ready-to-move-in, but in many markets and situations it may pay to consider buying a “fixer-upper.”

There are at least four ways to finance construction projects, but only one allows for a minimum amount of equity or down payment. This program allows for the cost of renovation and/or repairs to be combined with the price of the home into one loan and is known as The FHA 203 (k).

The 203 k is strictly for primary residences. It allows for lower credit scored borrowers to obtain construction financing. It allows 3.5% down payment on a purchase and 2.5% equity on a refinance.

It goes up to a total project cost including purchase price of $625,500.

To be eligible, your home must be an owner-occupied:

Single family home

1-4 unit residence

Condominium and PUDS (restrictions apply)

Mixed use property

The loan includes:

The cost to purchase a home

The cost to improve and/or make repairs

Miscellaneous costs such as

o        Consultant fees

o        Permits

o        Contingencies and mortgage payment during the construction period (certain restrictions may apply)

Advantages:

Qualify with a down payment as low as 3.5% a 96.5% Loan to Value…where can you get a HELOC with that kind of LTV?

Gift funds ok – with up to 6% sellers concession

Common sense credit qualifying

Your Real estate agent can expand their buyer’s search to properties that need renovation

Close on the property in its current condition and perform all repairs after closing

Cure open permit and building violations

Convert single family homes into legal two families

Rehabilitate storm or fire damaged properties

Appraisal based on the after-improved value   No need for an “as-is” value

No fear of a low appraised value

Never hear, “It failed the home inspection”

203K reduces monthly utility costs and annual maintenance costs

203K eliminates the need to use high interest charge cards

203K builds equity for homebuyers

203K reduces unforeseen expenses after closing

What could be better than taking a “bargain” fixer-upper and turning it into the house of your dreams?  And, increasing the value of the property at the same time?

Carl Guzman, NMLS# 65291, CPA, is the founder and President of Greenback Capital Mortgage Corp. He is a residential financing expert and a deal maker with over 26 years’ experience. Carl and his team will help you get the best mortgage financing for your situation and his advice will save you thousands! www.greenbackcapital.com  [email protected]

By Carl Guzman