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Selling A Property To A  FHA 203k Buyer

If you are selling a home that needs minor or major upgrades, an FHA 203k Loan is one of many renovation programs that includes funding for renovation costs in the original loan amount, at the time of purchase.

Typically, properties that need more than a little renovation work or upgrades are sold to cash investors at a discount due to the misconception that banks will not lend mortgage money on an uninsurable or unfinished home.

Investors purchasing a home with cash are generally able to drive the price down below market value since they have to budget spending additional funds after the purchase in order to rehabilitate the property and get it ready for resale at a profit.

However, if a buyer who actually plans on living in that home and neighborhood was able to purchase the distressed home and finance the renovation work into the original loan amount, then it is a win win for everyone. Not only does an FHA 203k Loan help preserve real estate values where it makes sense, but this rehab mortgage program provides employment opportunities for the local construction industry.

There are many ways that a local  203k real estate agent with renovation experience can help sellers and investors market their distressed listings to buyers who will actually be moving in to these homes and begin the process of rebuilding our communities.

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See which Renovation Mortgage Program your scenario or property may be eligible for.

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203k Lenders

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203k Real Estate Listing Frequently Asked Questions

You can also call us directly at (877) 770-2904 to speak with a licensed renovation lender.

Based on traditional conventional mortgage underwriting guidelines, a property in need of minor or major repairs that impact the livability of the home are not eligible for financing. The FHA 203k and other renovation loan programs provide for additional funding to fix this problem, which will obviously benefit listing agents who need to reach a broader buyer market.

  • Repair or replacement of roofs, gutters and downspouts.
  • Repair, replacement or upgrade of existing HVAC systems.
  • Repair, replacement or upgrade of plumbing and electrical systems.
  • Repair or replacement of flooring.
  • Minor remodeling, such as kitchens, which does not involve structural repairs.
  • Painting, both exterior and interior.
  • Weatherization, including storm windows and doors, insulation, and weather stripping.
  • Purchase and installation of appliances (free-standing ranges, refrigerators, washer/dryer…).
  • Accessibility improvements for persons with disabilities.
  • Lead-based paint stabilization or abatement of lead-based paint hazards.
  • Repair, replacement or addition of exterior decks, patios, porches.
  • Basement finishing and remodeling, which does not involve structural repairs.
  • Basement waterproofing.
  • Window and door replacements and exterior wall re-siding.
  • Repair or replacement of septic system and/or well.
  • Major rehabilitation or major remodeling, such as the relocation of a load-bearing wall.
  • New construction (including room additions).
  • Repair of structural damage.
  • Repairs requiring detailed drawings or architectural exhibits.
  • Landscaping or similar site amenity improvements.
  • Any repair or improvement requiring a work schedule longer than six months.
  • Rehabilitation activities that require more than two (2) payments per specialized contractor.

Many homebuyers look for damaged homes (fixer-uppers) so that they can spend time fixing it up themselves however way they choose to. HUD has four categories homebuyers can choose from, such as:

  • Insurable
  • Uninsurable
  • Uninsurable property with repair escrow
  • Uninsurable property with FHA 203(k)

These are mortgages that are bundled up with the cost of repairs included. Rehab loans are a great option to go with when considering financing uninsurable properties.

Insurable properties are homes that are eligible for mortgage insurance and meet eligibility requirements through the FHA 203k mortgage with typically a 30 year fixed-rate term and has become quite the option for many first-time homebuyers.

Uninsurable properties usually don’t qualify for FHA 203(k) financing guidelines due to extreme repairs exceeding $5,000, but homebuyers sometimes can purchase these homes with cash through HUD (Department of Housing and Urban Development).

Uninsurable properties within escrow would qualify under FHA 203(k) Rehab Loan guidelines but an escrow is required for repairs; as long as repairs don’t exceed $5,000 with the exception in some cases of the 10% contingency causing an increase in the escrow. Keep in mind that all repairs must be done after closing of the property within 90 days of closing. The lender will be required to inspect and distribute any and all payouts. Also, the repair escrow in most cases must be set up by an FHA lender writing the loan.

Uninsurable properties with 203(k) also does not qualify for the standard FHA mortgage but may eligible through FHA’s 203(k) rehab loan program or the streamlined rehabilitation loan. This option is for owner-occupied properties only and a majority of the time to homebuyers financing within cash.

CLICK HERE to submit a contact request online or feel free to Call us @ (877) 770-2904 to speak with a licensed renovation lender directly.

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