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Saturday, October 23, 2010


Tis the time of vast foreclosure opportunities. Since most of these properties needs some fixing, don't forget about this little-known loan program for fixer-uppers.

Home buyers thinking of purchasing a distressed property in need of repair, but who are concerned that the cost of the repairs could drain their savings account may qualify for the Federal Housing Administration’s (FHA) 203(k) rehabilitation program.


• The FHA’s 203(k) rehabilitation program provides loans for covering renovation costs as well as the purchase price of the primary residence. Investors are not eligible for this program. Additionally, similar to traditional FHA loan programs, the rehab program allows for a down payment of as little as 3.5 percent.

• A common misperception about the program is that the house needs to be unlivable. Realistically, the property just needs to be outdated, according to a lender familiar with the program. The property “just has to appraise below market value and then at market value with the repairs.”

• Improvements deemed “luxury” are ineligible; however, the program has a wide range of definitions for “repairs” and “modernization.” Covered repairs include items such as a new roof or heating system, as well as decorative changes, like replacing vinyl with ceramic tile on the kitchen floor or painting the interior.

• In addition to putting down at least 3.5 percent of the current value of the property, buyers also must use a HUD-approved lender, appraiser, and a contractor approved by the lender for the repairs. One list of approved businesses can be found at

• Borrowers considering the FHA rehab loan program should be aware that loan rates typically run around a percentage point higher than conventional loans, and come in 15- to 30-year terms, either fixed or adjustable. Additional paperwork for inspection, appraisal, title updating, and the like can increase closing costs by $1,000 or more higher than the average.

• For additional information about the FHA 203(k) rehabilitation program, please visit HUD 203K INFO

So if you're looking at a good buying opportunity but worried about how to find the money to fix it up, this is a great program for you.  Call me with any questions.  I have access to 203K approved contractors and lenders for this program.  It's worth your time to investigate the possibilities. 

Call Charlie, your friend in the Neighborhood with all your real estate questions.  If we don't have the answer, we'll find it for you!

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