Financing Foreclosed Homes

 A "not so beautiful day in the neighborhood" for some homeowners today. Living next door to a boarded up home after foreclosure is not anyone's choice. Even with the price being way below market value (also not a blessing for the neighbors) the problem generally lies in being able to finance a severely distressed property. There is an answer that a lot of folks are over-looking in today's market. That is the old 203K loan. Still viable, available and a real good way to purchase that "fixer property" and have enough money to make it habitable.

Foreclosure properties, especially those with the water and power turned off, may not qualify for standard financing, but may qualify for a federally insured 203(k)loan. Buyers who are going to "owner occupy" the property and do not have enough money to purchase a foreclosure home using cash, may qualify for the federally insured 203(k) loan, which allows borrowers to roll projected rehab costs into the loan.

Since most foreclosure properties are sold "as is" and, oftentimes, heating, plumbing, and/or electric are problematic or inoperable, it's unlikely a conventional lender will lend money on the home. With a 203(k) loan, buyers generally employ an independent consultant hired by the Federal Housing Administration to review contractor cost estimates and architectural plans for things like whether the work will bring the property up to minimum standards, while not going overboard on improvements.

Buyers should be aware that not all foreclosure properties will be eligible. For instance, a partially built house that has never had a certificate of occupancy will require a construction loan of the kind that a commercial developer would use. We're also seeing more and more "unfinished remodeling job" homes today where the seller ran out of money and the building systems and/or structural definitions are lacking or insufficient. Those would require construction loans as well.

The interest rate on a 203(k) loan is approximately a quarter of a percentage point higher than on a standard FHA-insured loan, and a buyer also can expect to pay 1 or 2 points. Also, as with other FHA-backed loans, down payments may be as low as 3.5 percent, and loan limits apply. Currently, most FHA loans are capped at $729,750.

My friends at PACIFIC FIRST FINANCIAL will give you all the information necessary to investigate the 203K loan for your purchase. They also work with the CHF Platinum Program which is a Homebuyers Assistance Program featuring low interest rates and down payment along with closing cost assistance with Grants that do not have to be repaid. Call Sheila for the latest info at 310-214-9299.

Tote your toolbelt over to my office and I'll give you list of great opportunities in your neighborhood! We're always ready to work for you here at Team South Bay Realty, Your Realtors For Life!

Call 310-534-3940 or email: Charlie

DON'T FORGET ABOUT THE 203K LOANS!

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.

KEEP THIS IN MIND

• 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 203kcontractors.com.

• 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!

$8,000 First-Time Home Buyer Tax Credit

As the stomach churns and as prices continue to plunge across the US, there are more programs being offered to help stimulate first time buyers into action. The biggest one right now is the $8,000 First Time Home Buyer Credit Program.

U.S. Housing and Urban Development Secretary Shaun Donovan on Friday unveiled a policy change to that program that would provide home buyers with quicker access. Buyers would be free to put the funds toward closing costs and a portion of their down payment instead of receiving only a tax credit. The federal government hopes that the measure will stimulate housing demand.

President Obama's $787 billion economic stimulus plan—which was signed into law in mid-February—included a tax credit worth up to $8,000 for qualified first-time home buyers. The $8,000, however, was only being issued as a "tax credit." The new HUD initiative enables borrowers to obtain short-term loans allowing them to tap the tax credit to actually purchase the home. Donovan said in a news release. "What we're doing today will not only help these families to purchase their first home but will present an enormous benefit for communities struggling to handle an oversupply of housing."

The measure only applies to Federal Housing Administration (FHA) mortgages and the short-term loans can't be used to pay for the minimum 3.5 percent down payment that FHA loans require. Instead, the loan can be used for closing costs and to finance the portion of the down payment that exceeds the 3.5 percent threshold. The administration opted to have borrowers come up with the initial 3.5 percent themselves to ensure that buyers have an investment in the purchase, which they feel will reduce the likelihood of default.

If you are a first time buyer and are interested in obtaining an FHA loan utilizing the $8,000 credit, call for more information and we will refer you to a qualified FHA Mortgage Broker in your area. This is a special program and must be handled by FHA certified mortgage brokers.

Also available on demand are 2009 Sales Charts for all the South Bay cities. Call or email with your specific city request and we'll send out your up to date FREE, no obligation sales chart for your area (or area in which you are interested in investing.) I will also be posting monthly updates for the South Bay area on my Facebook Page (check Twitter for update notices.)

Stimulate OUR economy - buy local!

By the way, the cute little house at the top is a new Lease Offering @ $2300 per month for those not yet ready to buy - call for more information. It's located in beautiful Lomita Pines!