203K Loans - The "But" Fixer

by Glenn Kavanagh
(Asheville, NC)

Have you ever looked at a home you wanted to buy because it was a great deal BUT it needed new carpet, BUT it needed new appliances, BUT it needed a new roof - and you didn't have the cash available to fix those items once you got into the house?

The FHA 203K Loan
You should look into the FHA 203K loan. I call the 203K loan the "But" fixer because the it can help you buy the home and give you the funds within your purchase loan to make those upgrades or repairs you'd like to make on the home before or after you move in. The fixer-upper is now within your reach!

An Affordable Dream Home
If you're on a budget, you may find that you only have a choice between houses that are too small for you or that need a lot of work before you can move in. There are, though, especially in this market, a lot of great fixer uppers that could be turned into dream homes with a bit of work. Even though you can't do any of the work yourself with the 203K loan(it has to be done by licensed contractor), you can often buy a fixer-upper and rehabilitate it for quite a bit less than you would spend on a comparable house in "perfect" condition.

How does it work?
The basics of the program work like this. We take the sales price of the house and add in the estimate of the costs to do the work you need to come up with the loan amount. When your loan closes, we place the repair funds into an escrow account to be dispersed to a licensed contractor when the work has been completed and inspected. The work must be done by a licensed contractor and they will only be paid after the work is complete.

You can get up to $35,000 for repairs or upgrades - even including things like new appliances!

There are many more details that I can't cover here but I'd love to answer your questions and help!

Please feel free to give me a call if you'd like more information. We offer the 203K loan at New American Mortgage and I'd love to help.

Happy house hunting!

Glenn Kavanagh
Senior Mortgage Consultant
New American Mortgage

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Feb 18, 2011
What upgrades are allowed on the 203K
by: Glenn Kavanagh

Obviously, any improvements needed to get loan approval or a Certificate of Occupancy (C/O) would be required, but anything else you'd like to do can be picked out by you. Here is a not so short list of the eligible things you can do with the $35,000:

*Repair/Replacement of roofs, gutters and downspouts

*Repair/Replacement/upgrade of existing HVAC systems

*Repair/Replacement/upgrade of plumbing and electrical systems

*Repair/Replacement of flooring

*Painting, both exterior and interior

*Weatherization, including storm windows and doors, insulation, weather stripping, etc.

*Purchase and installation of appliances, including free-standing ranges, refrigerators, washers/dryers, dishwashers and
microwave ovens

*Accessibility improvements for persons with disabilities

*Lead-based paint stabilization or abatement of lead-based paint hazards

*Repair/replace/add 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

*Septic system and/or well repair or replacement

*Minor remodeling, such as kitchens, which does not involve structural repairs

Now, any type of structural work like additions or repair to the structure would require the next level of 203K. That loan would work very similarly to a construction loan in that money would be taken out on draws and paid to a contractor/builder.

Feb 18, 2011
Who picks the updates?
by: Anonymous

Great information! I was just wondering who gets to pick the improvements you want? Does the bank have any say? Can you do anything you want as long as it's under the maximum cost?

Do you have to stick to just the repairs on the inspection report? Or you can remove the old laminate counter tops and put in granite?

Suppose you want solar panels and a sunroom addition? They aren't needed, but would be nice to have.

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