Many homebuyers are taking advantage of the HUD 203K mortgage loan program. Cash buyers have profited by buying distressed homes, making needed repairs and re-selling at large profit.
Conventional or FHA buyers are not able to capitalize on these bargains as they will not appraise or they are not insurable due to faulty roofs, electrical panels or other issues. Realtors are reluctant to advise clients of the benefits of the 203K program as it is just easier to sell these homes to cash buyers.
Under the 203K loan program, there is one closing, one long term loan, and the property is appraised based upon its improved value.
Loans are available to purchase and rehabilitate an existing one-to-four unit dwelling:
- Purchase the land and existing dwelling and rehabilitate it.
- Purchase a dwelling on another site, move it onto a new foundation, and rehabilitate
- Refinance existing liens secured against the property and rehabilitate the dwelling
- Two story: no more than 49% of the area is used for commercial purposes
- Three story: no more than 33% of the area is used for commercial purposes
- Purchase: a mixed-use building and rehabilitate the residential portion. Mixed- use buildings must meet the criteria for commercial to residential area
- One story: no more than 25% of the area is used for commercial purposes
- Construct a new home on an existing foundation
- Renovate the interior of a condominium
What type of repairs/renovations can you do?
Almost anything! Replace floors/floor coverings, paint, trim, roof, HVAC, electric, plumbing, appliances, kitchen remodel, bath remodel, add a garage or room additions, windows, insulation, driveway, well, septic, water treatment, mold assessment and removal, drywall, lighting, counters, cabinets,doors, refinish pool/deck, add a screen room….and, construct a new home on an existing foundation or partial foundation (the home can be bigger than the foundation) or move a home from another location onto a foundation on another property!
What type of repairs/renovations are not allowed?
Very few. You typically cannot include outbuildings such as sheds, add a new pool, extensive landscaping and window treatments such as draperies/blinds. You can add solar film to existing windows. Pool repairs are typically limited to $1,500.00.
Did you say, “I can construct a new home?”
Yes. You can construct a new residence on an existing foundation – you can even make the home larger than the existing foundation. Perhaps you found a property that you like and there was a previous home on the property (foundation is still partly there) or the home is in such bad shape that you need to tear it down – you can build a new home under 203K without the hassle and expense of construction to permanent financing, excessive downpayment, two closings, high interest construction financing, etc. Plus, as an added benefit, you can avoid impact fees in most jurisdictions which can be up to $24,000 in some parts of Central Florida.
What is the first step?
Call us for a consultation. Our initial 203K consultation and we will walk you through the process. You will be amazed at how easy it is. We will thoroughly explain the process, direct you to good realtors and lenders who are competent in 203K and help you determine a budget that will work for you. We offer a $100.00 initial telephone consultation (45 minutes) to help you get going – if we become your consultant, we credit this amount to the consultation fees! Call us, toll free at 855-932-3784 or visit: contact@TheBuildingInspector.net to set up your telephone consultation. Credit card required.
Why should you choose The Building Inspector?
First, no consultant is more qualified in all of central or NE Florida! In addition to being a proven custom home builder, we hold the following licenses/credentials:
Certified General Contractor Licensed Mold Assessor Licensed Home Inspector
Licensed Pest Control Operator Certified EIFS/Stucco Inspector
AHERA Asbestos Inspector and, over 38 years of building experience…
What mistakes do many borrowers make in the 203K process?
Choosing the wrong lender is absolutely the worst mistake made by prospective borrowers. Many lenders/mortgage brokers state they provide 203K or renovation loans when in fact, they have limited experience and no dedicated staff. Borrowers mistakenly look for a name they recognize or choose the first lender/broker they find to get pre-qualified. As it sometimes happens, they then repeat this mistake by choosing the wrong realtor to work with – having a realtor who is knowledgeable and willing to work with the renovation loan process is important. Quite frankly, many are not.
For these reasons, we recommend you speak to us FIRST! We will educate you on the program and make appropriate recommendations for qualified mortgage lenders and realtors who can assist you in the timeframe you need.
What is the typical process?
Once we have determined the renovation loan is appropriate for you, we will refer you to a mortgage lender who can assist you. You will get pre-qualified for a maximum loan amount with the lender.
Once you are pre-qualified, we can assist you in finding a realtor who will help you find suitable properties in your price range and desired location. Once you have selected a property, you should call us to go over the property. We will pull a permit history and briefly seek to identify any known public issues before you make an offer – this may save considerable time and expense. If the home looks good on paper, you can submit your purchase offer “contingent upon inspection and renovation loan approval”.
Upon acceptance of your offer, we will schedule the necessary property inspections and initiate the FHA repair documents. You will give the Specifications of Repairs to your chosen contractor (we can refer one if you need) who will prepare a final estimate. Please note all utilities must be on for the inspections!
Upon receipt of final bids, the Consultant will finalize the renovation documents for submittal to the lender/mortgage broker for approval.
Upon lender approval, the lender will order the bank appraisal. Assuming the home appraises as needed, the lender will submit all paperwork to underwriting for final loan approval. This process typically takes about 30 days to closing.
After closing, repairs/renovations may proceed. Repair monies are escrowed. As the work progresses, periodic bank draw inspections will be performed by the Consultant for payments to the contractor. A final inspection is performed once all work is completed and all building department inspections are approved.
For more information on the 203K program, visit: hud.gov. Once there, type in 203K in the search box.
Here are some of our recent projects.
Take advantage of low interest, purchase/renovation rates. The distressed home you saw may be the affordable home of your dreams.