Instant Equity Through a 203K Purchase??

I have recently been introduced to the FHA 203K Streamline loan for a purchase transaction that I am working on. The house was bank-owned, had been vacant for at least a year, but was in a good neighborhood. The borrower liked the property and saw opportunities to repair the house; but, would not be able to cash-flow the repairs or devote the time necessary to complete the repairs himself. The 203K loan will enable him to finance the necessary repairs into the purchase loan, for a down-payment as little as 3.5%.

As the transaction has unfolded, the borrowers instinct appears to have been on target. The repairs that will be done include the installation of new applicances, a new HVAC system, a new tankless water heater, new carpeting, new windows, and a new garage door. Under the terms of the loan, the repairs need to be completed by a licensed contractor within six-months of the close.

The home inspection did not identify any issues not addressed by the planned repairs, and the appraisal determined that the after-improved value of the house will provide the borrower with more than 10% equity in the property. This loan really can provide home buyers with the ability to find a deal on a house and finance necessary repairs and improvements to gain equity, without too much of their own sweat.

Sure, the loan does require some additional work for the loan originator and real estate agent, and may require 30-45 days to close, but under the right circumstances it is a very good product.

The Time To Buy Is Now

With housing prices down, and mortgage rates remaining at historic lows (the 30-year fixed Conventional loan rate is currently at or under 5%), now is the time to pull the trigger on the deal, and get into that house that you have been looking to buy.

New costs and fees, higher mortgage insurance costs, government-mandated changes to the commission structure for loan originators, and tighter underwriting and downpayment requirements will work conspire to cause rates to increase in the coming months.

With those factors in mind, homebuyers and their Realtors should ramp up the efforts to get into the housing market and capitalize on the current situation. Of course, it is always wise for home shoppers to consult with their mortgage broker to get pre-qualified for a loan in advance of making an offer. With a pre-approval in hand, buyers can have the confidence to submit strong offers on potential properties, and sellers can have the peace-of-mind, knowing that the buyer has the capacity to close the transaction.

Anyone requiring information regarding their financing options, or who needs a referral to a trustworthy and dedicated Realtor should contact me at 888/627-2002

Making the 203k Streamline Work

An FHA 203k Streamline loan is a great way for borrowers to obtain financing to complete non-structural repairs to a property they own or are purchasing. The Streamline program has the same underwriting criteria as a standard FHA loan, and will allow a borrower to finance up to $35,000 for the repairs. If used appropriately, especially with the high number of REOs on the market that need repairs and are priced accordingly, this loan will enable borrowers to get into a house with as little as a 3.5% down-payment, develop equity, and improve their neighborhoods, one house at a time.

The 203k Streamline requires that the repairs be completed by a licensed contractor, and the final disbursement of the repair funds will not be issued until the property is inspected to ensure that the repairs have been completed according the plans, in a workmanlike manner. With all of its moving parts, the 203k Streamline requires detailed planning and oversight, but with a system and team concept in place, the transaction can go smoothly.

Borrowers, Realtors, loan originators and contractors need to work together to ensure that the bids and plans are submitted in a timely manner, and that all underwriting conditions and requests for additional information are addressed promptly. The team should set realistic expectations about the timelines necessary to close the deal, and plan for potential delays in underwriting because the lender needs to evaluate the borrower, the contractor, and whether the added value of the improvments will exceed the cost of the repairs.

In today's market, the 203k Streamline is a great tool to get "the wrong house in the right neighborhood" sold.

Please feel free to contact me at 888/627-2002 to discuss the 203k program, or any other financing issues.