The FHA 203(k) mortgage program is the bomb (that’s for the gen Y’rs out there . . . for us Flower Children, it’s way cool). With this program, a home buyer can choose a property in need of repair and finance the cost of fixing it up right in with the mortgage. The repair and renovation money is held in escrow after closing and is doled out as repairs are made. This is beneficial to the home buyer as repairs are financed under the same terms as the home mortgage (usually that means lower interest, longer term and, therefore, lower payment). It also makes the home in need of serious repair — often the best buy in the market — an option for the average home buyer.
But here’s the catch: in order for this great program to work, everyone has to know their stuff! Most mortgage people have never done a 203(k). Most agents haven’t a clue about how to go about putting together a deal involving this kind of financing. Home buyers and agents are stymied when they contemplate how they are going to coordinate all of the bids and contractors involved in a project like this. Suddenly it looks like a 203(k) purchase is out of the question for most.
If you’re interested, however, there are some great resources out there. My San Diego area B of A Mortgage Loan Originator, Rob Webber,told me he has access to a specialized team of Mortgage Reps who do nothing but 203(k) loans. That’s a good start. And today I read about REbuildUSA, a network of agents and lenders who have trained and become certified in working this kind of transaction. REbuildUSA has just designated Lowes as their remodelling partner. Now, working with a REbuildUSA certified agent, a purchaser can go into Lowes and get their entire project bid, from materials to contractors and schedules. It’s one stop and all the gritty work is done.
I think this is an outstanding development. We’ d all like to work these kinds of transactions (and they will become more prevalent as time goes on) but few of us have the time or resources to figure it out on our own. REbuildUSA has created a path on which to run and has simplified the process of getting home buyers into rehab property. To learn more about their program, click HERE.