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Many people have asked me about buying and fixing up foreclosed or bank owner properties and what is involved in the process. My answer, like a broken record, is that; HUD has and we are an authorized and approved lender for a great program, the FHA 203K loan. The 203k loan program is designed for owner occupied properties, which means in layman terms means, that the owner or purchaser, is or intends to live in the property as their primary residence and can include the purchase price or payoff of the current mortgage plus the cost of repairs and upgrades to the loan amount to fix up the house to their tastes, standards or life style needs. Here’s how it works!

FHA 203(K) Renovation Loan

Home Inspection:
The cost of your construction is estimated by an FHA Approved 203(k) consultant (estimator). The cost consultant assists you in determining the scope of repairs and the costs budgeted for the renovation job.

Appraisal:
The appraiser will be given a copy of your "work-write up" to estimate an after improved value for your new or current home. We loan against that improved value thus allowing you to finance the cost of repairs.

Other Eligible Costs:
(THESE COSTS MAY BE FINANCED INTO THE MORTGAGE LOAN)

Eligible Work Items

· Repair/replacement roofs, gutters and downspouts

· Repair/replacement/upgrade of existing HVAC systems

· Repair/replacement/upgrade of plumbing and electrical systems

· Repair/replacement of flooring

· Exterior and interior painting

· Minor remodeling, such as kitchens, which do not

involve structural repairs.

· Weatherization: including storm windows and doors,

insulation, weather stripping, etc.

· Purchase and installation of appliances – including

free-standing ranges, refrigerators, washers/dryers,

dishwashers and microwaves.

· Improvements for accessibility for persons with

disabilities

· Lead based paint stabilization or abatement (HUD

REOs)

· Repair/replace/add exterior decks, patios, porches

· Basement finishing and remodeling, which does not

involve structural repairs.

· Window/door replacements and exterior wall

re-siding

· Septic systems and/or well repair or replacement

Ineligible Work Items

Any items that do not appear on the eligible list of that would:

· Necessitate a “consultant” to develop a

“Specification of Repairs/Work Write-Up”

· Require plans or architectural exhibits;

· Require a plan reviewer

· Require more than six months to complete (HUD

will not grant extensions)

· Result in work not starting within 30 days after loan

closing; or

· Cause the mortgagor to be displaced from the

property after mortgage loan closing.

Structural Alteration and Reconstruction:

Here are a few suggestions to get you started:

FHA 203(k) Renovation Loan

An important tool for community and neighborhood revitalization, the FHA 203(k) loan offers flexible qualifying and low down payments:

In review, the 203(k) loan program offers borrowers the resources to rehabilitate a home that may be in need of repair, either the home that they currently live in, or that special fixer-upper opportunity. One single loan is used to pay for the purchase (or refinance) and the cost of renovating the home.

Made available to certain lenders by the U.S. Department of Housing and Urban Development (HUD), the FHA 203(k) program has already provided many of my buyers, with the funds necessary to buy their first home, or greatly improve a current home. The FHA 203(k) loan is available to borrowers of all income levels, to homeowners who plan to occupy the house, and for homes with one to four units.

Dan Latimer

Sr. Lending Consultant