Financing A Foreclsoed Home With A Rehab Loan

Yesterday I wrote about trying to finance a foreclosed home that needed some work to the home. Because of the tighter guidelines it has made it very difficult for people to purchase a foreclosed home through conventional means of financing. But all hope is not lost for someone looking to buy one of these homes. There are options availble that will allow you to finance the cost of repairs into the new loan. The tricky part of it though is you need to qualify for the mortgage with the cost of reparis added in. They are known as a FHA 203K loan. If you are purchasing a Fannie Mae (governement owned) foreclosed home they offer homepath renvoation mortgage as an option.

The nice part of these loans is that you can add in the cost of the repairs to the home into your loan and still only have to come up with the 3.5% down payment needed for a FHA loan. You are required to have a slightly higher and better credit score than if you would qualify for a regular FHA loan; but if you qualify it can be very good program.

Not only can you amortize the cost of the reparis over the term of the loan (typically 30 years). But at today's low interest rates it would have to be less expensive than paying for it out of your pocket. And all the work is done on the home for you by liscenced contractors.

A home does not only have to be a foreclosed home to qualify for this program. It can be any home that would not normally qualify for a FHA loan right now due to the repairs it needs. Just be careful that with the reparis done on the home; the cost does not exceed what looked like a good deal initally.

I recently had a deal where the price of the home was exceptional for the area. Once entering and looking in the home we realized why. The buyer decided to check into and go the route of a FHA203k loan. By the time we got all the estimates for the reparis that needed to be done to the home and the carpet replaced the cost was no longer that good of a deal. In fact; a ready to move in home a few houses down from this one ended up being less expensive than the house that needed repairs once the costs were added in.

So, yes there are programs that exist to help buy homes in need of repairs. They are very attractive programs if you can purchase the home for the right price and have all the work done on it for you with it just being added to your mortgage payment.....

Dave diCecco
Realtor/Broker
www.davedicecco.com