FHA 203 K LOANS - An Old Construction Loan Program Begins to Make a Comeback!
LONG-STANDING FHA PROGRAM OFFERS PURCHASE, REHAB MONEY FOR AS LITTLE AS 3.5% DOWN!
According to Realty Trac, at this moment, there are over 2 Million Foreclosed Homes across the U.S. All are vacant, and many are in need of extensive renovation and repair. They are often not habitable in their present condition - many lack furnaces, electrical panels and wiring may have been removed, many are in need of considerable structural repair.
Here in Chicago this year, a considerable part of our Team's business this year has come from the distressed, short sale, and foreclosure market.
For houses that cannot be financed by conventional means, or with a normal FHA Loan, the FHA 203K Program can provide both purchase and construction funds with as little as 3.5% down. FHA 203K Loans can also be used by existing homeowners to finance home rehab projects.
As reported by Mary Ellen Podmolik in last Friday's Chicago Tribune, the FHA 203K Program is not new. Introduced in the late 1970's, this source of home funding was rarely used during the Housing Boom. 203K Volume declined each year between 2002 and 2006, but rose to 6,700 loans last year. So far in 2009, 11,000 homes bought using FHA 203K Financing have closed across the U.S., according to data from the U.S. Comptroller of the Currency.
Foreclosures currently on the market are starting to age, and are likely to deteriorate further if they remain unsold. A home that may have required simple cosmetic remodeling a year ago might need more extensive rehab today. FHA 203K loans can finance that rehab, from a small loan for a simple project, to perhaps several hundred thousand dollars, up to the FHA Financing Ceiling of $417,000 in and around Chicago, for extensive renovation or reconstruction projects.
But, be warned - the FHA 203K Application Process is not at all easy, or quick. Certified FHA Contractors must bid on and complete the work, under the watchful eye of FHA Inspectors as work gets completed. The contractors are paid only as each phase of a home remodeling project is completed - partial deposits are not allowed, and a portion of the repair and remodeling costs are held back from the contractor until the entire job is complete.
For deteriorating properties in attractive areas, however, the FHA 203K Program can bring middle-income, average-credit-score buyers to the closing table, and allow them to create a lovely home, in an area in which they want to live. And, in the process, they would be removing from the market a home that might have continued to sit unsold - vacant, and neglected.
DEAN MOSS & DEAN'S TEAM CHICAGO
