Jack's New Hampshire Real Estate Blog

How to finance a property in poor condition?
October 10th, 2008 11:01 AM

Conventional wisdon is Noooooooooooooooooo!  But in reality, the answer is a definative YES!!!!

With lots of bank owed properties for sale and the banks refusing to do repairs on their properties, there are many "nice" homes available at good prices that need work.  The "catch 22" is that most banks/mortgages companies do not like to loan on properties that need work.  A great solution is an "FHA 203K" loan that most lenders can offer.  Here is how it works....

FHA will loan against not only the purchase price of the property, but also the necessary repairs.  Therefore, if a home you like needs $20,000 in repairs and you dont have the $20K at your disposal, you can still buy it.  The FHA mortgage will provide you will the funds to fix the property.

In order to get an FHA loan the property must have atleast $5,000 of needed repairs and you must obtain reliable contractor estimates.  You will also need to qualify for the loan income wise.  When you close on your house, the lender will place the repair money essentially in escrow and pay you as work has been completed.  It works great!!!

One great benefit of buying a home in need of repair is that most of the time, the value increased by fixing it EXCEEDS the cost of the repairs.  Therefore, in most cases you will create/recapture instant equity.......and that is a great thing!!! 

If you are considering purchasing an owner-occupied home that needs work and you don't want to exhaust your cash reserves consider and FHA 203K loan.  If you email me at jacklavoie@comcast.net , I can offer several good mortgage companies who can provide you will such loans.

                                        

 


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Posted by Jack Lavoie on October 10th, 2008 11:01 AMPost a Comment

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