Consumers often find ample value in distressed homes – properties that are under a foreclosure order or up for short sale. In many cases, “distressed” speaks more to the condition of the home than their recent financial histories. They may have been empty for extended periods and subject to vandalism and theft.
If you are considering a home in need of renovation, you should consider a 203k mortgage. It would allow you to finance both the acquisition and rehabilitation with a single loan. There are two types of 203k loans:
203k Streamline: This is the most popular. The maximum allowable in repairs is $35,000 and does not allow any structural repairs to be done to the home (unless they’re a result of an unforeseen circumstance).
Full 203k: Allows for structural repairs and can exceed the $35,000 in home repairs. Both types allow up to $1,500 in swimming pool repairs.
Some important 203k facts:
- Since it is based on the home’s potential value after repairs (not its existing value), you can be approved for a higher loan amount.
- They carry long-term-fixed rates.
- They’re insured as soon as they fund.
- They include escrow accounts for the scheduled repairs.
- Loan amounts are capped according to local FHA limits.
- Only owner-occupied properties of one to four units qualify.
- The home must be at least one year old.