This article  was originally posted on the RIS Media website read on:

Fixer-Upper Financing: 203k Program Provides Buyers with Renovation Funds

By Eve Mitchell

RISMEDIA, March 27, 2010—(MCT)—The word “as-is” can indeed be one scary phrase. Especially when buying a home in today’s market where foreclosures and short sales that need fix-up work are plentiful.

But a little-known Federal Housing Administration (FHA) loan program that’s been around since 1978 can help take the sting out of “as-is.” Only 219 borrowers took advantage of the FHA’s 203k program in 2009. Not that many lending and real estate professionals are aware of the program, say observers.

Last year, Tom Meyer found a classic Oakland, Calif., home built in 1925 near Mills College he liked a lot. As a short sale it was priced right and about half the original asking price. Trouble was, the place needed some fix-up work—foundation improvements, dry rot work, a new roof over the garage and other improvements.

With the help of the FHA’s 203k renovation financing loan program, Meyer folded about $100,000 worth of repairs and improvements into his $422,000 mortgage. He had bought the home for $320,000. “I would not be able to pay a contractor $100,000 and buy a house at the same time,” said Meyer, who works in corporate media at Shaklee’s Pleasanton headquarters. “It had been essentially allowed to start falling apart over the last 20 years.”

He had rented in San Francisco for 25 years before moving into his new digs last September with his girlfriend, Cathy Keating. “We like old houses, and a great benefit of this program is that it helped us keep a beautiful but deteriorating house from deteriorating further. With the work we did, we expect it to still be standing and beautiful 80 years from now,” he said.

Renovation financing through the 203k program allows the costs of needed repairs and improvements to be included in the FHA federally-insured loan amount instead of having the buyer come up with cash or a separate loan to do the work.

“This is a perfect loan for an as-is situation,” said Kristine Marr, a loan officer with Prospect Mortgage in Lafayette, Calif. “It’s not a new loan program, although I think it’s going to have a lot more use today because we have so many foreclosures and bank-owned properties. You go into lots of homes and see people have yanked out stoves and ovens and fixtures and sinks.”

The work has to be done within six months after escrow closes. Borrowers have the option of putting up to six months of mortgage payments on the end of the loan if they don’t want to live in the house while the work is being done.

“Renovation financing is a program that allows you to not only finance the purchase of a home but finance any repairs and/or improvements. It provides buyers with a responsible way to purchase a fixer-upper property,” said Luis C. Munoz, who helped Meyer with the loan and is a renovation loan specialist with the Oakland branch of Mason-McDuffie Mortgage Corp. Munoz also gives presentations about the program at monthly home ownership workshops sponsored by the Unity Council, an Oakland-based nonprofit.

At a time when equity loans are hard to get, the program can also be used as a refinancing vehicle for borrowers who want to do repairs and improvements, provided the value of the home is greater than the value of the loan. “At the same time as you refinance, you pop in the extra dollars you need for whatever you want to do,” Marr said.

FHA home loans require certain health and safety standards be met and that needed repairs identified during the inspection process be completed before escrow closes. However, minor repairs and improvements costing between $5,000 and $15,000 can be done after escrow closes for borrowers who opt for a streamlined repair program.

A 203k loan can help buyers finance both minor and major repairs and improvements. It can also help buyers compete with investors when bidding for short sales and foreclosures, said Sheri Powers, director of the Homeownership Center at Unity Council.

The loans can also be used to pay for improvements such as new appliances, second-story additions, remodeled kitchens and bathrooms, and skylights, just to name a few examples. “Property repairs cost money and they want to make sure people using their loan program are going to be in the home in long run and not just the short run,” Powers said.

The loans have become more popular since home prices started falling and FHA lending limits were raised a couple years ago but are still a tiny sliver of overall FHA loan volume. Last year, 203k loans accounted for 219 mortgages in the Bay Area, compared to 35 in 2008, one in 2007 and none in 2005 and 2006, according to Department of Housing and Urban Development statistics. “It’s making a comeback,” said Powers.

Marr said that 203k financing is not for everyone. A buyer will have to work with contractors and may have to wait several months before moving in, she said. And there is no guarantee they won’t be outbid by an investor for the property. “A lot of listing agents are preferring the investors, because the investors tend to be all cash or 50% cash. That’s always hard to compete with,” she said.

(c) 2010, Contra Costa Times (Walnut Creek, Calif.).

Distributed by McClatchy-Tribune Information Services.

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.

There you go, the FHA 203K in a nutshell. This article is nicely written I couldn’t have said it better myself. If you have questions or would like to discuss this article feel free to post your comments below or contact me directly.

- Marvin
Marvin@203KMortgageLender.com
(888) 788-9398 x 203

Related posts:

1. Can You Afford to Say No to FHA Borrowers?
2. FHA 203K News Straight from the Dept. of Treasury
3. Rehab Loan Options for Homeowners

Today I came across yet another great post encouraging Real Estate Agents to consider those buyers who want to use FHA financing.   As a 203K Mortgage Lender I am trying to do my part in spreading the word that FHA Loans have a lot of benefits that the standard Conventional loans don’t.  So read on…you may be pleasantly surprised on how far FHA has come.

This article comes from a blog posted on Realtor.org

Here is an excerpt :

Can You Afford to Say No to FHA Borrowers?

By Robert Freedman, Senior Editor, REALTOR® magazine

Hopefully you don’t consider it a mark against buyers if they want to use FHA financing. It’s true it typically takes longer to process FHA-backed financing than it does conventional loan applications, but with the challenging credit environment, for a big chunk of your potential clientele the only financing available to them is FHA. What’s more, these days it’s taking longer to get conventional financing applications processed, so the time gap between the two has narrowed considerably.

Yet here in NAR we continue to hear that sellers—and some sales associates—are discouraging FHA borrowers from making offers on homes in the outdated belief that FHA is significantly slower and more paper-intensive than conventional financing.

Not true, says NAR Senior Policy Analyst Megan Booth. While it’s the case FHA still requires borrowers to jump through some hoops that don’t apply to conventional borrowers, the agency has undergone a sea-change in the last several years in the way it does business.

The agency is far more flexible and far more quick in its processing than it ever was in the past. Even its appraisal requirements are very much like those in the conventional market.

What’s more, FHA has just made some rule changes that increase the attraction of its financing for condos, including site condos. If you’re not familiar with site condos, they’re units in developments that look and feel like single-family communities but are structured as condos. We’re seeing more of these types of communities and FHA has moved out front by changing its rules to accommodate them.

To be sure, the agency faces challenges, but it remains that rare federal agency that is growing (35 percent of residential loans today) and making money for the federal government.

If you have FHA borrowers interested in a listing, can you afford to discourage them from making an offer? FHA is not the agency it was 10 years ago; you might be surprised at how the Depression-era mortgage insurer is moving into the Twenty-first Century.

This is very encouraging to Home buyers who are having trouble getting their offers accepted.  I hope all  Agents will be more open to FHA financing and reconsider the benefits that this type of financing provides.

If your an Real Estate Agent and would like some ideas on how to market the FHA 203K Loan I have a website dedicated exclusively to Real Agents.  You can check it out here.  http://agents.203kMorgageLender.com

I offer a FREE 203K Marketing package exclusively for Real Estate Agents who wish to promote selling less desirable or “As-is” listings. So Check it out.

Related posts:

1. Fixer-Upper Financing: 203k Program Provides Buyers with Renovation Funds
2. FHA 203K Loan Information
3. FHA 203K News Straight from the Dept. of Treasury

You can now find 203K Mortgage Lender in the directory of  

a pretty cool directory of blogs about anything and everything!

Related posts:

1. Can You Afford to Say No to FHA Borrowers?
2. FHA 203K News Straight from the Dept. of Treasury
3. Fixer-Upper Financing: 203k Program Provides Buyers with Renovation Funds

New OCC Community Developments Insights Report Focuses on the FHA’s 203(k) Home Rehabilitation Financing Program

August 6, 2009

by RealEstateRama

WASHINGTON, DC – August 6, 2009 – (RealEstateRama) — The Office of the Comptroller of the Currency (OCC) today published a Community Developments Insights report that provides bankers an overview the FHA’s 203(k) Home Rehabilitation Mortgage Insurance Program.

“The 203(k) Program is an important tool that can help mitigate a lender’s risk, while at the same time restore some of the nation’s foreclosed properties and help stabilize neighborhoods,” said Comptroller of the Currency John C. Dugan.

“HUD strongly supports OCC’s efforts to increase bank participation in the 203(k) Program. With so many bank-owned properties in need of repairs, this program offers a great way for homebuyers to finance both the purchase and rehabilitation of these homes,” said David Stevens, Assistant Secretary for Housing/Federal Housing Commissioner at the U.S. Department of Housing and Urban Development.

The 203(k) Program provides FHA mortgage insurance on loans which combine home purchase and rehabilitation financing

. Loans to rehabilitate and refinance a borrower’s current resident area are also available under the 203(k) Program. The 203(k) Program is a tool for FHA-approved lenders to originate loans for individuals, nonprofits and government development agencies interested in purchasing foreclosed properties in need of repair. Compared to conventional purchase and rehabilitation products, 203(k) loans carry less risk to lenders since these loans are backed by the full faith and credit of the federal government.

The report provides a comprehensive overview of this program for lenders that may be considering expanding their product line with 203(k) loans. The report also outlines how FHA 203(k) loans would be evaluated under the Community Reinvestment Act.

The Insights report can be accessed on the OCC’s Web site at: http://www.occ.gov/cdd/203k_Loan Program_Insights_Jul09.pdf.

Contact: Dean DeBuck

(202) 874-5770

Related posts:

1. FHA 203K Loan Information
2. Fixer-Upper Financing: 203k Program Provides Buyers with Renovation Funds
3. Beware! No Termite License Can Be a Terminator!