If you are a San Diego homebuyer that is interested in buying a home that real estate agents may call a “fixer”, “contractor’s delight”, or “in need of TLC” then FHA’s 203(k) loan program may be just right for you.
This little publicized program has a whole lot of potential if the home you plan to purchase needs $5,000 or more in renovations in order to be rehabilitated. The loan program is available to homebuyers who plan to owner occupy the home as well as non-profit organizations.
- one to four unit family dwelling completed for at least one year
- during demolition, some of the existing foundation must remain
- condos and multi unit dwellings have additional criteria
- “improvements” included in the loan program must become part of the permanent real property of the home
- must have a qualified contractor do the “work” on the home
The benefit of this loan is rather than having a high interest rate construction loan, you can use the FHA 203(k) loan product that traditionally comes at a lower rate than a construction loan. Another benefit is the total cost of the home renovation is also included in the loan. Two types of appraisals will be done on the home in order to determine the max loan amount allowed; an “as-is” appraisal and a “value after rehabilitation” appraisal. Once the home closes escrow the “rehabilitation funds” will be held in an escrow account for the homeowner to access for construction costs etc.
