You were in the process of searching and viewing Anaheim real estate properties and Anaheim Homes for Sale that you picked from the Anaheim MLS you found online. However, the prices of the homes are relatively high for your budget and you know that you cannot finance these homes. Good thing is that you have a real estate agent who suggested that you consider purchasing a fixer-upper property. Although fixer-uppers are cheaper, these kinds of homes need major improvement and renovation and if you are going to apply for a loan in a bank, you know that they will only provide you the loan once you made all the repairs necessary for it. And unfortunately, you can only make the repairs after you are able to purchase the house. Big problems with the financing, right? But there is no reason for you to give up yet. There is still a solution for this dilemma of yours. Try seeking help from the government.
The Department of Housing and Urban Development (HUD) is one of the government agencies that can help you with your home buying problems. They have different loan programs for qualified US residents. Specifically, they offer a loan program for home buyers planning to invest in a fixer-upper property and this is what they refer to as 203k loan. It allows a buyer to get a home that is not in its best condition and the total amount of the loan will compose of the acquisition cost and the repair cost. Federal Housing Authority is the one insuring the 203k loan and you can get this loan from any qualified mortgage lenders in the country. Usually, the down payment for the loan needs to be 3.5 percent of the final price of the house and the improvement costs. If you are planning to get a 203k loan, here are the steps you can follow:
1. Find a fixer-upper property that you will like and write a purchase offer for after you and the realtor make a feasibility research for it. The legal paper you will be writing needs to state that you are getting a 203k loan for it and the purchase is still contingent on the approval of the loan.
2. Pick one from offered 203k loans that are approved and certified by the FHA. After choosing, arrange the details of your proposal for the repair that needs to be done in the house, which should include its estimate total cost.
3. Let the lender arrange for the appraisal process of the house so you can determine the potential price of the property in the real estate market once the repairs are all made.
4. After submitting all the requirements and documents for the loan application like your credit reports, financial info, etc, wait for the loan to be approved. The total amount of your loan should cover all the expensed for the acquisition and repair of the house. Furthermore, the loan amount should also have funds for the allowable closing cost and contingency reserve, which is usually ten to twenty percent of the improvement costs.
5. The house will be paid during the closing costs and the remaining funds allocated for the renovation and repair should be taken into escrow.
6. During the closing, the house will be paid off and the remaining money from the loan that will be used for the home’s repair and improvement will be put into escrow.