Many Realtors have stories of clients who can envision the possibilities of a house that’s seemingly being held up by a prayer.
If you are one of these people, but are short on cash, here’s a solution: a government-backed loan that covers not only the purchase price of the home, but the cost to rehab it as well. It’s a loan provided by the Department of Housing and Urban Development, known as the Section 203(k) Program.
This loan is best known for allowing the borrower to rehab and repair a home, but it has other uses as well. Borrowers have used the loan to:
Convert single-family homes into multifamily dwellings, with up to four units.
Convert multi-units to a single-family home.
Move a house to purchased land.
With most government loans, not only must the buyer qualify, but also the home. A dwelling’s eligibility includes:
It must be at least one year old.
If the home is going to be demolished, the existing foundation must remain.
If the program is being used to rehab a condo, you must intend to live in it, and all work must be confined to the interior of the unit.
Qualifying for the loan is identical to the requirements for any FHA loan. Some requirements of the borrower are:
Show a steady employment history, preferably with the same employer for at least the past two years.
Be a lawful resident of the U.S. and have a Social Security number.
How the 203(k) Loan Works
The beauty of this loan program is that the borrower has only one loan that incorporates both the price of the home and the cost to rehabilitate it. The loan amount is based on what the property’s projected worth will be after the work is done.
So go ahead and fall in love with the possibilities. You can afford to buy a fixer.