Considering an “As-Is” Option?
Foreclosures and short sales have introduced “fixer-uppers,” homes in need of repair and care into the luxury market recently. With lower home values and higher lending regulations, this can result in problems with loan approval. Searching for resolution, I thought it was time to let you in on a little known loan program.
Did you know that the Federal Housing Administration (FHA) has a loan program (since 1978) to help with “as-is” repairs? It is not widely publicized. In fact, only 219 borrowers used this program, known as the FHA’s 203K, in 2009!
Many homeowners fall in love with a potential home, only to discover at inspection that dry rot work, roofing, new appliances, remodeling, or other needed repairs might be deal stoppers. The FHA’s 203k renovation financing loan program, allows for these needed repairs 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 repairs.
The only conditions are that work has to be done within six months after close of escrow, but the borrowers have an option of adding six months of mortgage payments to the end of the loan if they don’t want prefer to live elsewhere while the work is completed. FHA home loans also require some health and safety standards be met and that repairs identified during the inspection be completed before escrow closes. Also, the buyer needs to work with contractors and may not be able to move in right way. Yet, minor improvements and repairs can still be done after escrow closes.