FHA 203(K) REHAB PROGRAM IS HERE!

SHOW BUYERS HOW TO TURN THIS

INTO THIS!

TRY AN FHA 203(K) Mortgage!

The FHA 203(k) mortgage is the perfect tool to sell distressed foreclosed properties!

In a single loan, your buyer can get the money to purchase the home and make all needed or desired repairs and improvements.

The loan works like this. Plans and specifications are prepared for the repairs and improvements to be completed. An appraisal is done based on a before repair and an after repair value. The loan is closed and funds are disbursed for the purchase of the property. An escrow account is established for the work to be done. At each stage of the completion of the work a draw is paid from the escrow account to pay for the completed work.

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Repairs needed; FHA-203(k)

FHA 203(k)

Most mortgage financing plans provide only permanent financing. That is, the lender will not usually close the loan and release the mortgage proceeds unless the condition and value of the property provide adequate loan security. When rehabilitation is involved, this means that a lender typically requires the improvements to be finished before a long-term mortgage is made.

When a homebuyer wants to purchase a house in need of repair or modernization, the homebuyer usually has to obtain financing first to purchase the dwelling; additional financing to do the rehabilitation construction; and a permanent mortgage when the work is completed to pay off the interim loans with a permanent mortgage. Often the interim financing (the acquisition and construction loans) involves relatively high interest rates and short amortization periods. The Section 203(k) program was designed to address this situation. The borrower can get just one mortgage loan, at a long-term fixed (or adjustable) rate, to finance both the acquisition and the rehabilitation of the property. To provide funds for the rehabilitation, the mortgage amount is based on the projected value of the property with the work completed, taking into account the cost of the work. To minimize the risk to the mortgage lender, the mortgage loan (the maximum allowable amount) is eligible for endorsement by HUD as soon as the mortgage proceeds are disbursed and a rehabilitation escrow account is established. At this point the lender has a fully-insured mortgage loan.