Rehab Mortgage Loans for San Diego, Temecula and Murrieta Home Buyers

Filed under: 203K Rehab Loans

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With the real estate resale market still being dominated by short sales and  foreclosures it’s not very surprising that the majority of homes on the market  today aren’t exactly in sparkling clean condition. In fact, many of them are  in nasty condition. The previous owners of these properties aren’t exactly in  the mood to fix up a house that has created a financial mess for them.

This very situation is creating an amazing opportunity for buyers looking for Home Loans  in San Diego, Temecula and Murrieta that have the ability to look through all  the dirty flooring, holes in the walls, cracks in the sinks and possibly some  funky smells. Enter the FHA 203K Rehab loans.

These rehab loans comes  in two varieties: the full 203K and the streamlined 203K. The streamlined 203K  loan will give home buyers up to a $35,000 rehab budget. The full 203K will  allow for rehab costs well over the $35K budget.

Let’s focus on the  Streamlined 203K for now. This loan has all the same qualifying parameters as  the standard FHA loans: 3.5% down payment, 620 or higher credit score, solid  income, solid credit, no need for large sums of cash reserves. The only  difference with these mortgages is we have a licensed and bonded contractor to  give us a bid for making all the repairs to the house. We submit the contractor  bid along with all the normal pay stubs, W2s, bank statements etc. to be  underwritten. The contractor bid is the only additional step for the home  buyer. When the appraisal is done, he or she will give us a value based upon  completion of all items in the contractor bid. FHA will lend up to 96.5% of the  future completed value! A portion of the $35K budget can be put toward paying  the mortgage for the first month or two while the repairs are being completed so  you don’t have to live in the house while the construction is going on.

Examples of items that can be included in the contractor bid: Paint,  carpet, tile, hardwood flooring, window coverings, appliances including washer  and dryer, drywall repair, counter tops, hot water heater, AC units, ceiling  fans, all plumbing fixtures, etc.

Who should be thinking about a rehab  mortgage?

I believe there are three answers to this question. 1) This  mortgage is for home buyers that have the ability to walk into a house that is a  mess, but can see that true potential of customizing the house to their own  taste. 2) Buyers that are adventurous enough to pick out their own finishes  and work with the contractor to see the project come together. We have  contractors that are very good with these projects we can refer. 3) Buyers that  want to purchase a house well under market value, put in the effort to rehab the  house and very likely have some built in equity when the project is complete.

Here’s a real example: I have a client that purchased a home that was  built in 2003. The previous owners lost the home to foreclosure and left the  house in pretty bad shape, but it only needed cosmetic repairs. My client  purchased the house for $240,000. In the three weeks following my clients  purchase he had contractors paint, put in new flooring throughout, replace a few  windows, repairs some holes in the walls, seriously clean up all the landscaping,  and give the house a major scrubbing. All said he paid the contractor just  under $20,000. The house looks great and is valued at about $310,000.

I  definitely don’t think everyone is cut out for buying a “fixer” home and  handling the rehab, but for those that can see through the grime of many of the  homes on the market today and aren’t afraid of working with a contractor, a  rehab loan might be one of the smartest ways to purchase your next home.

For more information, contact Bill Provost at 760-282-4415 or visit

Franklin Loan Center | NMLS 237653
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