Rehab Mortgage Loans for San Diego, Temecula and Murrieta Home Buyers
Filed under: 203K Rehab Loans
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 http://www.homeloanpartner.com
Franklin Loan Center | NMLS 237653
Licensed by the Department of Financial Protection and Innovation under the California Residential Mortgage Lending Act, 4131316