Business With Greg Mortgage and Real Estate Blog

With REO listings growing and getting a higher demand from home buyers I thought I would start a post about the financing avenues.

In the past there was typically a problem in the lending community with education on how to include repairs and rehabilitation in a home purchase. So many loan officers would say they cannot do it or imply it is not available. Some would offer it and say you have to have good to excellent credit.The fact is that all the above is a myth and that the problem is loan officer education on the subject.

Programs available:

1) Construction/Rehab: This program is commonly offered by lenders whom do Home Construction.

Some limitations include:
a: Good Credit with limited or no delinquency.
b: Down Payment requirements of 5% or up to 25%.
c: Imposing a minimum on the Rehab project. Example: Rehabilitation minimum of $50,000.
d: Higher interest rates, limited amortization options, and sometimes only available as an ARM or Balloon.

Some factors that may help buyers:
a: More options for draw schedules.
b: More options regarding verification of income and assets.
c: Some offer self-rehab although limited.

2) FHA 203K: This program is offered by Approved FHA lenders. However, there is a course you have to complete as a Loan Officer to be able to do these loans. So, it is rare to find someone that offers an FHA loan and also is able to offer 203K. HUD has a list of approved FHA lenders and approved 203k consultants on their site.

Some drawbacks include:
a: Full Documentation Only. Most self-employed individuals struggle to be approved due to lack of profit showing on their Schedule C.
b: Limited Draw Schedules although it allows most of the work to be done more quickly.
c: Owner Occupied Only! No investors.

Some factors that may help buyers:
a: No Credit Score Requirement!
b: Limited to No Down Payment!
c: Typically there is no minimum requirement on rehab project.
d: Low interest rates regardless of credit score!

3) FHA 203Ks: This program is like the above but it is a streamline version. There is no additional requirement for a Loan Officer to do them. They only have to work for a company that is FHA approved.

This program is probably one of the best to use on any home. If your buyer has good credit or bad credit the rate is low.

The limitations:

- Up to $35,000
- Cannot do anything requiring blueprints

Say you hate the kitchen cause it is puke green. Done!

The house has no appliances. Done!

You are disabled and need wheelchair access. Done!

You want to gut it to the studs and hang new drywall, flooring, kitchen, bath, appliances, siding, windows, lighting, a new roof, down spouts, FURNACE, plumbing, HVAC, electrical, add a deck, add a porch, add a patio, basement finishing/remodeling/waterproofing, septic and a well. Done!

Perfect. Even those borrowers with limited credit, no credit, flawed credit can qualify.

 Fannie Mae also has a nice product available called Homestyle. It typically requires a 5% down payment but there are ways to get around that. FHA is far superior though.