Foreclosures are a problem, not just for the person losing their home or for the lending institution that is now owning and marketing the home, but also for the person buying the foreclosed home. Now, I know that everyone thinks that buying a foreclosed property is the way to go in this market to be able to save a heap of money, but in reality it doesn’t work as well or as often as you might think.
Let’s take a look at the foreclosed property for a minute. First of all, we have a property that has been someone’s home and was probably pretty well cared for or possibly, it was a rental and has seen better days. Either way, the owner was not able to make the payments for whatever reason and when they stopped making payments, they probably also stopped with their upkeep of the property. So, most often, you have a home that has been vacant for a few months with an absentee owner (a bank or mortgage investor) that is unwilling to put any more money into the property than they already have invested.
The home could be in need of a new furnace. It might have carpet that looks like the former owners had cows for house pets or it might have a roof that is barely keeping the rain out. Are you prepared to make those repairs as soon as you buy the home? It may or may not still be a good deal as long as you do your homework. Number one on the homework list of things to do is to find a good lender that can help you with an FHA 203k Streamline loan so you can get those repairs done. Take a look at my recent post about this product from www.myfhamortgageblog.com.
January 26, 2009
I want to talk to people that want to purchase a bank owned property (foreclosure) or currently own an Oregon home and want to make some repairs or renovations to it but due to the current real estate market, don’t think that they can. Current home owners have limited choices when it comes to paying for a renovation. I can think of four different choices: (1) pay for it out of pocket, (2) put it on a high interest credit card, (3) pray your home still has enough equity to take out a home equity line of credit (HELOC) or (4) refinance into a FHA 203k Streamline renovation loan. Purchasing a foreclosure has the same problems, but it has to be done after closing and most lenders won’t lend on homes that are not in decent repair.
Now, I want to show you five reasons why the 203k renovation loan is the best choice when the repair costs are $35,000 or less.
- Have you shopped for home equity line of credit (HELOC) lately? They are much more difficult to find at a reasonable loan to value (LTV). The banks and investors who used to buy them in the secondary mortgage market have stopped because of performance. Many of the major banks are completely out of the home equity market because they are continually writing off non performing loans. Those that do still offer HELOCs, offer them at a much lower LTV and can cut the LTV at anytime if they decide you are in a declining market. Often times the HELOCs can be reduced in the middle of a project with no advance warning.
- Renovation loans are based on AFTER REPAIR VALUE with an appraisal that is “subject to” the repairs being made. Equity lines don’t consider the value of your home when the repair is finished (only CURRENT value), 203k renovation loans do.
- 203K loans are first lien mortgage products. You only have ONE loan! Gone are the days of making two mortgage payments. One payment goes to one lender.
- Moving to a different home that needs repair? Good luck getting a first mortgage let alone a second to renovate. Lenders of traditional loans will not lend on homes in disrepair, but 203K renovation lenders are not concerned with the current condition of the property. Renovation lenders are only concerned with the after repair condition of the property.
- Thinking of putting the renovation amount on your credit cards? Consider that a 203k loan has a lower interest rate, longer repayment period AND tax advantage?
In this market there is no better loan than the FHA 203K renovation loan if you are looking to spruce up your current digs (or looking to purchase that foreclosure down the street with no appliances). One loan based on after repair value at an affordable fixed rate. FHA 203K loans were built for this market. You can get up to 95% of the current value of your home and up to $35,000 in repairs ($31,500 plus 10% contingency) with the Streamline 203k refinance. You can get up to 96.5% of the purchase price plus the repairs up to $31,500 plus contingency. Sounds complicated, then call me. Let me help you with the process. *NOTE: This loan will not work for foundation repair or landscaping. Manufactured homes are OK as long as foundation and tie downs are installed prior to inspection.
Step two in this process, partnering with a Realtor will be covered in tomorrow’s post. Please check back, because I think that, if you are interested in buying your family home from the supply of foreclosures, this will be some interesting information. Of course, since I am writing it, I could be a bit prejudiced.
February 2nd, 2009 | 
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so nice post and thank for that.