Fixer Upper
Yes, folks this is not another one of those fancy 100% financing programs that caused the massive financial collapse! This is the FHA 203K program which most major US Banks including Wells Fargo, Bank of America now offer where the post purchase repair costs are included in your purchase loan. In the case of this loan program, your loan is based on the After-Repair Value of the home. Allow me to explain how this works.
You find an awesome fixer upper priced at $250,000 where the seller does NOT have the money to repair it. Let’s assume you will need $30,000 of repairs to turn this into a wonderful home. What the banks will offer you is a loan to purchase the home for $250,000 and then create an escrow account for $30,000 to be allocated for repair payments.
However, to be able to successfully access the repair funds you will need to :
1) Obtain Project Bids
2) Expect an appraisal visit from the bank who is giving you this loan.
3) Submit your contractor’s information to your lender.
4) Ensure ALL the permits are in place prior to the start of repairs.
5) Educate your contractor that the funds are typically released every 30 days and after inspections and work approval.
But it’s always smart to get Post-Rerhab home value request from a Realtor who knows the area to make sure that total money you are investing in this property will not place your home on top of the market.
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