The number one complaint I hear regarding buyers who want to purchase a home using an FHA loan is the fact that the home they want to purchase cannot be bought with an FHA loan.
There are a few reasons this can be true however, the most common reason is due to the condition of the home. Whether you are purchasing with a conventional mortgage or an FHA mortgage an appraiser will visit the property. When purchasing FHA the appraiser will make a list of repairs that will be required to be completed prior to settlement. There are Sellers not willing to make these repairs and sometimes with a bank owned property or an estate property they simply will not be completed.
There is an option. An FHA203K loan is a renovation loan that is available to purchasers. This loan still requires 3.5% as a downpayment and the purchaser can also receive up to a 6% Seller's Assist towards closing costs. The differences with this loan make it a great option for a purchaser and include:
- The ability to purchase a home that needs work;
- The ability to purchase a home that needs updating when the purchaser does not have the funds to make those updates;
- Opening up all homes for sale to an FHA purchaser.
The loan works in the following way:
- The purchaser finds a home, puts in an offer and has the offer accepted;
- A contractor who is approved by FHA and the Bank provides a written estimate of the repairs required by FHA and any updates/changes the purchaser would like to make;
- The appraiser makes a determination as to whether or not the additional renovation funds will bring the home to appraised value.
For example. A purchaser makes an offer of 100,000 on a home and it is accepted. FHA requires repairs that amount to $2,000.00 and the purchaser wants to install a new kitchen, bath, and hardwood floors totaling $20,000.00. The appraiser will evaluate whether or not the home value will be $120,000.00 once those repairs/renovations are completed. If so, the approval is received and the purchaser is on his/her way to becomming a home owner.
Although this is a great loan it is imperative that a purchaser works with a Realtor who is experienced in these types of transacations. That will ensure that the process continues on a smooth path to settlement. For more information on homes available visit www.JenniferDaywalt.remax.com.
Jennifer Daywalt, Realtor
Phoenixville's Home Town Realtor
RE/MAX Results Realty - Collegeville
610-489-7355 Main * 610-999-7693 Direct
Licensed in PA
No One Sells More Homes in Phoenixville