Fixer Uppers / Beginning Investors

Buying fixer upper homes and distressed properties has had a wave of popularity due to an overall desire to beat higher housing values combined with the influence of real estate reality TV shows.  Starting out as a beginning real estate investor can be fun and financial rewarding, if you attack the purchase process strategically and use available tools that are readily available to you.  We highly recommend starting with one of our agents before you set expectations and goals for yourself.

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The FHA 203K funded loan program lets you minimize your financial risk when buying a home in need of repairs or when purchasing a multi-unit property for a Be Your Own Landlord situation.

FHA 203K Renovation Loans

With the FHA 203(k) Renovation Loan, you can purchase your primary home and renovate it — all with one convenient loan. This loan lets a buyer finance the cost of improvements into the purchase or refinance of the home, meaning you have one monthly payment that includes your mortgage and repair costs.

Lower Financial Risk

A minimum down payment of 3.5% down is required. The down payment funds can be money that you have saved, or may be a gift from family members. Loans and grants from down payment assistance programs may also be available.

Flexible Guidelines

Typically, you must have a credit score of 660 or higher, and you do not need to be a first-time homebuyer to be eligible for a 203(k) Renovation Loan. If renovation is extensive and the underwriter determines you cannot live in the home during construction, up to six months of mortgage payments — principal, interest, tax and insurance — may be included in the 203(k) Loan, so you don’t need to make double housing payments when the home is uninhabitable.

Property Eligibility

Single-family residences (either stand-alone homes or attached homes, like row homes), and homes in planned unit developments (PUDs) are 203(k) eligible. The FHA 203k supports the following types of situations:

  • Purchasing a fixer-upper home in need of upgrades, repairs or larger renovation projects from a traditional home seller, even if the homes is being sold “as is.”
  • Purchasing an up to 4 unit property in need of upgrades or repairs. You must live in one of the units as your primary residence.
  • Buying a foreclosed property from banks, housing agencies and government-sponsored enterprises, as well as properties eligible for short-sale transactions

Maximum Loan Amounts

The maximum amount you can borrow with a 203(k) Loan for a purchase is the lower 96.5% of the sales price plus improvements or 96.5% of the after-improved value. For a refinance, it is 97.75% of the after-improved value.

The amounts are also subject to the standard FHA Loan limits, which vary by market. They currently range from $271,050 to $625,500 for a single-family property.

If you have questions regarding FHA 203K and how to get started as a real estate investor, call 202.759.4114 or by email.

Free Workshops You May Like

Just getting started? Try our twice weekly Home Buyer Workshops. These free seminars have helped area buyers purchase over $33.7 million in area properties since just 2013.

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