As a buyer, you should know that not all financing will work for all homes. There are times when a conventional, FHA, VA, etc will not work for a property. Unfortunately, not all professionals are educated equally on this topic. So it is in your best interest to understand when you might need to use a rehab loan.
A few lenders will offer escrows, up to $5000, to make minor repairs. These repair items need to be corrected within 2 weeks of closing. So if that is not possible, then the item wouldn’t qualify for this option. Items such as a stove, replacing carpet (if none exists), fixing a faucet, cracked windows, etc. The items can’t impact habitability or safety of the property.
For larger things like the entire kitchen is missing, severe roof leaks, broken plumbing, etc, a rehab loan is your best bet.
You definitely want to speak to your lender about qualifying for a rehab loan. Not all buyers will qualify for a rehab loan, even if they qualified for a conventional loan. Program requirements vary between mortgage types.
Make sure when you speak to a lender that they and their company are proficient at rehab loans. It will make a difference in the process.
An FHA 203k loan will most likely require a HUD consultant (for larger loans $35k+). The consultant will look at the property and confirm what the scope of repairs should/will be. As a buyer, you will be paying for the HUD consultant. If the rehab is less than $35k (really about $27k as there is a hold back), the HUD consultant is not a requirement. The larger rehab is great for larger renovations.
So if you are not finding your dream home on the market, purchase a distressed home and renovate it to what you want. I have seen some beautiful rehabs from a really distressed property. Open your mind and your vision and get creating!
If you have any questions about rehab financing, feel free to contact Lisa.
This blog, JerseyGirlForeclosures.com is based on the opinion and expertise of the blogger, Lisa G Lopez. Ms Lopez is not an attorney. This blog post should not be considered legal advice. If you need legal advice, please seek legal counsel.