Seal the Deal on your Baton Rouge Foreclosure Bargain with a 203K Loan

Have potentially high repair costs discouraged you from taking advantage of a great deal on foreclosed or bank owned homes? Keep in mind that while the prices are tempting, the last owner was probably short on cash to do much upkeep or the home may have been vacant for while or been vandalized by the former owners or intruders. Just because a home needs work does not mean you should pass on it if you like it. As it happens, there is a great source of funds available to enable you to make repairs and wrap the costs to do into your mortgage. The 203K loan is designed just for this.

Sponsored by the U.S. Department of Housing and Urban Development, the loan is designed to simplify financing on owner-occupied homes that need work at the time of purchase. There are some restrictions on how the funds can be used, but with the exception of adding luxury features, major structural repairs, or new construction, the money can go toward most other things, such as replacing major systems, replacing appliances, rehabbing interiors, or even adding rooms or decks. Even investors who plan to rent or flip the property can qualify for the funds - up to $35,000 for the streamlined program or more, depending on what you need and can afford.

Keys to obtaining 203K funding are a knowledgeable Realtor and a willing lender. In times past, when foreclosures were not such a common part of local housing mix, some Realtors did not know much about these loans, while some banks did not offer them.

The amount of the loan needed for repairs will come out of the amount of the loan you have been preapproved for. For this reason, you should seek pre-approval before getting too serious about a house. Armed with the knowledge of how much you can spend, you can then work with an experienced Realtor to find properties in your price range. If you find a property you like that needs work, you and your experienced Realtor can then work with an experienced contractor to see what is involved.

If the contractor finds extensive damage that would put repair and mortgage costs above the pre-approval amount, you can keep looking for another home or find ways to bring repair costs in line with his budget. For repairs under $10,000 the lender may allow the buyer to do the repairs himself - a great idea if you have skills or the repairs are the kind that require more time and effort. In some cases, the lender will let the buyer be his own contractor.

There are many cases when the rehab investment will pay off handsomely for the buyer when he resells the property. Before proceeding further, the Realtor should weigh in on whether making the repairs would put the home in line with housing values in the neighborhood. If you overinvest in the property, you may not get it back at resale.

If you decide to go ahead with the purchase, you must present the contractor's written estimate to the bank. The lender will then add 10% for cost over runs and figure in your3.5 % FHA down payment and the selling price. Then the lender will compare the total with the expected "repaired value" appraisal and make a decision on the loan.

Once the loan is approved, the sale is completed; the repairs must begin within 30 days. Funds for the remodeling are put in escrow and paid out upon completion of each part of the repair. All repairs must be completed within six months of purchase.

The funds from this program can be combined with other incentives offered on a state or local level - and with the $8,000 new homebuyer's tax credit. For information about the program, see the HUD website to talk to your experienced realtor in the Baton Rouge - Prairieville area - Sandy Sandlin. Sandy's Team can help you find the right property and walk you through your 203k loan. Call us today at (225) 677-SOLD or email info@sandyco.com. We are here it help you in East Baton Rouge, Livingston Parish, and Ascension Parish.