Buying a Pig using the FHA 203(k) Program

Let’s consider the facts: There is significantly more demand for housing than there are units available. The newer, better condition homes are being snatched up. In many cases multiple offers are creating a bidding war where the final purchase price is higher than the list price.

What does remain is a lot of inventory of homes in need of repair or updating. Their owners see that now is the right time to unload while the market is hot and demand is high. I’m not referring to tear-downs. The properties I wish to focus on are the homes that have seen their better days, but are not too far gone.

Homes in need of repairs and or renovations are not that desirable to the mass of home seekers. Most don’t want to deal with it – they just want to buy and move it. Almost everyone is unaware of great programs that allow one to purchase a home in need of help – all with a minimal down payment.

If you are looking for an edge on the competition to find the home of your dreams, this program might just be your ticket to not only find that home, but allow you to make it your home right from the start!

For owner-occupant purchases, FHA has an excellent renovation program that could turn that pig into pony. It is called the FHA 203(k) Limited. The limited is the important part, because there is another FHA 203(k) program that allows for major renovation and additions.

Under the limited program, which is capped at $35,000, no General Contractor is required, nor is a HUD Consultant. Under this program, here are the things you a use the $35,000 towards:

• Repair/replacement of
o Roofs, gutters, downspouts
o Existing HVAC systems
o Plumbing and electrical systems
o Flooring
• Minor Renovations that do not involve structural repairs (kitchen/bath remodeling)
• Painting of interior and/or exterior
• Weatherization (insulation, storm windows, etc.)
• Purchase and installation of appliances
• Septic system and/or well repair or replacement
• Accessibility improvements for persons with disabilities
• Lead-based paint stabilization or abatement of lead-based paint hazards
• Repair/replacement/addition of exterior decking, patios, or porches
• Basement finishing and renovation so long as it does not involve structural repairs
• Basement waterproofing
• Window and door replacements
• Exterior wall re-siding

I have always professed that current FHA loans are not a great deal, because they have upfront fees that you can add to the loan, and high mortgage insurance costs. But what makes this program an excellent choice is that you can buy a home, get it improved, and get those improvements added to your financing. That means you get all this done with as little as a 3.5% down payment!

I can’t think of a better way to find a home that is not being bid up with multiple offers, and will allow you to repair/update it into exactly what you want. Using FHA’s 203(k) Limited will allow you to turn that pig into a pony.