It is pretty tough to find a home that you really love within a limited budget. Most people want to have a place they can move right into, turnkey if you will. Many dilapidated houses get overlooked because they need way too much work. Buyers think they will need a ton of money in order to renovated to their taste. The movie The Money Pit comes to mind where the young couple pours a ton of money into this house that continually falls apart. In the end, however, the home comes out stunning and elegant. There is a great product from FHA that allows buyers to renovate needy homes, it’s called a 203k loan. With this product, you only need 3.5% down and some patience and diligence.
The way the loan works is basically you’ll get a loan for what the property would be worth after renovations. A HUD consultant will help determine the value after renovation. After closing, you will receive a certain number of draws in order to complete renovations, which all must be done within a six month time period. The whole process requires tight communication between you, the lender, the HUD consultant and an approved contractor.
Now, there are 2 types of 203k loans, streamline and standard. The streamline type will lend you up to $35,000. This is the easiest way to go and requires the least amount of work. However, if a property needs more work than this you’ll need to go with the standard 203k, requiring a good deal more amount of work.
In the end, if you have the patience and can be inconvenienced for a few months, the 203k may be the best way to go. Ultimately you may end up with more of a dream home than you would have gotten otherwise.