Tuesday Jun 23 2009
FHA program offers purchase and renovation funds
By: Dena Kouremetis and Beth Mergens
Homebuyers waiting until they can find that fixer-upper diamond-in-the-rough type property at an affordable price are finding it easier than ever to make their dreams come true, according to Wells Fargo’s Sean Anderson, a renovation specialist located in their Iron Point location in Folsom. Anderson offered his expertise in explaining Wells Fargo’s FHA 203K loan product; one in which renovations are rolled into the primary mortgage, eliminating the need for equity lines or other types of add-on loans once escrow closes. “This program isn’t just for people looking to remodel a kitchen,” explains Anderson. “It can be used to address health and safety issues as well as updating and remodeling when repairing bank-owned homes that have been trashed or vandalized.” Anderson goes on to explain that these loans will not cover luxury amenities, such as adding a pool or making wild architectural changes, but can be used for any other type of improvement, such as add-ons to the existing structure, complete kitchen and bathroom remodels, walk-in closets, structural issues, new roofing and windows, HVAC systems, etc. Government-backed FHA loans, known for their low down payment requirements (as little as 3.5 percent) are ideal for homebuyers with limited funds. And while the 203K program can be used for refinances as well, the beauty of purchasing a home with it means only one escrow close for both the home and its renovations. This is done with a holdback feature, with funds designated specifically for remodeling held in escrow after the close. These holdback monies are earmarked to pay pre-arranged validated building contractors and are monitored by both borrower and lender. “One of the beauties of this loan program is that the lender has faith in the finished product,” explains Anderson. “The appraisal is done using the after-improved value, making it a ‘win-win-win’ proposition. A buyer can take advantage of the lower pricing offered on a home receiving little attention from the average buyer due to its condition, transform it into a lovely home again, and benefit the surrounding neighborhood as well.” When asked for local examples where these loans have made a difference, Anderson describes a home in the foothills whose foundation included a crack that ran up a wall and into the roof. No one was even making offers on the property due to this disturbing disclosure. The purchaser was able to put only 3.5 percent down into the very affordably priced property and with the 203K program, finance the entire repair. According to Anderson, this purchaser may be able to someday walk away with some real equity. Anderson admits that although the 203K program is not new, it is gaining steam now, in a market where homes have been abandoned, vandalized or have fallen into disrepair. “Emotions can run very high when people are forced to leave their homes,” explains Anderson. “We’ve seen instances where bags of concrete were poured down toilets and appliances were ripped out of kitchens. These are the kinds of repairs that would have to be address for health and safety reasons before any lender would permit new owners to occupy the house.” The FHA (owner occupied only) all-in-one purchase/renovation loan’s limit is $200,000. For renovations costing less than $30,000, Wells Fargo offers a more streamlined version. For more information, call Anderson at (916) 294-3213. Dena Kouremetis is available at firstname.lastname@example.org. RE/Max Gold’s Beth Mergens can be reached at 947-3993 or at FolsomlakeHomes.com.