Financing a Distressed Property with a Home Improvement Loan

Home buyers in low inventory areas are often drawn to the possibility of purchasing a distressed property – not only to help their dollars go further but to open up their search options as well. Distressed properties come in a variety of forms, with short sales, foreclosures, and real estate owned (REO) being the most common. And while they differ from traditional sales in some ways, there is a special loan offered that makes acquiring distressed properties a bit easier.

FHA 203k Loan (also known as a rehab loan)

This is a special loan available through the Federal Housing Administration, which allows individuals who will eventually live in the home they have purchased to roll the cost of renovation into the mortgage. This eliminates the need for a second home improvement loan.

The main reason to finance a distressed property with a renovation loan is that these homes generally have extensive damage that must be repaired before they are habitable. If a home has been sitting empty for some time, it may be stripped of plumbing and cabinetry. Sometimes angry former homeowners will have deliberately vandalized the property. This isn’t always the case; however, more often than not you will need to be prepared to put some money back into a distressed property to turn it into your dream home.

Advantages of an FHA 203k loan include:

  • Owners may finance the total cost of the repairs in addition to a contingency for unanticipated expenses.
  • The loan may be used to make up to six months of mortgage payments while the rehab is underway.
  • Renovations may be structural or cosmetic as long as they are at least $5,000.
  • The renovation may be a complete teardown, provided that the new home is built on the existing foundation.

If you’re ready to check out distressed properties the first thing you want to do is get a pro on your side. Metrowest specializes in these types of sales. Give us a shout today – we’d love to help you start the process.

Ken Blevins

About Ken Blevins

Ken Blevins, CEO of Metrowest Real Estate Services, is a veteran in mortgage and default servicing with more than 24 years of experience in collections, foreclosure/bankruptcy, loss mitigation and real estate disposition (REO). Blevins was an original co-founder of Metrowest in 2003, a Real Estate Brokerage and Services Company focused on the resale, recovery and liquidation of distressed real estate in Denver, Colorado and surrounding metros. Blevins assumed the role of CEO in January 2014 and provides strategic direction and has management accountability for the day-to-day operations. Under his direction, Blevins drives all default management operations to maximize asset value recovery and reduce loss severity through a strategy focused on customer service and state of the art technology. Blevins has 18 years of direct operational experience in all facets of REO Asset Management having managed large national REO Disposition contracts for Fannie Mae, Freddie Mac, Wells Fargo, JP Morgan Chase, CitiFinancial, GMAC Mortgage and other various financial institutions. Blevins specialties include REO asset management, real estate investment, bulk REO acquisitions and distressed asset recovery and liquidation, and he has directed the resolution and liquidation of over ten billion in institutionally-owned residential real estate.

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