Loan helps with home makeovers -

Loan helps with home makeovers

If you are looking to buy a fixer-upper, the Federal Housing Administration's 203 K Rehabilitation Mortgage Insurance Program lets you combine the cost of repairing your home into your mortgage.  It's a good tool for families who don't have the cash-on-hand to make the repairs.

"It really helps that person who wants to buy a $150,000 house, but may only have the budget for a $100,000 house," said Shawn Miller, vice-president of branch development at Home Town Lenders.

Miller said instead of asking the bank for a second loan for roof repairs or to fix the septic system in your home, the 203 K puts all of it into one note.

"You could step in now with this program and take advantage of getting the best deal. What could be $5,000 to $15,000 in repairs could have $50,000 in equity in them," said Miller.

There are two types of loan. A streamline 203 K is for repairs or improvements that cost $30,000 or less.

The second type is for improvements that cost more than $30,000. You have to spend at least $5,000 on repairing the home, and the total cost of the mortgage and repairs has to fall within the FHA mortgage limit for your area.

Miller said if you're looking to buy low and raise the property value or refinance your home, the 203 K program could be a good option.

"Basically, this allows you to, without the cash, get a re-financed home. The appraiser goes out there and says what the home would be worth if these repairs were done. And then, basically, you get the cash, a minimum of $5,000 up to, some people say, as high as $25,000. We've done them as high as $50,000," added Miller.

The closing can take up to 60 days. You have to buy the house and be living in it. You also have to use a licensed contractor, and the work has to begin within a month of closing, and be finished within six months.

For more information about the FHA 203 K Rehab Loan Program, click here.

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