Flash: 203K Loan Program-need money for repairs? If you are looking to flip a property and don’t know how to get it financed then this 203K Loan program may be for you. The program is a Federal Housing Administration 203K loan allows a buyer to borrow-and pay back in one mortgage-funds to purchase and renovate a property. the amount borrowed is the sum of the home’s price and the estimated price of the repairs.
203K Loan Advantages
Advantages include a buyer being able to keep funds in the bank while using this FHA type loan. In that way if repairs get too costly monies in savings can stay strong while renovations are being made. If it takes a while to sell the home it could deplete any savings thereby putting enormous stress on the owner. Secondly, interest rates for Government backed loans are typically low- this gives the bottom line a shot in the arm! Lastly, the 203K Loan is designed for buyers of fixer uppers whereas traditional lenders have a problem with this and won’t grant a loan based on repairs.
Don’t be in a hurry for this loan though. It can usually take up to 45 days to get one. If you are borrowing over $35K then you must submit a repairs plan. This is added time and cost but worthwhile in the long run. Since most real estate agents do traditional transactions your offer may not be favorable looked at because some agents are not “mortgage educated” to understand the process. At Janke & Co Properties, we understand this fantastic loan program and will work to get offers accepted!
In the end you can decide whether the deal you made allows you to collect rent for a few years and create some positive cash flow or flip it for a nice profit. Not every deal is a home run…Remember if you pay cash you deplete your open to buy and still will incur holding costs such as taxes and utility costs. The value of the 203K Loan program is that it gives you more flexibility to do more deals knowing you have savings to back you up if the profits don’t come rolling in. At least you will get to first base!