Without the HUD FHA 203K mortgage loan, many home buyers wouldn’t have the opportunity to buy a Kansas City home at a deep discount.
It’s the perfect mortgage home loan for anyone who wants to buy a distressed Kansas City home (such as a foreclosure) and doesn’t have a lot of upfront cash. With an over-abundance of foreclosure homes hitting the Kansas City real estate market, there is a huge opportunity to buy a home at a deep discount.
OK, you crossed the first hurdle and found a deeply discounted home in a great area! The next challenge for Kansas City home buyers has been how to get the home repaired. If you didn’t have much money to buy the home, where is the repair money coming from?
Her comes your baby, the HUD FHA 203k.
203(k) – How Is It Different?
Most mortgage loan financing plans provide only permanent financing. That is, the Kansas City lender will not usually close the loan and release the mortgage proceeds unless the condition and value of the property will provide adequate loan security. When rehabilitation is involved, this means that a lender typically requires the improvements to be finished before a long-term mortgage is made on the Kansas City home.
What? That means the repairs need to be made prior to closing. Banks will not do that.
The HUD FHA 203K loan program allows the Kansas City home buyer to buy the home with as little as 3% down, then allow the buyer to use approved contractors to complete the repairs after closing. Problem solved for the Kansas City home buyer who has very little cash.
Are All Kansas City Properties Eligible?
To be eligible, the property must be a one- to four-family dwelling that is not brand new. The number of units on the site must be acceptable according to the provisions of the local zoning requirements. All newly constructed units must be attached to the existing dwelling. Cooperative units are not eligible.
Kansas City homes that have been demolished, or will be razed as part of the rehabilitation work, are eligible provided some of the existing foundation system remains in place.
In addition to typical home rehabilitation projects, this program can be used to convert a one-family dwelling to a two-, three-, or four-family dwelling. An existing multi-unit dwelling could be decreased to a one- to four-family unit. Again as long as it is acceptable to local zoning requirements.
A 203(k) mortgage may be originated on a “mixed use” residential property provided: (1) The property has no greater than 25 percent (for a one story building); 33 percent (for a three story building); and 49 percent (for a two story building) of its floor area used for commercial (storefront) purposes; (2) the commercial use will not affect the health and safety of the occupants of the residential property; and (3) the rehabilitation funds will only be used for the residential functions of the dwelling and areas used to access the residential part of the property.
Most single family homes under $250,000 in Kansas City are eligible for HUD’s FHA 203K mortgage loan.
Not all lenders offer this loan, and not all REALTORS understand the structure of this loan....for a reason.
Should we talk?
RE/MAX sells more homes than any other real estate company.
For a reason...should we talk?
Let us know what you think or add to our blog by writing a comment. Do you have a real estate question for the Real Estate Wizards? Email us at RealEstateWizard@DowellTaggart.com
Blog post written by the Dowell Taggart Team of RE/MAX Best Associates
Go to our Kansas City Real Estate Website!
1 Comments
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