How do you finance a distressed home in Kansas City that needs lots of repairs?

How do you finance a distressed home in Kansas City that needs lots of repairs?

If you are looking to buy a home in Kansas City that needs repairs, then you may have already found that finding the distressed home is the easy part. There are plenty of opportunities in the Kansas City real estate market. There is a record number of distressed homes for sale in Kansas City.

The problem is that if you are not a cash buyer, you will have some difficulty financing your distressed home purchase.

The days of easy loan programs that could solve these problems is over, and you have to know exactly what to do when you structure a real estate contract to buy a home that needs repairs. Unless you plan on paying cash for the repairs, you must think-through the structure of your offer and communicate clearly with your chosen Kansas City mortgage lender. Not all mortgage loan providers have products to fit your needs, so make sure you address this with your Kansas City real estate agent before you begin the home selection process.

There is is a good reason to ensure that you are working with a full-time professional well-trained Kansas City real estate agent, because if your agent is not up-to-date with the most recent mortgage lending programs, you will end up either spending more cash out of pocket, or losing the home to a buyer who has the better real estate agent who can structure a deal that can be financed properly.

Common Issues When You Buy A Home That Needs Repairs

There are so many short sales, foreclosures, and REO properties on the market, that having to make necessary repairs are not uncommon when you select a Kansas City distressed home. Often times, these repairs can cost a significant amount of money, so you have to know how they will be addressed in the sales contract, who will pay for them, and which ones your Kansas City mortgage lender will allow to be repaired after closing.

Likely Acceptable Items When You Buy A Home That Needs Repairs

Most lenders who allow for repair escrows maintain a list of things that they will allowed to be escrowed at closing. Every mortgage lender and loan program is different an it is important to get a list of allowable items prior to writing and offer. Typical allowable escrow items:

• Roof repair or replacement
• HVAC repair or replacement
• Replace missing appliances
• Peeling Paint
• Non-structural wood rot damage
• Installation of new flooring
• Repair or replace pool equipment or liners

Non-Allowable Repairs For Inclusion In A Repair Escrow

Here are some common repairs that need to be addressed prior to closing, as most Kansas City mortgage lenders will not allow a closing to occur without these first being fixed:

• Full remodels of kitchens or bathrooms
• Structural damage
• Repairs taking longer than 2 weeks
• Landscaping or yard equipment replacement or repair
• Furniture
• Damages exceeding $10,000 (with the likely exception of roofs and HVAC)
• Major peeling paint and exterior paint needed

If you would like to close on your Kansas City home and make the necessary repairs after closing there are a few mortgage loans that you maybe elgible for:

1) HUD's FHA 203K Rehab Mortgage Loan-  Mortgage loans for home buyers who need more than $35,000 in home repairs.

2) FHA Streamline 203K Rehab Mortgage Loan - Mortgage loans for home buyers who need less than $35,000 in home repairs.

3) Zinc Financial Rehab Loans - Private investment company who offers home buyers finanancing on distressed homes.

4) Fannie Mae Homestyle Renovation Loan - Fannie Mae mortgage loan offered to home buyers on distressed homes.

5) Homepath Renovation Mortgage - Mortgage loan offered on Fannie Mae REO properties.

Need help buying a distressed home, contact the Dowell Taggart Team.

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Blog post written by the Dowell Taggart Team of RE/MAX Premier Realty 

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