Buying Fixer Upper With FHA 203k Rehab Loan Program

Gustan Cho Associates are mortgage brokers licensed in 48 states

This BLOG On Buying Fixer Upper With A 3.5% Down Payment With FHA 203k Loans Was UPDATED And PUBLISHED On January 1st, 2019

Buying Fixer Upper With a 3.5% down payment With 203k Loans and no closing costs with both the acquisition and construction budget is now possible with our FHA 203k Loan.

Is HGTV your favorite channel?

  • Do they dream of buying a fixer-upper, and creating a home-like they do on those awesome renovation programs
  • Well, the dream come true will become a reality!
  • Homebuyers can be buying Fixer Upper with just 3.5% down and no closing costs

The best part: 

  • Homebuyers won’t have to spend a penny out of pocket for the renovation
  • Did home buyers know the government offers a loan program for borrowers to buy run-down properties, and renovate them into beautiful homes
  • So, if home buyers want to get in touch with their creative side, and think they have great ideas on creating a floor plan, then there are a few things they should know
  • Buying fixer-upper is closer than you think

In this article, we will cover and discuss Buying Fixer Upper With FHA 203k Rehab Loan Program.

FHA 203k Rehab Mortgage Loans: Buying Fixer Upper With A 3.5% Down Payment

How to buy Fixer Upper with the FHA 203k rehabilitation loan program

There is a program called The FHA 203K Loan that lets you purchase or refinance their current home and renovate the property with one mortgage loan closing.

Here how buying a fixer-upper with 3.5% down payment with no closing costs works:

  • The program is called the FHA 203k Loan
  • FHA 203k Loans are for owner-occupied properties that are one to four units
  • The projected renovation costs are held in an escrow account, and are disbursed as the work on your home is being completed

Before each disbursement of funds to the general contractor takes place, an inspection is required to make sure the craftsmanship is excellent, and the homeowner’s property is up to code with all regulations.

How Does Buying Fixer Upper With A 3.5% Down Payment And No Closing Costs Work?

The way the FHA 203k Loan Program works is like this:

  • The loan amount is based on the lower of the projected market value following repairs (when you are refinancing an existing property), or the purchase price plus renovation costs
  • Basically, you are borrowing against what the value will be after the renovation is complete
  • Homebuyers do not have to worry about closing costs because they can get a sellers concession or a lender credit to cover part of all of their closing costs
  • Actual Purchase Transaction: Borrower found a home in a great neighborhood for $49,000.00
  • The property was uninhabitable
  • Complete rehab of the property – $260,000.00 per approved contractor statement
  • Total purchase price – $309,000.00
  • The borrower is only required to put down 3.5% of the agreed-upon seller’s asking price and the renovation costs
  • The property appraised for $314,000.00 after renovation
  • That can be you! 
  • If you wanted to know how these home buyers that are featured on those great HGTV programs can afford to create those beautiful homes
  • Well, now you do!!

Protection Against General Contractors

Which means protection against general contractors

Borrowers are protected from their general contractors taking advantage of them:

  • What’s even better? 
  • Homebuyers can’t be taken advantage of by a contractor due to strict rules and regulations set by HUD on payment to general contractors
  • Everyone hears the horror stories of the guy who is in a lawsuit because his contractor made a mess of his home, and has lost thousands of dollars
  • This can’t happen to homebuyers, because there are checks and balances put in place before homebuyers even get started

A licensed contractor who is also licensed by HUD (U.S. Department of Housing and Urban Development) will be assigned to you and your property as your consultant to map out the scope of work and create a contractor bid for renovation desired.

The FHA 203k Loan Contractor And HUD Consultant

Home Buyers will select a contractor that you feel comfortable with, and they will submit a contractor bid independent of consultants bid:

  • If there is a discrepancy, then adjustments will be required to ensure that you are receiving a fair bid for the scope of work required
  • Once the bid is approved by the Lender and consultant, the loan will move towards closing
  • Now the homeowner can feel confident that they have professionals behind making sure that no one is taking advantage of them
  • Once the loan has closed, and the renovation costs have been put into an escrow account, work can be started
  • Just because the loan has closed, the lender and the consultant are still involved in the renovation process
  • Assigned consultant will determine how many disbursements will be set up so that he/she will have proper inspection visits based on the size of the renovation
  • Some may require two visits, and some may require ten visits
  • The main thing to keep in mind is that the consultant is inspecting the work that is completed
  • If there are concerns about the craftsmanship, the consultant will address it on the homeowners’ behalf

All that anxiety over dealing with a contractor just disappeared!

Lenders Who Are Experts On FHA 203k Loans

More about the author of the purchase of a fuser upper with an advance payment of 3.5%

Gustan Cho Associates are experts in FHA 203k Mortgage Loans. Gustan Cho NMLS 873293 is a mortgage industry veteran with over 20 plus years in the business and he and his team of experienced loan officers have originated and funded countless FHA 203k Loans.

  • As I said before, the homeowners’ dream of having the fixer-upper is closer than they think!
  • Keep in mind that not all mortgage lenders and Mortgage Loan Officers are the same
  • The Big Box Banks with the household name does not make them experts in this type of lending
  • Working with an expert in 203k lending is just as important as having a contractor consultant in their corner
  • There are many different loan programs available to homeowners and buyers, and very few companies and Loan Officers are experienced in this type of lending
  • We have the expertise and knowledge to make this a great experience in renovating a current home or buying a project
  • Either way, if homeowners always wanted to try their hand at renovating a property, contact us for more information
  • Information is power, and we are creating powerful borrowers
  • A small makeover or a complete renovation can feel like a daunting task, and the fear of the unknown may stop you from pursuing a project home
  • But I hope with the information we have given you, you may feel different now
  • It’s much safer than homebuyers think, and you will have a team of professionals by home buyers side to make sure you will realize your dream
  • So, do home buyers have what it takes to take on a fixer-upper?

About The Author Of Buying A Fixer Upper With A 3.5% Down Payment

Gustan Cho is the National Managing Director at Gustan Cho Associates Mortgage Group. Gustan and his expert team of licensed mortgage loan originators and support staff are experts in originating and funding FHA 203k Loans.

  • Gustan Cho Associates has a national reputation for not having lender overlays and being able to close mortgage loans in 21 days.
  • Borrowers with any questions on qualifying for an FHA 203K Rehab Loan or any other mortgage loan program with no lender overlays, please contact us at Gustan Cho Associates at [email protected]
  • Borrowers can also  call and/or text Gustan Cho NMLS 873293 at 1-262-716-8151

Our Consumer Direct Division at Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays.