Tips On Buying A Fixer Upper With A 3.5% Down Payment
This BLOG On Buying A Fixer Upper With A 3.5% Down Payment Was Written By John LaGrassa, Vice President of Business Development at CrossCountry Mortgage
Is HGTV your favorite channel?
- Do you dream of buying fixer upper, and creating a home like they do on those awesome renovation programs?
- Well you can! You can buy a Fixer Upper with just 3.5% down and no closing costs.
- The best part: You won’t have to spend a penny out of pocket for the renovation.
- Did you know the government offers a loan program for borrowers to buy run down properties, and renovate them into beautiful homes?
- So, if you want to get in touch with your creative side, and think you have great ideas on creating a floor plan, then there are a few things you should know.
- Your fixer upper is closer than you think.
FHA 203k Rehab Mortgage Loans: Buying A Fixer Upper With A 3.5% Down Payment
There is a program called The FHA 203K Loan that lets you purchase or refinance your current home and renovate the property with one mortgage loan closing. Here how buying 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 your contractor takes place, an inspection is required to make sure the craftsmanship is excellent, and your property is up to code with all regulations.
How Does Buying A 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.
- Home buyers 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 renovations.
- 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
Borrowers are protected from their general contractors taking advantage of them:
- What’s even better? You 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 you, because there are checks and balances put in place before you 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
- You will select a contractor that you feel comfortable with, and they will submit a contractor bid independent of your 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 your consultant, your loan will move towards closing. Now you can feel confident that you have professionals behind you making sure that no one is taking advantage of you.
- 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 your renovation process.
- Your 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 your consultant is inspecting the work that being completed.
- If there are concerns about the craftsmanship, your consultant will address it on your behalf. All that anxiety over dealing with a contractor just disappeared!
Lenders Who Are Experts On FHA 203k Loans
The Joe DeMarco Team at CrossCountry Mortgage are experts in FHA 203k Mortgage Loans. Joe DeMarco 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, your dream fixer upper is closer than you 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 your 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.
- You wouldn’t go to a soybean farmer to buy corn?
- We have the expertise and knowledge to make this a great experience in renovating your current home or buying a project.
- Either way, if you always wanted to try your hand at renovating a property, contact us for more information.
- Information is power, and we are creating powerful borrowers.
- A small make over 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 you think, and you will have a team of professionals by your side to make sure you will realize your dream.
- So, do you have what it takes to take on a fixer upper?
About The Author Of Buying A Fixer Upper With A 3.5% Down Payment
John LaGrassa is the Vice President of Business Development for The John LaGrassa Group at CrossCountry Mortgage Inc. John and his expert team of licensed mortgage loan originators and support staff are experts in originating and funding FHA 203k Loans. The John LaGrassa Group at CrossCountry Mortgage has a national reputation for not having lender overlays and being able to close mortgage loans in 21 days. If you have any questions on qualifying for a FHA 203K Rehab Loan or any other mortgage loan program with no lender overlays, please contact The John LaGrassa Group at CrossCountry Mortgage Inc. NMLS 3029 at email@example.com or call 1-800-900-8569. You can also text Gustan Cho NMLS 873293 at 1-262-716-8151 for faster response. Our Consumer Direct Division at The John LaGrassa Group is available 7 days a week, evenings, weekends, and holidays.