Buying Foreclosure Home Colorado With FHA 203k Rehab Mortgage

Gustan Cho Associates
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This BLOG On Buying Foreclosure Home Colorado With FHA 203k Rehab Mortgage Was PUBLISHED On June 24th, 2020

The state of Colorado has seen explosive housing growth since 2013.

  • All areas of Colorado, whether urban or rural, has seen double-digit housing value increase since 2013 with no signs of a real estate market correction
  • The whole state of Colorado got hit big time after the 2008 real estate and credit meltdown
  • Many did not expect a comeback
  • Some regions of Colorado seen property values tank by 50% or more after the 2008 real estate housing crash
  • Almost all regions of the state of Colorado has its real estate home values prior to the 2008 housing meltdown and/or higher

With mortgage rates being the highest in the past 10 years, there is no sign of any slowdown in housing demand in Colorado.

Demand Versus Inventory Of Homes

What is buying a home foreclosure in Colorado with a FHA 203k Rehab mortgage

There is more demand for housing than the inventory of homes especially in Denver and surrounding communities.

  • There are so many families migrating to the state of Colorado that the state is facing a major teacher shortage crisis
  • Not only are migrants retiring seniors purchasing their final homes but young families are relocating to the Great State of Colorado
  • A substantial percentage of our business at Gustan Cho Associates are mortgage borrowers from Colorado

In this article, we will discuss and cover Buying Foreclosure Home Colorado With FHA 203k Rehab Mortgage.

Is Buying Foreclosure Home In Colorado A Bargain For Home Buyers?

Many home buyers believe that buying foreclosure home that they can get a major bargain.

  • This may be so in some cases, however, buying foreclosure home is not always a deal
  • A foreclosure home is when the lender goes through the process in foreclosing a home when the borrower defaults on their mortgage

Here is a case scenario:

  • homeowner turns in the keys to the lender
  • do a deed in lieu of foreclosure
  • they voluntarily give up the deed to their home to their lender
  • the lender will not foreclose on their home if the homeowners do a deed in lieu of foreclosure or short sale
  • or lender can go through the foreclosure process

They can evict the homeowner due to defaulting on their mortgage note.

Lenders Pricing Out Foreclosed Homes

How do lenders value excluded homes?

Once the foreclosure process is complete, the lender goes through their due diligence and seek consultants to price the home to list on the market:

  • Many times foreclosure homes are in bad shape
  • There are times where foreclosure homes cannot be financed because they are not habitable
  • Regardless, lenders will try to get the most money they can from foreclosed homes
  • Often times buying a foreclosure home is like buying a regular home at market price
  • There are pros and cons of buying foreclosure home
  • Again, there are times where buyers can get a deal in buying foreclosure home if the home is trashed and needs a lot of work
  • The cons in buying foreclosure home and/or a short sale are that it may take longer to close than a regular home
  • This because buyers are dealing with a lender and not homeowners directly

The lender is the owner and seller of the foreclosure home.

Buying Foreclosure Home That Needs Work

Many foreclosure homes may need a lot of work and standard financing may not work.

  • Buying a foreclosure home that is stripped such as needing a new kitchen, bathroom, HVAC, millwork, or a home that squatters were living in can be done with an FHA 203k Loan
  • FHA 203k Loans are acquisition and construction loans all in one loan
  • The lender will be funding to purchase of the property and the funds to rehab the home
  • There is one appraisal that is required, as is an appraisal and as complete appraisal

The home buyer needs a 3.5% down payment on the after improved value of the property.

Types Of FHA 203k Renovation Loans

Which means buying a foreclosure home with a loan of 203,000

The two types of FHA 203k Loans available:

  • FHA 203k Streamline Loan
  • Full FHA 203k Loans

203k Streamline Rehab Loan limits the construction budget to $35,000:

  • Cannot do room additions or structural changes to the existing home with the 203k Streamline Rehab Loans
  • The full 203k Loan, there are no construction limit and structural changes can be done
  • Total gut/rehab and room additions are permitted

Buying Foreclosure Home With 203k Loan

One of the greatest benefits of buying foreclosure home with an FHA 203k Rehab Home Loan is those home buyers can buy a fixer-upper with an acquisition and construction loan with only 3.5% of the after improved value of the property. Homeowners can customize their own way. With an FHA 203k Rehab Home Loan, homeowners can do a complete gut rehab or even a teardown. They can build new with the choice of their own furnishings and appliances. Homebuyers who are interested in buying a foreclosure home with an FHA 203k Loan and need an FHA 203k Lender, contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us at gcho@gustancho.com. The team at Gustan Cho Associates is available 7 days a week, weekends, and holidays included to serve your needs and answer all of your questions.

3 Comments
  1. Gustan Cho, NMLS 873293 says

    Colorado home prices is really appreciating with no signs of a market correction. My folks just sold their home in Tampa and retired to Colorado. Their 2,400 square foot single family home with 4 bedrooms, bonus room, four bathroom with inground pool and manicured landscaped yard sold for $350,000. Beautiful home. They then rolled that cash on a Colorado one bedroom condominium which is more like a small apartment in Lakewood Colorado for $400,000. Could not believe the home value in Colorado.

  2. alex carlucci says

    Buying a foreclosure can be a great way to get a deal. Understand that investors with big money are getting the great deals in front of buyers with mortgages. One reason is that many foreclosed homes are in bad shape and not eligible for financing. You can always do a 203k but sellers are wary of accepting these contracts over a cash offer from an investor. When a home is in bad shape FHA loans are difficult due to the appraisal having strict restrictions. No chipped paint, no buckling driveways or sidewalks, no loose railings, and all the mechanicals working just to name a few.

    1. Gustan Cho, NMLS 873293 says

      Home buyers of fixer uppers can benefit with FHA 203 renovation loans. Great loan program with 3.5% of after value down payment. One to four unit properties are eligible for 203k loans

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