Did you even know it existed? Many people don’t. But it’s true, you can get a loan for more than the price of the home to roll in rehab costs.
Let’s say you find a house for $135,000. It is perfect for you, except it needs a new roof, carpet and water heater. It would probably cost about $20,000 to get it to how you want it, and you don’t have the cash to fix those things. Some people would give up at that point and say they can’t afford that house. BUT there is a way. A 203k rehab loan can help you.
With a 203k loan, you can roll the costs of certain repairs into the loan. The lender would pay the contractor directly, and you would pay for the repairs in your monthly mortgage payment.
One good thing about this type of loan is that often, the house will appraise for even more once the repairs are done. For example, your $135,000 house that needed $20,000 worth of work ends up costing you $155,000. However, it is entirely possible that once the repairs are done, that same house could appraise for $170,000. It just depends on the house.
A down side of this is that you are financing roofing shingles for 30 years in your mortgage. Over the course of the loan, you end up paying much more. In real life we know that it is very rare for people to stay in their house for 30 years, but it is something to be aware of.
This loan could be just the thing to get your into the home you want, even if it needs some repairs. Check out the HUD website for more info, and give me a call if you have any questions. I can help you find a great home and I can hook you up with a lender who knows how the 203k program works.