Loans for Fixer-uppers

BARGAIN hunters ought not to overlook properties in need of extensive repairs. A federally backed lending program enables buyers to roll the cost of necessary fixes into their mortgage, which can sometimes yield a quick return on their investment.

The Federal Housing Administration’s 203(k) program (or, rehab loans) provides for loans that cover purchase and renovation costs for single-family homes and multi-family with up to four units. The total loan amount is based on the property’s appraised value once the repairs are completed. The down-payment requirement is just 3.5 percent.

Using this program, someone who buys a run-down home at a low price, and chooses the renovations wisely, can immediately come out on top, according to 203(k) loan specialists.

“When people are buying the houses correctly, they’re actually generating instant equity,” said Jeff Onofrio, the director of renovation lending at AnnieMac Home Mortgage in Mount Laurel, N.J. “It’s a matter of getting the right house at the right deal.”

Matt Perillie, a loan specialist at Campbell Mortgage in North Haven, Conn., had a similar reaction. “The properties that are going to give the instant equity are the bank-owned houses with no heat or a failing roof, and those shortcomings are accounted for in the sales price,” he said.

Click on the link to read how this program works: Real Estate, New York Times, January 17, 2013

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