How to Buy a Wakefield MA Foreclosure and Finance the Repairs
Bank foreclosures that need substantial repairs are often the best values in the marketplace. Properties that are in bad condition can be difficult to finance for the average home buyer. Wakefield multi-family foreclosures typically have the greatest opportunity as the competition for these properties has fewer buyers. If you have the vision, patience and willingness to work through a rehab project, then you should consider the FHA 203 (k) program as your financing option.
The 203 (k) insurance on a FHA loan enables home buyers and homeowners to finance both the purchase (or refinancing) of a property and the expense of its rehabilitation by using a one mortgage or to finance the rehabilitation of their present home. If the property repairs exceed $35,000 then an FHA approved lender can help you in getting qualified and receiving the loan.
The FHA 203 (k) Program
When a home buyer hopes to buy a Wakefield home in need of repair or updating, the home buyer normally has to obtain financing first to purchase the home; additional funding to perform the rehabilitation construction; and a permanent mortgage once the work is completed to pay off the interim loans with a permanent mortgage (end loan). Usually the interim financing (the purchase and construction loans) necessitates fairly high rates of interest and short amortization time periods.
The Section 203(k) program was created to address this situation. The borrower can usually get one mortgage loan, with a long-term fixed (or adjustable) rate, to finance both the purchase along with the rehabilitation of the property. To grant funding for the rehabilitation, the mortgage amount will depend on the estimated value of the property with all the work completed, taking into consideration the money necessary for the work. In order to reduce the risk to the mortgage lender, the mortgage loan (the maximum allowable amount) is eligible for endorsement by HUD once the mortgage loan proceeds are disbursed and a rehabilitation escrow account is established. At this stage the mortgage lender has a fully-insured mortgage loan.
If you are considering purchasing a Wakefield foreclosure or a property in need repair, consult with your real estate agent, a HUD approved lender and visit the HUD website where you can review the options and eligibility requirements of the 203 (k) program. Contact the Wakefield MA building department for information regarding the codes and permitting process or consider utilizing the services of a general contractor who is experienced in rehabilitation projects.
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Sunday, February 13, 2011
Buying a Wakefield Foreclosure and Financing Repairs
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