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Suppose you want to be a player in the buyer's market you hear so much about and take advantage of a great deal on a foreclosed property or a "fixer -upper."  The properties you see need so much work that you don't see how you could manage the repairs.   The 203K loan was set in place for situations like this.

The 203K loan allows a buyer to wrap repair costs over $5,000 into the mortgage.  The deal is that you work with a consultant and a contractor in addition to your Realtor® to assess what needs to be done with the home and develop a plan to complete repairs within six months.

Technically, the program does not have a ceiling but the amount of the total loan must fall within the amount the buyer was pre-approved for.  Dollar amounts up to $35,000 are processed under a streamlined plan.  The program will not finance repairs that will put the home out of line with other homes in the neighborhood.  To assure this, the property is appraised as is and in view of its value after repairs.  203K funds can be used in conjunction with community development block grants or other financing.

Many repairs and updates are covered by a 203k loan.  The program does not support luxury updates but will cover a wide range of repairs and renovations.  These include:

• Remodeling bathrooms or a kitchen, including new built-in appliances
• Replacing a roof, gutters, and downspouts
• Adding a family room, bedrooms, or bathrooms
• Replacing flooring, tiling, or carpeting
• Completing a basement or attic conversion or adding a second story
• Expanding or building a garage or carport
• Renovating a deteriorating property, such as repairing a chimney, termite damage, or structural problems
• Upgrading plumbing, heating, air conditioning, or electrical wiring
• Eliminating health and safety hazards, such as removing lead-based paint
• Making the home accessible to the disabled
• Installing a well or a septic system
• Adding a porch, deck, or patio
• Adding or repairing siding or repainting
• Installing energy efficient windows or doors
• Repairing an existing swimming pool

With this loan, the buyer will end up with an FHA loan that is structured so the contractor receives incremental payments as work is completed in the first six months.  Because there are many regulations covering the program, a special 203k consultant is assigned to each project to assure compliance.

A successful 203k project requires an owner with vision - and a lender, contractor, and Realtor® with experience in processing the loan.  The results can be amazing for both the new homeowner and the neighborhood.  The 203k loan offers a potential buyer who can see past the current state of a home an opportunity to acquire a great home at a great price.

Rachel Valentino can help you get a 203k loan in motion on properties in DC.  Check out her ACC website today for a great selection of properties in Washington, as well as Virginia and Maryland.