Real Estate Blog

Are you in the market to buy a home for sale in St. Johns County?  Are you willing to put a little “sweat equity” into a home for a lower purchase price?  If yes, then an FHA insured HUD 203(k) loan may be just the thing for you.  If you qualify you could be approved for a loan equal to the selling costs, and the estimated costs of repair and remodeling. 

There are many reasons why a home may be in disrepair.  The age of the home, or it may have been unoccupied for a length of time causing the property to wither.  Or, perhaps an owner simply ignored maintenance issues and would now rather sell than fix the property.  In any case, a fixer-upper home can be a good start for an individual or family willing to invest the time and effort in a St. Johns County real estate remodel.

• As with most home purchases, you first need to target a suitable home for sale and make an offer in the form of a sales contract.  The sales contract should state a contingency that you are seeking approval for an FHA-approved 203(k) loan for acquisition of renovation funds.  With a fixer-upper property, you will need to do a thorough inspection of the home and have a contractor make a list of repairs needed.  Be sure to choose a contractor who is licensed and bonded.  Checking references of past work is also a good idea.

• Once you find a suitable fixer property and execute an agreeable sales contract, you will need to select a 203(k) approved lender.  Complete an application for the purchase price of the home, along with a detailed estimate of total costs for repairs and improvements.  The detailed proposal should reveal the entire scope of the project, including an estimated timeline for repairs as well as the costs.

• An appraisal must be performed by a licensed appraiser.  He or she will determine the estimated market value of the home after repairs and renovations have been completed.  If the estimated appraisal value is within suitable FHA guidelines and the borrower meets qualifications for approval, the FHA lender will issue a loan that will cover the purchase price of the home, allowable closing costs, and costs for repair and remodel.  The remodel costs will also include a 10-20% contingency reserve to cover any “hidden” costs after remodeling begins. 

• After the closing, all extra funds are placed in an escrow account.  The hired contractor will make draw requests for funds as each step of the renovation has been completed.  To ensure that all renovations are complete and no liens will remain on the property, the lender will withhold 10% of the contractor’s estimate.  Once approval is made for all repairs and lien waivers issued, the final draw is released to the contractor.

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