Urban Natural Homes November 6, 2015

Rehab Loans for Both Buyers & Sellers


We all know that with historically low inventory the housing market out there is tight. Houses in popular areas that are in good condition are competitive and moving quickly. But what about the homes that aren’t in great condition and will require significant repairs and/or upgrades? Often these types of homes will sit on the market longer as potential buyers are deterred by the idea of sinking a lot of cash into them. Well, one way to jump into the market and potentially snag a home with “good bones” is to consider rehabbing a home that is in less than perfect condition through the utilization of a loan that allows you to roll your rehab expenses into the mortgage. There are several options, which range from smaller loan amounts for system and energy-efficient upgrades to larger amounts for major upgrades and structural repairs. Sellers who are short on cash for the repairs needed in order to get a house ready for the market may also consider refinancing with one of these rehab loans. Following is a brief overview of a few loan products that can be used for financing both home purchases and upgrades. If you would like more information, contact me and I can put you in touch with some lenders who specialize in rehab loans.

FHA 203K Standard and Streamline Loans:
The Federal Housing Administration offers two types of loans allowing buyers to finance both the home purchase and upgrades all in one package. Because they are FHA loans, both types will undoubtedly be easier to qualify for than a conventional rehab loan. The FHA 203K Standard loan can be used to finance substantial repairs and renovations greater than $35K, however, this kind of loan requires a consultant to oversee the project. The Streamline (or soon to be called Limited) 203K loan is for projects under $35K and does not require a consultant to oversee the project.

Homestyle (Fannie Mae):
The Homestyle rehab loan is a conventional loan and will undoubtedly have stricter lending guidelines. This type of loan, however, offers more flexibility in terms of what can be financed. You can, for example, finance investment properties, second homes and even luxury items such as pools and tennis courts.