While you are showing a home that needs a bit of tender loving care, the best approach is to provide your clients with information on the FHA 203K renovations loans. The loans are great for those looking for a bargain that have their heart set on a fixer upper or even on a foreclosure that needs repairs prior to moving in or even for a homebuyer that wants to add on another room.
Renovation loans will provide homeowners with the money they need to buy a home as well as all the renovation necessary. This means there will only be one loan application, one group of fees including closing costs, and only one mortgage payment each month. While in closing, the money for the home will be used to pay for the home, while the rest of the money intended for renovation will be placed in a trustee account and provided as all repairs are finished. For this type of loan all kinds of improvements can be done that will add more value to the home including new carpet, landscaping, room addition, roof, plumbing, or an updated kitchen. Along with this all energy efficiency improvements can also be used for a renovation loan as well as qualifying for tax credits found in the new stimulus package.
One more advantage of a renovation loan is that the loan amount is based on the value of the property after all the renovations are finished. Other great reasons to look at this type of loan include the down payment, which can be only 3.5%. In many cases, the loan may even offer a lower interest rate than you could receive from a second mortgage and all improvement costs can be spread out over the life of the loan. If you cannot live in the home until renovations are complete, the loan can even provide financing up to six months until the home is livable.
Just understanding what your clients can receive with renovation loans will certainly help your clients when they fall in love with a fixer upper.