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What is a 203K Loan ?

What is a 203K Loan ?. An FHA Rehabilitation Mortgage (Average 203K rehab is $7,500) First Lien Position Owner Occupied Assumable. The Advantages. Renovation cost in tax deductible mortgage rather than high cost credit cards or retail installment loans.

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What is a 203K Loan ?

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  1. What is a 203K Loan? • An FHA Rehabilitation Mortgage (Average 203K rehab is $7,500) • First Lien Position • Owner Occupied • Assumable

  2. The Advantages • Renovation cost in tax deductible mortgage rather than high cost credit cards or retail installment loans. • Can escrow payments while repairs completed. • Escrow funds in interest bearing account. • Frees cash on hand for other investment opportunities. • Only one monthly payment

  3. 203(k) Eligible Properties • 1-4 unit properties • Condos (interior only & max 4 units) • Existing homes complete for over 1 year • New construction on part of original foundation • Row Homes

  4. 203(k) Necessary Improvements • Health and safety repairs • Corrections of code violations • Correcting structural deficiencies • Repairs necessary to meet HUD property compliance • smoke detectors

  5. 203(k) Repair Ideas • Structural alterations and additions • Remodeling Kitchens and Baths • Modernize plumbing, heating, AC and electrical systems • Install or repair well or septic system • Roofing, gutters, downspouts

  6. Other 203(k) Improvements • New free standing appliances • Interior & exterior painting • Flooring, carpeting & tile • Swimming pool repairs • Energy efficient improvements • Other improvements that are a permanent part of the real estate

  7. Ineligible 203(k) Improvements Luxury items that are not a permanent part of the real estate are not eligible as a cost of repairs.

  8. Other Important Things to Know • No cash back – left over money goes towards principal balance • 3 & 4 units must be self-sustaining • Identity of Interest transactions are not permitted on 203k programs

  9. Selling the 203(k)

  10. Turn an old listing into a $old listing • Market house with a renovation & payment plan • Advertise renovation in newspaper ads or Community Home booklets.

  11. Create a Vision for a buying decision!! Watch for reactions to specific parts of the home. Use phrases like… “if you want to change the color of the carpet in the living room, you can just include that in your mortgage.” or the kitchen cabinets, bathroom fixtures, appliances, put on a deck, etc…

  12. Improve your listing power!! Get the listing by assuring the seller a quicker sale advertising their home as the “Create your own dream home!!!!”

  13. Turn Renters into Homeowners • Pre-counsel borrowers to look for less expensive fixer – upper (doesn’t have the curb appeal) • A two unit can help pay the mortgage • Get great referrals and life long customers

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