Question: True or False: The FHA 203k Renovation Loan in Texas is Just for HUD Foreclosures?
False! It’s time to dispel this mystery…the FHA 203k Renovation loan in Texas along with its conventional counterpart, the Fannie Mae HomeStyle Renovation loan, can be used for any type of property. Furthermore either can be used for a purchase or a refinance. I think far too often these loans are associated with HUD or bank foreclosures since those homes tend to be the most distressed but that’s not always the case. This is especially true in today’s market due to the speed at which the inventory is going under contract.
I’m finding more and more clients are willing to take a previously owned home and renovate it to their liking since finding a brand new home is virtually impossible. As a result it’s important to highlight the fact that any home is eligible for a renovation loan. In today’s market more than ever the world of renovation lending is hot. Maybe it’s because the move in ready homes are flying off the market or could be the HGTV craze or maybe the renovation loans are just getting more press.
Just to give you an idea of the how these renovations loan are being used all across Texas, let me tell you about some of our most recent projects:
The first is very interesting because it’s a refinance. The homeowner tried to fund the project out of pocket and between that and the contractor walking off the job they realized they needed some help. The sad truth is that this project is about 70% completed but luckily with the help of the FHA 203k loan we were able to come in and lend enough to complete the project. Result is a happy homeowner with a newly renovated home and a lower payment!
Their new loan amount is now $268,700. This includes the refinance of their first and second mortgage as well as $70,000 in renovation costs.
Another client found a great home in the historic district of McKinney, TX. Using the Fannie Mae HomeStyle renovation loan they were able to purchase and renovate the property. They also were able to put down 20% which allowed them to avoid mortgage insurance. Trust me when I say, this home needed some help. It has wonderful potential but was being sold by an elderly couple who couldn’t keep it updated. The home was practically inhabitable but in about three months it will be a beautifully restored historic home.
This home was purchased for $205,000 and they added $42,000 in renovation costs. The after improved value is $290,000.
In Dallas, TX we just closed an FHA 203k full renovation loan for a customer who wanted to completely gut and modernize their new home. Interestingly enough on this project it began as a Fannie Mae HomeStyle but we converted to FHA 203k. The reason was that the neighborhood was very stagnant when it came to recent sales so the appraisal came in a bit low on value. Using the FHA 203k renovation loan we were able to finance up to 110% of the after improved value which allowed the loan to close with the current bid.
Home was purchased for $170,000 and the renovation costs were $92,000. The appraised value is $242,500.
Over in San Antonio, TX we have a customer purchasing a rural property which contains a guest house in the back. They are going to use the Fannie Mae HomeStyle renovation loan to completely remodel both homes. They are putting 5% down so they are paying a small amount of mortgage insurance but it’s definitely less than FHA. Also since this is a HomeStyle renovation loan some luxury items are allowed such as landscaping, high end appliances and pool repair.
The purchase price of the home is $249,000 and the renovation costs are $73,000. The value came in at $330,000.
What about multi-family dwellings? Not a problem! The full version of the FHA 203k renovation loan allows this type of property to be purchased and renovated. In fact we have on in Austin, TX under construction now. The buyer purchased a property that is currently occupied by two tenants. He will be living in one unit and leasing the other three. Before he moves in he is renovating all of the units and expanding the square footage of his own. All of this is possible under the FHA 203k rehab loan.
The question I get asked most often: Do renovation loans really ever close? The answer is yes they do and we do it all month long. I would not dare say that these loans are always a walk in the park but it today’s lending world loans are tougher in general. Specific to renovation it’s all about knowing the moving parts and keeping all parties moving towards the goal and on a timeline.
Repairs don’t scare me and they shouldn’t scare you either! Call me today and let me give you the straight scoop on how renovation loans works!