The 203k “rehab” loan is the most popular loan for fixer uppers.  It allows you to buy a home that needs minor to major fixup and also loans you money for the work you want done. 

The most common financial advice highlights the importance of spending less than you earn, but when you face real-world problems, that’s not as easy as it sounds. Make sure that you are in close contact with reputable Residential Foundation Repair Services that can come a and take a look at your property. They will be able to determine if any work needs to be done to the foundation, which as you can easily imagine has to be first step when it comes to deciding what kind of rebuilding or remodeling this property will have done. For more examples of situations that are similar to this we bring you some quick tips you can apply to your life to manage your finances better and stay out of debt. Set Up a Budget The first thing you need to do is to investigate your finances. Gather all information about your income, to better understand where your money is going and what you can change. Here’s how it works:

1. Meet with a Mortgage Pro who is experienced in doing 203k home loans and get preapproved.  You will need to get preapproved for not only the purchase price but also the fixup costs you expect as well (for example $150,000 for the home and $25,000 for fixup= $175,000)

2. Start house hunting with your Buyers Agent. Your Agent of home refinancing needs to be comfortable and knowledgeable about fixer upper homes.  If this is not a specialty of theirs, you’ll want to find someone else as they will be a huge part of the process.

3. Write an offer and negotiate the purchase price on a home. You can still ask the seller to do some repairs even though you’ll be having more done with your 203k funds.

4. Decide what you want to have fixed up with the amount of fixup money you are approved for your LAND LOANS options available.  Lets say its $25,000.  You’ll need to prioritize what you want to repair or remodel because you can almost always spend more and more money on fixup.

5.  Get bids from contractors on your priority list of fixup items. If work is minor like painting, you can probably do that yourself and not have to use a contractor- but ask your lender to be sure!  Give your list of bids to your lender for their approval.

6.  Have appraisal completed that gives an “as is” and an “as completed” value. Your Mortgage Professional will order the appraisal and give the appraiser your list of repairs that you would like to have done.

7.  Close on the home and start the repairs within 30 days. You’ll have 6 months total to get all the work done and your lender will pay for repairs at regular intervals as they are completed.

8.  Sit back and enjoy your fixed up home!

Alright, you and I both know nothing goes quite that smoothly so let me give you some tips, cautions, and details:

• Not all lenders are experienced with this loan so you absolutely must have someone with a track record of doing several cash loans for other buyers.
• There are two versions of the 203k- Streamlined for under $35k in fixup and Regular for over $35k.
• The Streamlined 203k is only for non-structural repairs so no tearing out walls or fixing foundation problems.
• You can use an FHA loan with only 3.5% down payment with this program!
• Some safety and energy efficiency upgrades may be required as your first repairs.

For full details on 203k loans, go to the HUD site at http://www.hud.gov/offices/hsg/sfh/203k/203kabou.cfm

We’ve got a Fearless Homebuyer Lesson for you if you want to know other ways to Find Cash for Fixup.