HUD’s little known 203(k) Mortgage Program expands options for homeownership

DATELINE: NORWELL and PLYMOUTH, MA…
A fixer-upper or handyman special may be all you can afford but how can you get a mortgage on a house that needs work? It’s a catch-22 situation that vexes potential homebuyers eager to become a homeowner in today’s buyer’s market.

“Many potential homeowners aren’t even aware of the existence of HUD 203 (k) loans that are specifically designed to meet the challenge of financing the purchase of a home that needs rehabilitation,” explains Brian Comer, President of Norwell and Plymouth based Advanced Mortgage Services. “The 203 (k) program eliminates the need to take out multiple loans to fix up a property. Rather than taking out a short term loan to buy the property, and another short term loan to cover the costs of repairs and improvements, and a third loan to obtain permanent financing to cover the first 2 loans, the 203 (k) program allows the borrower to take out one loan to cover both the purchase and rehabilitation costs.”

According to HUD (The US Department of Housing and Urban Development) guidelines, the 203(k) loan process includes the following steps:
* A potential homebuyer locates a fixer-upper and signs a contract contingent on 203 (k) loan approval
* Working with an FHA-approved 203(k) lender, the homebuyer arranges for a detailed proposal showing the scope and cost of the work that needs to be done
* An appraisal is done to determine the value of the property after renovation
* If the homebuyer meets the lender’s credit criteria, the loan will be issued for an amount covering the cost of the property, remodeling costs, closing costs and a contingency reserve.
* At the closing the seller is paid and the remaining funds are escrowed to pay for repairs and improvements.
* Work begins after the loan closes
* Escrowed funds are released during the construction period to pay for repairs as they are completed
* 10% of each payment for repairs is held back until the lender determines their will be no liens on the property after rehabilitation is complete

Advanced Mortgage Services is an approved HUD 203 (k) lender. For further information about this government insured mortgage program please call 781-659-6555, 508-747-9520, or 888-665-6345, or visit www.ams-loan.com.