FHA 203k for First Time Home Buyers!
Are you a First Time Home Buyer? Have you been looking at the houses on the market in St. Charles, St. Louis or else where in Missouri and feeling a bit let down?
Nearly every day there are first time home buyers purchasing a home and settling for less than what they wanted. Why is that? Sure, the market of available homes is made up of mostly foreclosures, distressed properties, aged and outdated houses, that perfect home is difficult to find if not impossible. That is only part of the problem, too many first time home buyers settle for a not so perfect home not only because of what houses are available but also because of their mortgage lender and the loan program they put them in to.
Here is the scenario that many first time home buyers are finding, they are first pre-approved by thier mortgage loan officer for what in most cases is the standard 30 year fixed rate FHA mortgage. This is a great mortgage program, it provides easier qualifying guidelines and has one of the lowest required down payments, other than VA or Rural Development mortgages.
Then the first time home buyer goes looking at and for the houses in St. Louis, St. Charles or anywhere in Missouri, what they find is not what they had hoped for. Sure, the houses are in the neighborhoods, school districts, and areas desired, the houses are the types of homes the first time home buyer want. The yards are spacious, it's a ranch, it's a two story, it has a basement, a garage, it's what they were looking for except for one thing, it needs a lot of work to make it livable or for that matter what you would want to wake up to every day. By the way, this usual FHA mortgage loan has a standard of inhabitability that many of these homes will not meet. So the first time home buyer goes on looking and eventually they end up settling or they continue renting.
There is an FHA mortgage program available to all first time home buyers that will allow you to purchase that near perfect house and turn into your dream home. What if I told you this loan program allows you to transform any house into the home to be proud of, but within a very short time, months, you can have a home that has doubled, tripled or more in equity.
THE FHA 203k EQUITY PLAN for First Time Home Buyers
The FHA 203k mortgage is specifically designed to provide any home buyer, with the means to fund the repair, rehabilitation and renovation of their near perfect house into the home of their desires. The FHA 203k mortgage will roll into one loan the sales price of your near perfect house and the cost of making it your dream home, I will not get into this loan in-depth in this article. If you would like to learn more about the FHA 203k mortgage please visit my website FHA 203k Information where you will find all you need to know or you can read several articles by other lenders at this blog site.
Note: the FHA 203k mortgage is not the same as the standard FHA 203b mortgage, not all lenders can provide the FHA 203k mortgage which is one of the reasons they do not offer this program to home buyers.
I successfully work with a home buying team every month that helps several first time home buyers every month find and secure the home of their dreams using the FHA 203k mortgage and the FHA 203k Equity Plan. So much so that I encourage all my home buyers not to buy a new home until they find THE house that can quickly turn their 3.5% down payment into at least a 10% equity stake. In most instances my first time home buyers will have established that 10% to 20% equity stake within three to six months after closing on their new home, even in today's declining, stagnate, or barely growing house market.
HOW DOES THE FHA 203k EQUITY PLAN WORK
Start with the development of your home buying team, your team will consist of a real estate agent, a mortgage loan officer who can do FHA 203k mortgages, and a home remodeling contractor. Don't be concerned if you do not immediately have a contractor available to you, more than likely your real estate agent or loan officer will help you.
Are you willing to do your 'home' work? I hope so, because the FHA 203k Equity Plan can and will place thousands upon thousands of dollars worth of equity into your home. First, your real estate agent should be well versed and experienced in putting together a reliable and accurate Comparable Market Analysis, CMA. Your real estate agent should have a very solid knowledge of the housing market in the area you want to live, and last your agent should have a true desire to see you get the absolute best home on the market.
Second, your loan officer should have the the FHA 203k mortgage available to them, make sure they have done several FHA 203k loans because these home loans are a lot more involved than the normal FHA mortgage, in the hands of an inexperienced lender a 203k can turn into a home buyer's nightmare. In the right hands the FHA 203k mortgage is fairly easy and will not take more than another couple of weeks to close than a normal FHA 203b, I usually ask for 45 to 60 days to close.
The contractor should have experience in home remodeling, renovation and repair work. They should be aware that the FHA 203k mortgage will pay them through an escrow account that will not provide funds to them until work is proven to be complete. The contractor should have a very sharp pencil, meaning that they know how to create thorough and accurate estimates. Last, the contractor may have to visit several houses with you, providing estimates of work, make sure they are willing to do this for you.
The very first thing is to have your mortgage loan officer team member insure you have a complete working knowledge of the FHA 203k mortgage and that they PRE-APPROVE you for a FHA 203k mortgage. This will establish the limits of the total loan amount, it also provides you with a virtual wheelbarrow full of money, when you make an offer on your new home the seller will know you are a home buyer to be taken seriously.
Now that you are pre-approved, have your real estate agent team member provide you with a list of candidate houses, these will be homes that match what you are looking for in a home, have all the appearances of a bargain home, priced well below the market, and may need some TLC to get the house to be your home.
Drive by and visit the houses with your real estate agent, take with you a note pad and a camera. At every house you visit take extensive notes on the house, note the repairs you feel need to be made, develop a wish list of what you would like have done to the house to make it your home. Are the appliances outdated, you can have them replaced with a FHA 203k home loan. Is the flooring hideous, worn, spotted, shag carpeting, the FHA 203k mortgage can cover that too. Would you like a bigger garage or a garage period! Whatever you can dream of more than likely can be done with a FHA 203k home loan. If the house is empty or you have permission take pictures of the house to help you remember that house later.
Keep in mind that your have a real estate professional as one of your team members, ask for and listen to their suggestions and allow them to point out the good and the bad. Your real estate agent is a fountain of knowledge and wants to see you get that great bargain home with a ton of equity potential.
Next, whittle the number of houses to your favorites and most potential homes. Go back and revisit the houses on this new list with your contractor team mate in tow. At each home provide your contractor with your notes and your wish list for that home. Let the contractor do thier thing, finding items that need attention or repaired, and have them make suggestions as to remodeling and your wish list. Be taking notes of everything from this visit too. Before you leave that house or very soon after have your contractor provide you with an estimate of cost to make this house your home.
Add the sales price of the house and the estimated cost of repairs does it come in below the amount that your loan officer approved you for? Ask yourself this question; can I see this house as my home? If so, you are ready to move on to the next step. This next step will determine whether you make an offer on the house and for how much. Now that you have established the cost of purchasing this house and bringing it up to what you want in a home have your real estate agent perform a bulletproof CMA based on the repairs, work, and remodeling you will do for this house.
Does the Comparative Market Analysis show that this house has the potential to meet your minimum gained equity after your down payment? Yes or No, if yes then keep going. If No, don't be concerned there are a lot more potential homes out there and coming on the market
Based on the findings of your real estate agent's work this will determine whether your make an offer or not. Also, it establishes your negotiating start and and end positions, you know the value this house holds so do you start low and have a stop point or do you make a higher offer and negotiate seller concessions to help reduce the cost of purchasing a new home. This is why you have a real estate professional, they are trained and experienced in negotiations.
When using the FHA 203k Equity Plan never buy a new home that doesn't have at least 10% Equity Potential!
The FHA 203k Equity Plan has helped many first time home buyers gain near instant equity wealth as well as protect the new home buyer from a declining housing market. In this current housing market a first time home buyer with a very small down payment can quickly see their investment turn into a situation in which they are upside down, owing more than the current value of their new home. The 203k Equity Plan helps to combat this situation.
Another advantage of the FHA 203k Equity Plan is that many first time home buyers are finding that they are gaining a 20% or more equity position which allows them to refinance, a few months after the completion of work, to a new mortgage with a lower interest rate and no mortgage insurance. Just the elimination of the required FHA monthly mortgage insurance payment can lower a house payment by 10 to 20 percent. Now you have a home with equity and a lower house payment!
PUT YOUR TEAM TOGETHER TODAY AND TOMORROW START YOUR HOME WORK
IF YOU ARE A FIRST TIME HOME BUYER LOOKING TO PURCHASE IN ST. LOUIS, ST. CHARLES, REALLY ANYWHERE IN THE STATE OF MISSOURI I WOULD LIKE TO JOIN YOUR TEAM.
CONTACT BOB RUTLEDGE
LISTING AGENTS, USE THE FHA 203K EQUITY PLAN TO ATTRACT MORE HOME BUYERS.