Here are a couple of great resources regarding foreclosures. If you are a buyer interested in foreclosures or bank-owned properties, make sure to visit our page: Buying Foreclosure Properties in Oregon, written by REALTOR® Gary Eckdahl.

Timeline of a Foreclosure

Foreclosure Terms

Important Foreclosure Terms

ASSIGNMENT OF DEED OF TRUST: A document that transfers the lender’s (beneficiary’s) interest in a deed of trust.

BANKRUPTCY: A legal process that allows a debtor to discharge certain debts without paying the total amount due.

BENEFICIARY: The lender or person to who the obligation is owed.

BIDDING INSTRUCTIONS: An authorization form signed by the beneficiary authorizing the trustee to make the initial opening bid at a trustee’s sale and subsequent bids.

DECLARATION OF DEFAULT: A document signed by the beneficiary instructing the trustee to prepare the Notice of

Default should the borrower not bring the loan current, to sell the property, encumbered by the loan, in order to satisfy the unpaid debt. This document is not recorded.

DEED OF TRUST: A written document describing the real property being given as security for an obligation.

EXTENSION AGREEMENT: An agreement that extends the due date of a note.

FORECLOSURE: Enforcing a lender’s rights upon the default of an obligation that is secured by a deed of trust. A deed of trust must contain a power of sale clause to enable the trustee to initiate a non-juridical foreclosure.

FULL RECONVEYANCE: A document prepared by the trustee or substituted trustee, when the obligation secured by the deed of trust is paid in full. When recorded, the re-conveyance takes the deed of trust off record.

NOTICE OF DEFAULT: A written document that is recorded, published, and posted given notice of public record that a borrower has failed to perform his or her obligation under the terms of the promissory note. This document is recorded.

NOTICE OF TRUSTEE’S SALE: A document that is recorded, published, posted, and mailed and sets forth the date, time, and location of the trustee’s sale.

POSTPONEMENT: A verbal announcement made at the time and location of a trustee’s sale, extending the sale to a future date.

PUBLICATION PHASE: The period of time beginning after the third month starting on the date that the Notice of Default records. This period ends with the trustee’s sale being conducted. The trustee sees that the document is recorded, published and mailed in accordance with the requirements of the civil code.

RECISSION OF NOTICE OF DEFAULT: After the default has been brought current or by the request of the beneficiary, this document when signed by the lender and recorded by the trustee, will remove the Notice of Default from record.

REINSTATEMENT PERIOD: The time period between the time that the Notice of Default records and ends 5 business days before the trustee’s sale. The lender must allow reinstatement during this period of time. A lender may elect to allow reinstatement after the 5-day period ends, but before the trustee’s sale.

SUBSTITUTION OF TRUSTEE: A document signed by the lender and recorded by the trustee whereby the beneficiary appoints a successor trustee to the trustee of record.

TRUSTEE: The party who holds title to real property in trust for the benefit of another. The trustee’s most common functions are to process a full (when a loan is paid off) or partial (when a portion of the property is being released) re-conveyance and to process a trustee’s sale.

TRUSTOR: The borrower or owner at the time the deed of trust is created.

TRUSTEE’S DEED UPON SALE: A document signed and recorded by the trustee that transfers ownership of the real property to the purchaser at a trustee’s sale.

TRUSTEE’S SALE: A public auction sale of a property described in a Notice of Trustee’s Sale, which property was given as security for the repayment of an obligation.

Many thanks to Western Title & Escrow in McMinnville, Oregon for providing these terrific resources!

Randy McCreith, Principal Broker

How to Listen to Bad News

There is a lot of bad news about the housing industry and the economy right now, and has been for the last 3 years. Ignoring it or hiding from it is of no benefit to anyone. However, there are serious flaws with the delivery of it, the interpretation of it, and the application of it that need to be addressed. Here is what I have learned:

• ·      The Usual Suspects: Almost all of the news about the housing market is about a few, and the worst markets in the nation. Florida’s housing market, after a great run tanked many years ago because of numerous hurricanes and has remained decimated to this date. Most of the large housing markets in California are legendary for their regular wild, roller coaster swings. Ridiculous and irrational high prices are followed by gut-wrenching correctional lows, and this cycle has gone on for decades. Las Vegas was the speculation capital of the nation, and when the music stopped, there were a great many empty houses and defaulting owners who should have remained renters. Phoenix, the younger sister of Las Vegas, has imitated her sibling on a slightly smaller scale. The mind-boggling volatility in these markets makes them the fodder of much discussion and the source of most news stories. Notice also that these markets are all in the Sunbelt.

• ·      Ubiquitous Bad News: There is always a down economy somewhere and wherever it is the reporters will soon be on hand to floodlight it for the rest of us. When oil and gas are flying high, so are the housing markets in Colorado, Texas, and Oklahoma; but when not, their whole economy struggles, including the housing market. That is when we hear about them. Manufacturing areas, for example Michigan and Ohio, currently have problems with in an increasingly global economy and so their markets are down. They get a lot of attention, especially in election years. Good markets rarely make the news except as a minor statistic in someone’s list ranking all the bad news areas.

• ·      “If it bleeds, it leads”. The news media by nature is part of the sales and entertainment industries. They must sell advertising and subscriptions or they have no business viability. They also must attract and retain a great many eyes or they are out of business. They also must cut costs and consolidate functions to stay on top like any other commercial enterprise.

To do so they need the shocking headlines, and the graphic pictures, and unbelievable stories. It is not a well-hidden fact that news stories for TV are often selected because of the most graphic and sensational video. Additionally, fear has always sold best. Stories of impending threats and imminent danger are the most powerful at capturing and retaining the public. Think about 911 and how everyone spent all available time watching the news. If the public’s attention is fixed, then the value of advertising is greater and demand for services is higher. Nothing is more powerful than people all across the nation standing around water coolers talking about the latest news which we should be worried about.

• ·      The Badness about Bigness: Although ‘bigness’ in anything has some pronounced benefits, rarely are the benefits quality, or attention to detail. Think about the big box stores for home improvement. We love the fact that they have just about everything, except enough competent sales associates! Massive media conglomerations produce generic, pre-digested news, usually with a national and international focus. The wire services collect news stories, synthesize them, summarize them, and feed them, almost as sound bites, to all the local markets to keep their news machines churning.  National media companies buy out most of the local outlets and push their news downstream to be disseminated at the local level as if these stories represent the reality everywhere. Don’t believe it!

• ·      Journalism is Anemic if not diseased. Were there really days when journalists researched stories in depth with a critical eye? Were there times when journalists became acutely knowledgeable about specific industries and well-versed in local conditions? Has there truly been a time when information was delivered to us without editorial bias and sensational hooks?

If so, these are bygone days. Today, the media seems to have more of a vision for social engineering and political change than for disseminating objective, unbiased truth. If they are not in the pockets of politicians or commercial interests then they are serving some philosophical ideal which will produce human utopian. I just want the news! That is the data and facts in an accurate context. Given that, then we can pursue solutions through critical thinking as people vie to understand the reality and which solutions are most reasonable.

• ·      What Year is it anyway? To listen to the news today you would think we are in The Second Great American Depression. The truth is that we have almost nothing in common with the Great Depression of 1929 and this it is an outrageous claim that our time is similar. We can scarcely compare our situation with the late 1970s and early 1980s when mortgage interest rates were 21%, unemployment nationally was almost 13% and inflation hit a high of 13.5%. Does anyone remember the Savings and Loan crisis of the late 80s’? That has more in common with the current banking troubles than the depression (more on this silly comparison at a later time).

The reality of the housing industry is that almost all detailed comparisons locally tend to go to back to 2003, or a couple of years in the early 1990’s. Among the usual suspect areas it is worse, but by no means the depression. Our current valuations are still up almost 50% in last five years and we have just reached the levels of only two years ago even though we have been hit with a sub-prime crisis, unprecedented oil prices, a meltdown of the financial sector, and a deep recession with increasing job losses. I am not saying it cannot get worse but it has a very long way to go to match what some of our grandparents lived through.

• ·      Is Everyone in Foreclosure? In high speculation areas even in Oregon, like Bend and Happy Valley in Clackamas, there are too many foreclosures. Developers and Builders, who were trying to keep up with an expanding market, also got hit very hard and many have been forced into Chapter 11 Bankruptcy to renegotiate debt. But what about the local market? We have very few foreclosed upon homes which are bank owned (REO). This is growing not because of so much corruption or excess in our area but because sales were paralyzed, time and recession has drained us, and job loss cripples more and more people.

What you are not being told is that ‘foreclosure’ as used in the media includes everyone who is over 30 days late on their mortgage payment. Technically they are in default and on the road to the auctioning their property for missed payments and penalties. Most people correct the deficiency in the 6 month process to auction, and many others sell the home to satisfy the debt. Very few end up on the auction block. What about ALL the notices in the newspaper? They are required to print public notice 4 times before they can conclude the foreclosure process so they really represent 25% of those in trouble, some of these will never end up in auction. In February of 2009, Yamhill County still had a foreclosure rate of just over 1%; less than the normal national average. However, our rate of foreclosure had skyrocketed! From few to a few more. Statistics lie, when someone wants to use them for ‘shock and awe’.

There is hope and help. The internet, although the greatest tool for mis-information in the history of the human race, offers you the ability to go wherever you want, and drill deep into any industry you want, to find in-depth, critical analysis, of news from a variety of sources.

For housing you can relatively easily research the local markets. Do not look to the news outlets. Look to the industry professionals. Listen to people on the street who live in this industry day to day and year to year. Every industry has its gurus who study history and current conditions; that eclectically, but critically, learn from those who lead the industry.

Consider the source and then ask your local Bella Casa Realtor®, mortgage broker, title company, and local bankers for the reality. The news media moguls, they never come here except to tour wineries!

Here are some rules for helping your kids to buy a house.  There are many options, and with housing prices so depressed, this may be the perfect time to help your kids become first time homeowners.

By Linda Stern WASHINGTON — In some circles, the graduation gift du jour is a Manhattan apartment, according to a recent New York Times story. Note to my kids: Sorry, we are not in those circles.

Still, it would be nice. Given current market conditions, a compelling argument could be made for helping your kids buy their first home.

“Now is the time,” says Benjamin Tobias, a Plantation, Florida, financial adviser who helped his 29-year-old son and daughter-in-law purchase a home. “We feel that in this area, we are at or very close to the bottom of the housing market, and with low interest rates on top of that, anybody who can should be buying now,” he said.

In addition to the opportunities some see in the real estate market is the financial disparity between the generations. Baby boomers have money to invest, but are turned off by the low interest rates offered on bank savings and the risks posed by stocks and bonds. Many have children coming out of college unable to find the kinds of jobs that would allow them to save up the big down payments many lenders now require. Others are trying to erase past credit problems (or short sales of homes they previously owned) and can’t get mortgages in today’s more careful lending market.

“We get asked this question (helping kids buy a house) so often,” said Mark Rylance, a Newport Beach, California, financial adviser. But he’s seen good intentions backfire on all concerned, so he warns clients about the downside. Buy a house for a deadbeat kid — or even at the wrong time for a solid bill-paying one — and a bad turn in the housing or job market can ruin your credit score, your bank account and your relationship.

If you can afford to help (the most important consideration) and you want to, make sure you set it up in the most advantageous way. There are a variety of financial arrangements that can accomplish this: Parents can lend a down payment (or the entire mortgage) to the child; they can co-sign a bank loan, enter into a shared-equity arrangement with the younger generation or simply hand their kids a sum of money as a gift. They can also buy a house themselves and work out a rent-to-buy arrangement with their children.

Here are some considerations:

Apply due diligence to the deal
Have the house appraised and get the best advice you can about the real estate market in the area where the kids are house shopping. Parents who helped their kids buy a house at the height of the housing market are suffering along with them now.

Rylance has a client who loaned his son $100,000 for a down payment on a $500,000 house, but then life intervened. As real estate values plummeted in Orange County, his son’s family grew. Now the house is too small, but the son can’t move his family because he is seriously under water on the loan — to his father! That would make strategic default pretty messy.

Nail down the legal details
These financial arrangements can maximize tax breaks if they are structured correctly. Get a financial professional to review your arrangement, and perhaps a lawyer to commit it to paper.

Give them a down payment
Anyone can give anyone else $13,000 a year without running into gift tax problems. So a couple can give a couple as much as $52,000.

Make a private mortgage
Well-heeled parents can skip the middle-man banker and make the whole loan; an approach that often benefits the parent and the child. If it’s a long-term loan, the interest rate has to be over 3.82 percent (the Internal Revenue Service adjusts that rate regularly) to make the deal qualify as a loan and not a gift. But that still offers the parents more income than they’d get at the bank and gives the child a low rate and, as the loan is secured by the house, a mortgage interest deduction. A relatively new company, National Family Mortgage, will, for a fee, structure the mortgage and even service it for you, so the child sends her monthly payment to a third party.

This approach has advantages for wealthy parents who want to get money out of the estate. By “lending” the child money and then giving them a separate amount every year (those gift tax limits would apply), they can get money out of their estates.

The disadvantage to this approach is that the mortgage won’t help the child’s credit history. And the child should have some skin in the game, so make sure there’s a down payment that you aren’t providing.

Share equity
Bert Whitehead, a fee-only financial adviser in Franklin, Michigan, is very big on these arrangements. When a client wants to help the next generation buy a house, the client puts up the 20 percent down payment, and the kid makes the payments. After five years (or other agreed-upon period), the home is sold, and the parent and child split the profits. That worked well, years ago, when Whitehead did it with his son. But clients who did this at the peak of the housing boom now find they are sharing debts instead of equities.

Co-sign their loan
That could be all the kids need to get a good mortgage, and that’s what Tobias did for his son — who couldn’t get a mortgage because he’d been on a two-year adventure travel spree. But Tobias’ son now works with him (and the son’s wife has a good job), so he’s confident he’ll be paid back. The problem with the co-signing approach is that you’re on the hook if your child fails to keep up payments. If he’s even late, it can impact your credit score. And if you want to buy another home yourself, you may find the co-signed loan uses up your borrowing bandwidth.

Buy a home and rent it to your kids
That may be a good investment for you, but it doesn’t really do much for your kids, points out Brian Kazanchy, a Morristown, New Jersey, wealth manager. “It doesn’t give them any ownership or upside, and it may also prevent them from building responsibility,” he said.

Do the deal and then stand back
Helping your kids buy a house can be a blessing for all concerned. But being that parent who helps the kids and then spends the next 20 years picking paint colors, moving furniture and walking in at will? Not so much.

Travis Newton, Senior Mortgage Broker

Travis Newton

Branch Manager

WJ Bradley

503.931.4490 Direct

Travis.newton@wjbradley.com

At Bella Casa Real Estate Group, we strive to have the most valuable information readily available to you on our website.  Bella Casa Realtors® are experts in many areas including our Yamhill County communities such as McMinnville, Newberg, Dundee, Carlton, Yamhill, Lafayette, Amity, Dayton, Sheridan and Willamina, Gaston and Bald Peak.  But we are expanding out toward Portland  also and many of our Realtors® are specializing in Sherwood, Tualatin and Wilsonville, as well!  Our experienced and knowledgeable Realtors® have written articles with valuable information on each of these communities.

If you are considering moving to one of these areas, or are just interested in learning more about your community, we proudly invite you to check out the new pages at www.thebellacasagroup.com!  Go to the “our areas” menu and click on any city or town!

If you would like to talk Yamhill, Washington, Clackamas, Marion, Polk or Multnomah County Real Estate with any of our Realtors®, we would love to talk to you, too!  To contact any one of our brokers, visit the Meet Our Realtors® page on our website, send an email to info@thebellacasagroup.com or call us at (503) 437-9005 or (503) 538-2085.  We look forward to talking with you.

Article by Gwen Moran
HouseLogic.com

If you’re trying to raise your credit score to get a good rate for a refinance or HELOC, you might besurprised by what affects—or doesn’t affect—your score.

More money improves your credit score

False. Your level or sources of income don’t affect your credit score, although lenders may look at it when making loan decisions, according to the Fair Isaac Corp., the company that issues the commonly used FICO credit scores.

Ownership of several credit cards can hurt your credit score

Mostly false. Having many credit lines isn’t necessarily a bad thing, says credit expert Liz Weston, author of Your Credit Score. Multiple lines give you a favorable debt-to-available-credit ratio. But use them correctly: It’s best to keep any balances below 10% or 20% of the total credit line, she says. Anything more will affect the ratio of debt-to-available-credit, which can decrease your credit score.

Opening and closing credit lines can hurt your credit score

True. New credit applications can decrease your credit score, so be careful about applying for new credit cards or personal loans before applying for a HELOC, second mortgage, automobile loan, or other large line of credit.

Surprise: Closing existing credit lines may also hurt your credit score, since it’ll damage your debt-to-available-credit ratio. A good rule is not to make any credit changes in the months leading up to a major credit request, such as for a HELOC.

Consolidating credit lines will help your credit score

Mostly false. Although it may seem like a good idea to move all your balances to one card, that can actually hurt your credit score, since your debt-to-available-credit ratio will spike on that card, says Weston.

However, credit expert Harrine Freeman says such a slight decline isn’t necessarily a deal-breaker for a loan, especially if the card has a lower interest rate and will allow you to pay off the balance sooner. Your score will increase as soon as that ratio goes down.

Changing jobs can hurt your credit score

Partly true. Taking a new job or losing your job doesn’t affect your credit score. However, if you have a spotty employment history, lenders may hold that against you in making a loan. Dips in income may signal that it could be difficult to pay bills in a timely manner.

Co-signing for others can hurt your credit score

Partly true. Simply co-signing on a loan for someone else may not affect your score, but if that person is late on paying the loan, it’s likely to show up on your report, says Freeman. And that’s a nasty surprise if you didn’t know the person was late.

Judgments and liens aren’t considered in your credit score

False. If you’ve had a judgment or lien filed against you, it’s considered in your payment history, which represents 35% of your score.

Similarly, while most utility companies don’t report payment history to credit bureaus, your account will likely be reported if it is seriously delinquent and referred to a collection agency.

Additional details on how to manage your FICO score are available on the FICO site.

Gwen Moran is a freelance business and finance writer from the Jersey shore. She’s the co-author of The Complete Idiot’s Guide to Business Plans and writes frequently about real estate.

Rules for Buying a Primary Residence Without Selling Current Home!

What if you can’t sell your home, but would still like to
buy? Here’s everything you need to know.

Rule: Home on the market and purchasing new primary residence
Q: What if the current home is NOT sold before purchasing primary residence?

~Must qualify with both monthly payments
~6 months worth of monthly payments for BOTH homes as a “cushion”
~Can be reduced 2 months worth of monthly payments if current home is 70%
LTV or below

Q: What if current home is sold-but NOT closed before purchasing primary
residence?
~Must present non-contingent sales contract for sold home
~Must present a lender’s valid loan approval for the new buyer
~Does not have to qualify for both payments
~6 months worth of monthly payments for BOTH homes as a “cushion”
~Can be reduced 2 months worth of monthly payments if current home is 70%
LTV or below
~If sold to relocation company, copy of executed buyout agreement, client
does not need mortgage payment cushion or count current payment in
qualifying ratios

Rule: Converting Primary Home into Second Home and purchasing new primary
residence
Q: What if client wants to convert their current home into a second home and
purchase another primary residence?
~6 months worth of monthly payments for BOTH homes as a “cushion”
~Can be reduced 2 months worth of monthly payments if current home is 70%
LTV or below
~Qualify for both monthly payments

Rule: Converting Primary Home into an Investment Property
Q: Can you qualify using rental payments?
~70% LTV or less on home being converted to rental home
~Fully executed lease agreement and Proof of receipt and deposit (into bank)
of security deposit
~2 months worth of payments for BOTH homes as a “cushion”

Q: What if the LTV is more than 70%?
~Must qualify with both monthly payments
~6 months worth of monthly payments for BOTH homes as a “cushion”

Q: How is the LTV determined?
~Exterior-only appraisal dated no more than 60 days from the date of
closing.

Only certain borrowers will qualify.  But this may be a great time to discuss your options and see if you do.

Travis Newton, Mortgage Broker

Information compliments of Travis Newton
WJ Bradley Mortgage
Branch Manager/Sr. Loan Officer
503.931.4490
travis.newton@wjbradley.com

US Military extended home buyer tax credit deadline is right around the corner.  Watch this informational video by the IRS for details.

Article by G.M. Filisko
Published by HouseLogic.com

By doing your homework before you buy, you’ll feel more content about your new home.

1. Decide how much home you can afford

Generally, you can afford a home priced 2 to 3 times your gross income. Remember to consider costs every homeowner must cover: property taxes, insurance, maintenance, utilities, and community association fees, if applicable, as well as costs specific to your family, such as day care if you plan to have children.

2. Develop your home wish list

Be honest about which features you must have and which you’d like to have. Handicap accessibility for an aging parent or special needs child is a must. Granite countertops and stainless steel appliances are in the bonus category. Come up with your top-five must-haves and top-five wants to help you focus your search and make a logical, rather than emotional, choice when home shopping.

3. Select where you want to live

Make a list of your top-five community priorities, such as commute time, schools, and recreational facilities. Ask your REALTOR® to help you identify three to four target neighborhoods based on your priorities.

4. Start saving

Have you saved enough money to qualify for a mortgage and cover your downpayment? Ideally, you should have 20% of the purchase price set aside for a downpayment, but some lenders allow as little as 5% down. A small downpayment preserves your savings for emergencies.

However, the lower your downpayment, the higher the loan amount you’ll need to qualify for, and if you still qualify, the higher your monthly payment. Your downpayment size can also influence your interest rate and the type of loan you can get.

Finally, if your downpayment is less than 20%, you’ll be required to purchase private mortgage insurance. Depending on the size of your loan, PMI can add hundreds to your monthly payment. Check with your state and local government for mortgage and downpayment assistance programs for first-time buyers.

5. Ask about all the costs before you sign

A downpayment is just one homebuying cost. Your REALTOR® can tell you what other costs buyers commonly pay in your area—including home inspections, attorneys’ fees, and transfer fees of 2% to 7% of the home price. Tally up the extras you’ll also want to buy after you move-in, such as window coverings and patio furniture for your new yard.

6. Get your credit in order

A credit report details your borrowing history, including any late payments and bad debts, and typically includes a credit score. Lenders lean heavily on your credit report and credit score in determining whether, how much, and at what interest rate to lend for a home. Most require a minimum credit score of 620 for a home mortgage.

You’re entitled to free copies of your credit reports annually from the major credit bureaus:Equifax, Experian, and TransUnion. Order and then pore over them to ensure the information is accurate, and try to correct any errors before you buy. If your credit score isn’t up to snuff, the easiest ways to improve it are to pay every bill on time and pay down high credit card debt.

7. Get prequalified

Meet with a lender to get a prequalification letter that says how much house you’re qualified to buy. Start gathering the paperwork your lender says it needs. Most want to see W-2 forms verifying your employment and income, copies of pay stubs, and two to four months of banking statements.

If you’re self-employed, you’ll need your current profit and loss statement, a current balance sheet, and personal and business income tax returns for the previous two years.

Consider your financing options. The longer the loan, the smaller your monthly payment. Fixed-rate mortgages offer payment certainty; an adjustable-rate mortgage offers a lower monthly payment. However, an adjustable-rate mortgage may adjust dramatically. Be sure to calculate your affordability at both the lowest and highest possible ARM rate.

Article by Shauna Zamarripa, ehow contributor
Published March 23rd, 2011
ehow.com

FHA 203K loans are an option for property rehabilitations.

When consumers use FHA financing, the most traditional source of funding is an FHA 203b loan. However, FHA 203b loans have specific requirements of a property for purchase; namely the condition of the property and habitability requirements. However, for properties that are severely damaged, an FHA 203k rehabilitation loan can be used.

History

Historically, FHA loans were created to boost home ownership sales by decreasing down payment requirements on mortgage loans. As a result, conventional non-FHA loans typically require down payments of 10 percent or higher, while FHA loans can require down payments of less than 4 percent.

FHA loans are federally insured loans that require the buyer to pay an upfront insurance premium at closing, as well as a monthly insurance premium designed to protect the lender from loss in the event of default and foreclosure. Due to the nature of the insurance required to obtain an FHA loan, the government did not — in general — want to back loans on properties that were considered uninhabitable; that is, in need of roof replacements, plumbing work or other major repair items.

Significance

FHA 203k loans allow the buyer to roll in the costs of repairs to rehabilitate the property into the mortgage loan. The formula to do so is quite simple. The bank takes the “as is” market value of the property and adds the costs of repairs to the loan. Upon closing, the repair work is completed and the buyer can take possession of the property.

The minimum amount of repairs required to utilize an FHA 203k loan is $5,000 and the maximum is $35,000. However, this is not considered a second mortgage or home equity or improvement loan. This portion of the loan is added on to the primary note.

Function

FHA 203k loans are applicable to single family homes or multiple family dwellings of up to four units. This means that an FHA 203k loan can be used to rehabilitate or repair single family detached properties, condominiums, town homes or small apartment facilities.

In addition to streamlining costly repairs for a property, a FHA 203k loan can be used for modernization of an existing home. This is useful for homeowners who want to update a kitchen or bathroom in a home that they purchase. These loans can also be used for room additions or other home expansion projects.

Considerations

When taking into account loan qualifying amounts on an FHA 203k loan, the purchase price must be less than the sales price after the amount of repair work is finished. The best way to ensure that an FHA 203k loan is approved is to have contractors provide estimates of repairs or updating on a home prior to entering into a real estate contract for purchase. This way, a consumer can be prepared for the total loan amount, knowing that she qualifies for the property after its improved value has been assessed.

Expert Insight

Due to the meticulous requirements and nature of FHA 203k loans, consumers should consult an FHA 203k loan specialist. Not all lenders who are familiar with standard FHA 203b loans know how to structure and prepare the necessary paperwork for an FHA 203k loan. Talk to several lenders about their experience with this specific type of loan. If they have little to no experience, they are likely not the right choice to handle a loan this complex.

For more information about 203K rehab loans, please visit the U.S. Department of Housing and Urban Developement’s website or contact your local mortgage broker.