203(k) Rehab Loans in California
Commonly referred to as a renovation loan, a 203(k) rehab loan is offered through the FHA and allows homebuyers to access money to purchase a home as well as renovate the home all through a single mortgage. Having the option to apply for a single loan to accomplish two goals means homebuyers no longer have to go through the tedious task of applying for multiple loans; this is convenience at its finest. In fact, a single loan helps take the monetary guesswork and aggravation out of the home-buying process.
It wasn’t that long ago that buying a fixer-upper meant the buyer had to go through a long and difficult process. Even being able to secure funds to purchase the home was hard as most banks did not want to lend money for a house that was in bad shape. Until repairs had been competed, banks usually would not agree to a loan. This made it difficult for people to buy these homes because, ideally, they needed access to money to make the repairs, thus meaning they not only needed money to buy the house but also to complete repairs; this is why 203(k) loans are so advantageous.
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What exactly does a 203(k) loan do?
With a 203(k) loan, a buyer can purchase a piece of property and within the loan amount will be additional funds that are to be spent on repairs and renovations. For example, if a piece of property is being sold for $125,000 and needs $35,000 in repairs, then a borrower would acquire a 203(k) loan in the amount of $160,000. If preferred, this type of loan can even be acquired by an existing homeowner who wants to make renovations on their current home.
How does a person qualify for a 203(k) loan?
Many times, 203(k) loan borrowers will complete their repairs and renovations for less than what they expected, meaning they have monies left over in their Repair Escrow Account. If this is the case for you, any leftover monies will be applied to the principal balance of the loan.
If you would like to learn more about rehab loans and how they can be of benefit to your next investment, please don’t hesitate to reach out to us today.