Prospect Mortgage — Create Buying Opportunities with an FHA 203K Rehab Loan 

Bosmol
Bosmol
Feb 18, 2014 · 4 min read

An FHA 203K loan could offer the best solution to buyers working with a lender or Prospect Mortgage to secure financing. Interest in a distressed property shouldn’t act as a barrier to home ownership, and there are ways that a realtor can help buyers qualify for a mortgage when a home needs repairs.

Additionally, this type of financing exists for purchases of short-sales and foreclosures, as well as any properties placed under the “distressed” label. The opportunity to include distressed, foreclosed, or short sale properties as possible purchases may be the best way to find a buyer a home in a competitive market.

Likewise, sellers who own distressed properties will be able to take offers from buyers who can’t pay in full and must obtain financing in order to make a purchase.

203K Loan Basics to Share with Buyers

New and veteran home buyers will likely need clarification on some of the differences between a traditional mortgage and 203K loans. Buyers and realtors alike must be prepared to wait longer to complete the application process for a rehab loan.

The main difference between traditional mortgages and rehab loans is that a 203K loan provides funds to complete repairs of the home. This means a contractor will need access to the property so as to craft an appropriate bid for the project. Additionally, a HUD-approved inspector must look at the property, which takes time to arrange.

Let buyers and sellers know that the closing date probably won’t be scheduled for at least 60 days. Some loans are completed in about a month and a half, but 60 days is quite common for the full timeline.

Crafting the 203K Offer/Proposal

Applying for an FHA rehab loan requires a written proposal that’s different from the proposals used for non-rehab loans. Within the purchase offer, agents must make sure that the proposal mentions that a 203K loan will be used for the purchase.

Figures used while crafting the proposal include the following:

  • List of likely renovations
  • Cost of required improvements
  • Post-renovation value of the property

In addition, the proposal must mention that the contract is contingent upon loan approval, as well as the buyer’s agreement to improvements of the property.

Tips to Make Happy Buyers

Successful real estate agents thrive upon recommendations and repeat business from customer reviews. Ensure a buyer’s complete satisfaction with the purchase experience by offering these simple tips during the application process:

  • Tell the buyer that he or she should have a contingency fund just in case repairs don’t go as planned.
  • Encourage the buyer to shop around for contractors or provide a trusted recommendation on an experienced contractor.

203K Loans Always Should Be On the Table

Realtors should note that 203K loans aren’t solely for distressed properties. In some circumstances, working with a buyer or seller might require a creative approach to lending. A 203K loan could be the best way to secure financing.

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Equal Housing Lender. Prospect Mortgage is located at 15301 Ventura Blvd., Suite D300, Sherman Oaks, CA 91403. Prospect Mortgage, LLC (NMLS Identifier #3296,www.nmlsconsumeraccess.org) is a Delaware limited liability company licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act and operates with the following licenses: AK Mortgage Lender/Broker License #AK3296; AZ Mortgage Banker License #BK0903027; CO licensing regulated by the Division of Real Estate; Georgia Residential Mortgage Licensee #16984; Illinois Residential Mortgage Licensee #MB.0006424; Kansas licensed mortgage company; MA Mortgage Lender/Broker License #MC3296; MS Licensed Mortgage Co.; MT Mortgage Lender Licensee #3296; Licensed by the NH Banking Dept.; Licensed Banker-NJ Dept. of Banking and Insurance #9932414; NV Division of Mortgage Lending Mortgage Banker #1173 and Mortgage Broker #3095;Operates as Prospect Lending, LLC in NY located at 711 Westchester Avenue, Suite 304, White Plains, NY 10604 (Licensed Mortgage Banker — NYS Dept of Financial Services); OR Mortgage Lender Licensee #ML-2006; PA Dept. of Banking license #22122; RI Licensed Lender #20021343LL, Loan Broker #20041643LB; Washington Consumer Loan Company License — CL-3296. This is not an offer for extension of credit or a commitment to lend. Loans are currently being closed and committed at the expressed rates, however these rates may change or may not be available at the time of your loan lock-in, commitment or closing. All loans must satisfy company underwriting guidelines. Interest rates and APRs are based on recent market rates, are for informational purposes only, are subject to change without notice and may be subject to pricing add-ons related to property type, loan amount, loan-to-value ratio, credit score and other variables. Call for details. Terms and conditions apply. Additional loan programs may be available. This is not an offer to enter into a rate lock agreement under MN law, or any other applicable law. Prospect Mortgage, LLC — NMLS Consumer Access | Texas Mortgage Banker Loan Origination Disclosure

HomePath® is a registered trademark of Fannie Mae.

Disclosure last updated September 4, 2013

    Bosmol

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