Recently we seen an influx of calls regarding the FHA 203k loan. My concern is that we’ve seen an increase from clients whom have already been pre-approved, currently under contract and found out that they are unable to be approved with traditional financing for the property! What does that mean? Well it means these buyers are now going upstream without a paddle!
The home has health and/or safety issues that caused the home to be ineligible for traditional financing and the only way to purchase the home is either cash or a rehab loan such as a FHA 203k or Conventional Rehab. With a rehab loan you are able to address the areas that are causing the home to not be purchased with traditional financing.
The reason we get the calls is because their current lender is not able to provide an FHA 203k or Conventional Rehab option. Now as a buyer you are forced to search for a new lender. The unfortunate part is that you have to start the pre-approval process all over again. Then you have to find a contractor to get an estimate/bid for the needed repairs/renovation and this part can take up to 2-3 weeks.
The moral of the story is that if you know you may be purchasing a distressed property and there are more issues than just flooring and paint, then you need to be asking your lender ASAP if they can provide rehab loans before putting an offer on the home! If not, then start looking for a lender who can and may be more versatile with loan options (FHA, VA, Conventional, Jumbo, FHA 203k, Conventional, etc.). As well as one who is experienced in rehab loans!
Give us a call if you have any questions or would like to learn more about rehab loans.