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Financing “As-Is” Properties
By C. J. Coury
A rarely used loan product, the FHA 203(k), is fast becoming one of the hottest topics on the training front. The renewed interest in this evolving product is due to the high number of distressed properties on the market and the declining amount of “cash” buyers to sell it to “as-is”.
There are numerous misunderstandings about this product that I would like to help clarify:
1. The maximum loan amount is currently $417,000
2. There is no maximum sale price for the property
3. There is no maximum amount for the repairs or improvements
4. The improvements can exceed the purchase price
5. The rate is the same or similar to that of a standard FHA loan
6. This is a first mortgage – not a second
7. The loan is typically a 30 year fixed
There are many advantages that this product offers – here are a few:
1. No repairs need be completed prior to closing
2. Realtor provides comparables to MLO
3. Appraisal is completed based on the renovated property only
4. Appraiser is selected from small list of 203(k) expert
This product will open up a whole new list of available properties to your non-cash customers and eliminate the problem of “low appraisals” due to property condition that cause the need for a renegotiation. My suggestion is that you reach out to a Mortgage Loan Officer that is a 203(k) specialist when you have a customer that you think might benefit from this outstanding product. If they are closing 4 or more of these loans per month they will be able to process your transaction smoothly and efficiently while removing most of the angst associated with a somewhat complicated product.
Talk to a 203(k) specialist MLO today and start selling more homes tomorrow!!!
C. J. Coury is a Senior Vice President with Bank of America and oversees their residential mortgage division serving Sarasota, Manatee and Charlotte Counties. Prior to joining Bank of America in 1995, C. J. was President of Mortgage Brokers of America in Birmingham, MI for 7 years. He has been an active mortgage finance professional since 1983. C. J. may be reached at (941) 952-2888 or by email at charles.j.coury@bankofamerica.com [2].
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