Here are eight steps to finding money to rehabilitate a foreclosed property:
1. Meet with a Mortgage Pro who is experienced in doing 203k loans and get pre-approved. You will need to get pre-approved for not only the purchase price but also the fixup costs you expect as well (for example $150,000 for the home and $25,000 for fixup= $175,000)
2. Start house hunting with your Buyers Agent. Your Agent needs to be comfortable and knowledgeable about fixer upper homes. If this is not a specialty of theirs, you’ll want to find someone else as they will be a huge part of the process.
3. Write an offer and negotiate the purchase price on a home. You can still ask the seller to do some repairs even though you’ll be having more done with your 203k funds.
4. Decide what you want to have fixed up with the amount of fixup money you are approved for. Lets say its $25,000. You’ll need to prioritize what you want to repair or remodel because you can almost always spend more and more money on fixup.
5. Get bids from contractors on your priority list of fixup items. If work is minor like painting, you can probably do that yourself and not have to use a contractor- but ask your lender to be sure! Give your list of bids to your lender for their approval.
6. Have appraisal completed that gives an “as is” and an “as completed” value. Your Mortgage Professional will order the appraisal and give the appraiser your list of repairs that you would like to have done.
7. Close on the home and start the repairs within 30 days. You’ll have 6 months total to get all the work done and your lender will pay for repairs at regular intervals as they are completed.
8. Sit back and enjoy your fixed up home!
Alright, you and I both know nothing goes quite that smoothly so let me give you some tips, cautions, and details:
See http://www.hud.gov/offices/hsg/sfh/203k/203kabou.cfm for more details.