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By Impac Correspondent Lending
Many lenders have noticed a growing number of cash buyers for residential real estate. These sales often involve distressed properties that require a significant amount of repair to be considered for conventional financing. Cash buyers typically purchase a property at below-market value and then put additional money into addressing the property’s required repairs before selling for profit.
For most homebuyers, paying cash for a property then spending additional money on improvements simply isn’t an option. That said, lenders should be aware that certain financing alternatives are available to their borrowers who are interested in getting a loan, then having additional funds to make repairs. Namely, originators should be familiar with the 203(k) renovation loan from FHA.
Having a thorough understanding of the FHA’s 203(k) product is especially important in light of the many borrowers who don’t seem to be aware of how they can benefit from this type of loan. That’s why the process of identifying, evaluating, and buying a property with a renovation loan requires the right kind of assistance from the right kind of mortgage lending professional.
Lenders can begin by getting familiar with the two common types of 203(k) loans from FHA:
Mortgage professionals should be ready to field common borrower questions pertaining to qualification.
According to the FHA’s general guidelines, 203(k) borrowers should:
The process of improving a home begins long before contractors begin working. By educating your borrowers, you can help them understand and acquire exactly the loan they’ve been looking for, while also earning their trust and growing your business.
A portion of this article originally appeared in the February issue of The Scotsman Guide.
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May 6, 2013
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