Are all of the homes in your buyers’ searches in need of updating or repair? The FHA 203k Rehabilitation Loan can be used to purchase or to refinance a home. As a real estate agent, this is an excellent product to present to buyers who are looking to repair or update a home that they are interested in purchasing. Many Realtors are not aware of the benefits this product has to offer, and may be missing an opportunity to increase their business.

Not only is the FHA 203k loan for buyers, but agents should also consider it to sell listings such as estate sales, outdated homes and foreclosed and distressed properties. From missing kitchens, to water issues, broken pipes, mold and damaged dry wall, none of these pose a problem for a 203k loan. The property can be purchased in “as is” condition.

As a buyer’s agent, this is perfect for the home that is in the right school district or great location, but the property isn’t as updated as the buyer wants.

There are two types of 203k loans – full 203k and 203k streamline:

• A full 203k allows for any type of rehab to a home and is not restricted to a $35,000 repair limit. The limit of the work is based on the FHA county limit. For example, in Cook, DuPage, Lake and Kane counties, loan limits are: one-unit: $410,000; two units: $524,850; three units: $634,450; four units: $788,450.

• Guaranteed Rate has completed full 203k rehab projects from $40,000 to $400,000, based on the county and property type. Work on a full 203k that is allowed, but not limited to, includes an addition to a home, building a garage, updating kitchens, bathrooms, replacement of HVAC and creating an open floor plan by moving walls. The full 203k allows for a home to be torn down and rebuilt as long as the existing foundation remains in place.

• For the 203k streamline, the total in repairs inclusive of contingency and fees can only equal $35,000 or less. The buyer can only do cosmetic repairs such as painting, new flooring, tiling, carpeting, siding, appliances and roofing. There can be no structural improvements or landscaping.

For agents that list or have buyers looking for two-, three- and four-unit properties, a 203k loan is a perfect fit. With a down payment of only 3.5 percent, it is a great way to get into an income property while living there for at least one year. Many of the multi-unit properties allow the homebuyer to live in a home for a fraction of what it would cost to rent.

Agents are encountering buyers who are re-entering the market to purchase because many faced credit issues over the past few years. Benefits of the FHA loan include: a minimum 640 credit score, a 3.5 percent down payment that may be gifted, a seller credit up to 6 percent towards closing costs, a two-year waiting period after bankruptcy and a three-year waiting period after short sale, foreclosure or deed in lieu.

Christine DePaepe is with Guaranteed Rate

To learn more about the 203k program and to receive marketing information for your listings or to share with your buyers, contact Christine DePaepe, Guaranteed Rate’s 203k division manager, at chrisd@guaranteedrate.com or 312-379-3542.