Low Inventory Doesn’t Mean You Can’t Have Your Dream Home
April 15, 2021
In February, the housing market finally saw the consequences of low inventory, after eight months of consecutive gains. Homes in contract saw a 10.6% dip from the prior month, which is a result of tightened supply, according to data from the National Association of Realtors.
In-contract deals declined in February due to a combination of mortgage rates increasing, heightened home prices and historically low inventory. Although MoM February saw a 6.6% decline in sales, YoY sales were still up 9.1%.
What Does This Mean for You?
If you’ve picked a geographical area, and a price point, to begin shopping for a home you may have noticed that you aren’t finding many options. Or, the houses you are finding are not the dream home you’ve always imagined. What are your options? You can broaden your search area or increase your price range but, sometimes this is not an option.
Another option you may not have considered is a 203(k) Renovation Loan.
203(k) Renovation Loan
The Federal Housing Administration (FHA) 203(k) loan allows a homebuyer or homeowner to finance the purchase of a home and the cost of rehabilitation with a single mortgage. This is also an option when refinancing an existing home to include the cost of renovation.
The 203(k) loan is designed for buyers who have found a home that has characteristics they love – price, location, style – but, requires either relatively minor updates or virtual reconstruction. To obtain a 203(k) loan, the home must be at least one year old, the cost of the renovation must be at least $5,000 and the total value of the property must fall within the FHA mortgage limit for the area. Value of the property is calculated two ways:
- Value of the property before rehabilitation + cost of rehabilitation
- 110% of the appraised value of the property after rehabilitation
The lowest calculation will be the updated total value of the home.
Types of improvements borrowers can make using a 203(k) loan include:
- Structural alterations and reconstruction
- Modernization and improvements to the home’s function
- Elimination of health and safety hazards
- Changes that improve appearance and eliminate obsolescence
- Reconditioning or replacing plumbing; installing a well and/or septic system
- Adding or replacing roofing, gutters, and downspouts
- Adding or replacing floors and/or floor treatments
- Major landscape work and site improvements
- Enhancing accessibility for a disabled person
- Making energy conservation improvements
Limited 203(k) Loan
Another option available is the Limited 203(K) loan. If you find a house that is almost perfect, but needs relatively minor updates, the limited loan allows you to finance up to $35,000 into your mortgage for repairs, improvements or upgrades.
Semper Has Solutions
Semper provides these loan solutions so you can choose what works best for you and get home faster. If a 230(k) loan sounds like it might be the right loan, contact us today to discuss your options.
You can get additional information on 203(k) and Limited 203(k) loans at https://www.hud.gov/program_offices/housing/sfh/203k/203k–df
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