It’s a great program for making up to $35,000 of improvements to the home.  Many time, foreclosed property has what Realtors refer to as “Deferred Maintenance.”  This means that people who could not afford to make their house payment – also could not afford to have the termite / wood rot repaired, or the stove fixed, or the carpet replaced… So this loan is PERFECT for those kinds of updates!

What items can you update – and which ones can you NOT do with this loan?  Here are some basic guidelines:

Eligible Improvements/Work

• Repair/Replacement of roofs, gutters and downspouts
• Repair/Replacement/upgrade of existing HVAC systems
• Repair/Replacement/upgrade of plumbing and electrical systems
• Repair/Replacement of flooring
• Minor Remodeling, such as kitchens, which does not involve structural repairs
• Painting, both exterior and interior
• Weatherization, including storm windows and doors, insulation, weather
• stripping, etc.
• Purchase and installation of appliances, including free-standing ranges,
• refrigerators, washers/dryers, dishwashers and microwave ovens
• Accessibility improvements for persons with disabilities
• Repair/Replace/add exterior decks, patios, porches
• Basement finishing and remodeling, which does not involve structural repairs
• Basement waterproofing, including mold removal
• Window and door replacements and exterior wall re-siding
• Septic system and/or well repair or replacement
• Connection to public water or sewage system

Ineligible Improvements/Work

• Major rehabilitation or major remodeling, such as the relocation of a wall
• New construction (including room additions)
• Repair of structural damage
• Repairs requiring detailed drawings, plans or architectural exhibits
• Landscaping or similar site amenity improvements, including fence
• Lead-based paint stabilization or abatement of lead-based paint hazards
• Any repair or improvement requiring a work schedule longer than three (3) months; or Rehabilitation activities that require more than two (2) draws/payments.
• Any work requiring a plan reviewer
• Result in work not starting within 30 days after loan closing; or cause the borrower to be displaced from the property for more than 30 days during the time the rehabilitation work is being conducted (FHA anticipates that, in a typical case, the borrower would be able to occupy the property after the mortgage closing.

REMEMBER!  If you are a First Time HomeBuyer, you might qualify for a $8000 tax credit (that you don’t have to pay back!)!  Click Here for more details!

Many loan officers do not offer this program, and are not familiar with the process.  Please call Steve and Eleanor Thorne, First Financial Services in Cary, NC for details!  919-649-5058

The problem is that many sellers, including banks holding foreclosed property, might not want to accept an FHA borrower? Why?  Because FHA will not take a property with a paint job like the one shown here.  If you were purchasing this property, the exterior repairs would need to be done PRIOR to closing.

Most homebuyers do not want to sink money into a property they haven’t purchased yet – leaving the repairs for the seller (who often doesn’t have a ton of cash on hand, ergo this is why they are selling!).

FHA did make some moves earlier this year that lead some to believe that it’s EASIER to get financing with FHA on an existing home… and indeed, if you are purchasing a home in fairly good shape the appraisal process is easier!  Look through this list with your realtor and we believe that you will agree that a Seller of a property in reasonable repair should accept a contract with FHA financing for the borrower.

Examples of MINOR property conditions that no longer require AUTOMATIC repair for existing properties are:

• Examples of Missing handrails;

• Cracked or damaged exit doors;

• Cracked window glass;

• Minor plumbing leaks (such as leaky faucets);

• Defective floor finish or covering (badly soiled carpeting);

• Rotten or worn out counter tops;

• Crawl Space with debris or trash;

• Defective paint surfaces in homes constructed Post 1978

Examples of tests that may no longer be REQUIRED:

• Wood Destroying Infestation Report-required if there is evidence of READILY OBSERVABLE ACTIVE infestation;

• Well (Individual Water Test)-Required if there is knowledge that well water may be near sources of contamination;

• Septic Test-required if evidence of system failure.

Don’t be confused when you hear stuff about FHA being a bad program!  Get the FACTS!  You MIGHT need an FHA 203K home improvement loan – ask us for details!

For more information on FHA MORTGAGES, contact Steve and Eleanor Thorne, The FHA EXPERT in NC at First Financial Services, Inc 919-851-3031