How to buy a home that needs work and still use an FHA loan.

Are you a first-time buyer who’s getting frustrated that there are no houses in your price range that don’t need a lot of work? If so, know that is completely understandable, but there are ways to work around this. Many first-time homebuyers can qualify for FHA loans to compensate for not being able to put as much down, but oftentimes homes that need a lot of work don’t qualify for FHA loans. To work around this, you can try using an FHA 203(k) loan. If that’s the route you want to take, there are three things you need to do: 

1. Work with an FHA 203(k) lender. You need someone who specializes in this type of loan because not all lenders offer it. Then you will be able to get the benefits of an FHA loan and still buy a house that needs work so you can save some money. However, this can be a complex loan, so you want someone experienced in this matter. Think about this before you get your pre-approval. 

2. Work with a Realtor to find the right property. You’ll need someone to help you find a place that fits the bill, as not every property that needs work will qualify for this type of loan. You’ll also need experienced help to make sure that the property is worth the amount you’re paying for it after all of the renovation costs. This is called the after-repair value, and you’ll need to be able to run the numbers to find it.

“You can get the benefits of an FHA loan and still buy a house that needs work to save money.”

3. Hire a HUD consultant. This is someone certified through the Department of Housing and Urban Development (HUD), and working with someone like this is especially important if your renovations will cost over $30,000. Hiring this person costs around $800 to $1,000, but it is very worth it. They will walk through the house and give you an estimate of what repairs will be required by the FHA and how much that will cost. They can help you get the license contract, which is necessary, as well as make sure everything is done correctly. 

Once you’ve gotten through those three steps, you can start working on renovations. On the bright side, you don’t have to stick to things that are wrong or broken; you can also make cosmetic changes to fit your style and preferences. As long as things fit in your budget and don’t go over the appraised value of the home, you’re good to go. 

With this, you can take a house that doesn’t look great, pay less for it, and be able to make something of your own! This way of thinking outside the box can help you afford your dream home. If you have any questions or need help, don’t hesitate to call or email me anytime. I would love to assist you.