by Marco Di Gabriele
"We don't want a fixer upper!"
Philadelphia’s real estate market is currently going through a period of huge growth & development. Despite the amount of new development happening in Philly, there is still a lack of inventory for buyers who are looking to purchase a new home. This means that home prices are continuing to rise. With prices reaching all-time highs, some home buyers are getting priced out of the market for move-in ready homes.
What do you do when all of the homes that fit your criteria cost way more than you are willing to spend?
"We don't want to buy a fixer upper, we want to buy something move in ready!"
What if you could have the best of both worlds?
Introducing the 203k loan.
203k loans are a great option for first time home buyers looking for a move-in-ready home who don’t want to pay a premium for new construction or already rehabbed homes. This loan type falls within FHA guidelines, but allows you to purchase a home that needs improvements before being livable. With a 203k loan you can essentially bundle the cost of purchasing a property & fixing it up into one loan.
If you're the type of person who can see potential in a property that is a bit run down, but you also don't have the expertise to fix the home yourself, this could be a great opportunity to buy a fixer upper and have someone else do all of the work.
How Does It Work?
Let's say you find a house in South Philly that costs $150,000 but it needs a lot of work.
The lender will assess the amount of work needed to update the home and make it livable.
For the sake of this example, let's say they assess that the property needs about $40,000 worth of work.
With a 203k loan you are able to bundle the repair costs into your mortgage.
This means that after the house is repaired and ready to be lived in, the total principle you will owe on your mortgage will be equal to $190,000.
Building Sweatless Equity
The best part about the 203k loan is the potential to build some equity, even though you aren't the one doing the sweating. Professional general contractors will take care of all of the repairs needed for the home to be made livable.
Even though you end up paying a 190k mortgage, often times after the property is fixed up it will actually end up being more valuable than 190k.
This means that not only do you get a newly renovated property to move into, but you've also already gained equity in the property.
Find a 203k Lender
If this is your first time hearing about a 203k loan, then you may not know who to speak with to get started. Let me know if you think think that a 203k loan may be a good fit for you and I will put you in touch with a 203k specialist who can walk you through the process.
