Many times when buying a Foreclosure, the home is in need of a little bit of work before you can live in it. There are a small handful of loan programs that are available for homes that need a little TLC including the FHA 203k, the FHA 203k Streamline and the Fannie Mae HomePath mortgage programs.
Which one is the “best” program?
It depends.
Start by asking these 2 simple questions:
- Is the home currently owned by Fannie Mae? If yes, then the Fannie Mae HomePath mortgage program is probably the best bet.
- Does the home need less than $35,000 of repairs and not owned by Fannie Mae? If yes, then the FHA 203k streamline program is probably the best bet.
The FHA 203k Streamline Program
Since many homes are not owned by Fannie Mae and most need less than $35,000 in repairs, the FHA 203k Streamline program is a popular option. Some of the highlights of the FHA 203k streamline program include:
- It works like a construction loan – you are able to buy a home that wouldn’t qualify for FHA financing and finance the repairs that will bring it up to FHA loan standards
- The total amount of the loan is the purchase price plus the amount needed for repairs
- FHA has limited the Streamline 203K program to a range between $5,000 and $35,000
- The requirements to qualify are the same as a traditional FHA loan
- The construction phase can’t begin until the loan closes. The funds to pay the contractor come from escrowed funds at the closing
- Up Front Mortgage Insurance Premium and Monthly mortgage insurance are paid to FHA just like a regular FHA loan
- Appraisal required
As with everything – the financing packages available when buying a bank-owned home will need to be weighed carefully. Be sure to ask multiple people and do your research… but in the end, you will find that by asking the 2 questions listed above, you will most likely get to the right answer.
