Purchasing a home with a 203K loan with the intention to live in it can be exciting for new home buyers. It allows you the opportunity to purchase a home in an area that you might otherwise have been unable to afford or a bigger home than you ever anticipated being able to afford. It also enables you to purchase a home that you can make to look just like you desire. That being said, not any old, rundown home will do – it is important to learn how to find the perfect house, just as you would if you were buying a home in good condition.
Look at Surrounding Values
The neighborhood or area that you plan to move into plays an important role in whether or not you are making a good purchase. Just because you can get a home for a low price does not mean that the repairs and remodeling that you do to it will make it skyrocket. If the values of the homes surrounding the home you plan to purchase are not very high, no matter how many changes you make, the value of your home will not be much higher. The market value of homes is dependent upon the values of similar homes in the area – if the area is filled with rundown or foreclosed homes, the value simply will not be there for you.
Look at the Price
The price of the home you are purchasing will play a role in how much is left for you to make changes to the home. If you are not getting a significant discount on the home that is in poor condition and the repairs you make will only add a small value to the home, there might not be room in the mortgage to fund the repairs. The 203K loan is maxed out at 110% of the intended value of the home, which in most cases is the perfect amount, but if there is not a lot of leeway in the price of the home and the future value, it could leave you in a bind.
Determine what you Want
It is easy to look at a home and think that you could knock down walls or make structural changes with the money provided by the 203K, but it might not be reality in all cases. You really need to do your research and use the input of a professional to determine if what you see in your head can actually be done on the home you want to purchase. It would be very disappointing to purchase a home with the intended remodeling to be done only to find out that it is not feasible. Talking to a HUD consultant as well as reputable contractors before making any decisions can help you determine if you are making a wise purchase decision.
Determining a good buy is not always the easiest thing to do, whether you are purchasing a 203K home or using conventional financing. It takes time to weigh the pros and cons of each home, especially if you are looking at fixer uppers. You will have to look beyond the mess, structural issues, and detrimental issues (termites, mold, etc.) that are present in order to make your decision. It is best not to do it alone – use the professionals that see these types of homes on a daily basis and are able to help you see the final outcome of the home you are considering. Do you research when looking for a consultant and contractors to ensure that you are getting an honest opinion as well.