203k Construction Loans

Quasi “Construction” Financing for Properties with Severe Condition Issues

There remains an excellent alternative for financing the repair and improvements of REO (Real Estate Owned) properties with severe condition issues.

FHA 203(k) Loans allow potential owner-occupants to finance repairs and improvements of almost any nature, as long the repairs are for an existing property. 203(k) Loans finance the purchase of the property as well as the cost of the improvements (paid out in installments over time). As with any “construction loan”, 203(k) loans require more paperwork and follow up than standard financing. The process can be made easier via a “Streamline 203(k)” if the improvements will cost less than $35,000.

The Energy Efficient Mortgage (EEM) Program is not intended for severe condition issues, but it is another excellent opportunity to finance significant improvements. EEM allotments are tacked right on top of FHA Loans at the same rate and terms regardless of the resulting loan-to-value ratio. EEM monies can finance anything that will improve the energy-efficiency of a home, including new doors,
windows, insulation, furnaces, etc.

Most lenders cap their EEM allotments at $8,000, but JVM has access to an EEM program that allows allotments up to 5% of the purchase price irrespective of the resulting loan size. Given that the FHA loan limit is now $729,750, EEM loans or allotments can exceed $35,000 in some cases.