what does it mean by cash sale or rehab loan only

When you see the phrase “cash-only” listed with a home for sale, this means the home is not in the condition to be financed under a conventional mortgage. These are distressed properties, those that have been abandoned for long periods of time, condemned, or have experienced flood damage or other natural disasters.

Full Answer

What is a home rehab loan?

Jan 09, 2011 · According to David Piché of RE/MAX Signature in Chicago and a specialist in marketing foreclosed properties for lenders, about 80 percent of foreclosures he sees currently fall into the ‘cash or rehab loans only’ category. He estimates that 60 percent of those buying these properties are investors, who will rehab and rent the units.

Can you get cash back on an FHA rehab loan?

When you see the phrase “cash-only” listed with a home for sale, this means the home is not in the condition to be financed under a conventional mortgage. These are distressed properties, those that have been abandoned for long periods of time, condemned, or have experienced flood damage or other natural disasters.

What are the different types of rehab mortgages?

An FHA 203 (k) rehab loan, also referred to as a renovation loan, enables homebuyers and homeowners to finance both the purchase or refinance along with the renovation of a home through a single mortgage. Instead of applying for multiple loans, an FHA 203 (k) rehab loan allows homebuyers to purchase or refinance their primary home and renovate it with one …

What is an FHA 203 (K) rehab loan?

Jun 08, 2021 · Only a 3.5 percent down-payment is required. In addition to other requirements, 203 (k) loan down payments are also significantly lower than conventional loans. With just 3.5 percent of the selling price down at closing, you can achieve your dream home. You’ll also have more available cash for furniture, moving expenses, and other essentials.

What are the benefits of a 203k loan?

203 (k) Rehab Loan Advantages 1 A convenient way to finance your home improvements without the need for perfect credit, huge down payments, or high interest rates 2 Upgrade your home with your style and needs 3 Buy a home that’s usually listed at a lower price due to the older existing condition 4 Great interest rates for your rehab in one loan 5 Come with a low down payment 6 A minimum down payment of 3.5% means you won’t deplete your savings trying to come up with a down payment 7 Qualifications may be more lenient than for a conventional loan because FHA#N#insures your mortgage

How long does it take to repair a home loan after closing?

After closing, the following will occur: A Repair Escrow Account is set up and the repairs must start within 30 days of closing and completed within six months.

What is the minimum down payment for rehab?

Great interest rates for your rehab in one loan. Come with a low down payment. A minimum down payment of 3.5% means you won’t deplete your savings trying to come up with a down payment. Qualifications may be more lenient than for a conventional loan because FHA. insures your mortgage.

How many units can you buy in a 203k?

203 (k) mortgages permit buyers to purchase multi-family homes with the stipulation the property doesn’t exceed more than four units.

How much down payment is required for a 203k?

Only a 3.5 percent down-payment is required. In addition to other requirements, 203 (k) loan down payments are also significantly lower than conventional loans. With just 3.5 percent of the selling price down at closing, you can achieve your dream home. You’ll also have more available cash for furniture, moving expenses, and other essentials.

How do fixer uppers make money?

You could make money in the long run. Fixer-uppers garner a significant return on investment (ROI) through value increases from upgrades and repairs. Depending on your location, you could land an even lower purchase price if the property requires an extreme makeover .

Does the FHA insure 203k loans?

While the FHA doesn’t actually provide buyers with the funds, it does insure the loan through approved lenders, such as Contour Mortgage.

Can you personalize a 203(k) loan?

You can personalize your new home as your own. A limited 203 (k) loan funds value-added, non-structural changes to customize the home as your own. These include paint colors, flooring, cabinetry, countertops, and other cosmetic improvements.

Do you have to itemize repairs before approval?

All repairs and improvements must be outlined and itemized prior to approval. A reputable lender can ensure you have the most accurate and correct information. It’s also prudent to check specific coverage items and dollar amounts.

What are the rules for FHA 203k?

FHA 203 (k) loan rules include a list of projects that are not allowed, which includes (but may not be limited to) the following: purchase or repair of any luxury item. any improvement that does not become a permanent part of the subject Property. improvements that solely benefit commercial functions within the Property.

What is a gazebo?

gazebos. additions or alterations to support commercial use or to equip or refurbish space for commercial use. The FHA loan rules are not the only ones that can affect FHA 203 (k) transactions; state law, lender standards, and building code may apply to any or all of the eligible improvements permitted under the 203 (k) rehab loan program. ...

Do 203k rehab loans need escrow?

FHA loan rules require escrow accounts to disburse 203 (k) rehab loan funds, and the completed work must meet state/local building code, FHA minimum standards, and other benchmarks where applicable.

Can you cash back on a rehab loan?

For example: cash back to the borrower is not allowed for FHA rehab loans, except specifically required to pay for materials and labor. The basic rule is that the borrower cannot "profit" from the loan in the form of money back that is not a refund or a “draw” for expenses on the renovations/upgrades. FHA loan rules require escrow accounts ...

Can I repair a pool with 203k?

One example: FHA borrowers are allowed to repair a swimming pool with 203 ( k) loan funds, but FHA loan rules state the borrower may not have one installed if one does not currently exist. Bath houses and tennis courts may not be installed, nor can barbecue pits or satellite dishes. The general rule is that FHA 203 (k) loans cannot be used ...

Can I use 203k for luxury?

The general rule is that FHA 203 (k) loans cannot be used for “luxury” items. Speak to your loan officer to learn what the parameters are for your specific needs. making structural alterations such as the repair or replacement of structural damage, additions to the structure, and finished attics and/or basements.

Clearing The Air

I’m sure there will be some of you reading this who have used an FHA 203k loan to buy a distressed property, and I do not mean to say it is impossible. Local market conditions significantly impact the possibility that this loan will be accepted for the purchase of a distressed property.

Back To Business

The purpose of this article is to illustrate an example that worked out very well for a buyer that I have been working with for quite some time. As with many savvy investors my client was very particular about what he wanted in a property.

The Challenge

Our challenge was how to make our offer stand out on top versus the others that were sure to come. Knowing my client had enough cash to buy this property with some to spare, I asked him why he chose an FHA 203K loan.

FHA 203K Refinance

Let me cut to the chase. If you buy a property with cash there is no title seasoning requirements to re-finance the property with a 203K loan. As such the refinance can happen immediately after purchase. Combine that with the huge desirability of cash in the eyes of the seller and this significantly increases the likelihood of a win-win situation.

Can you get insurance on a fixer upper?

In this case, it all depends on the seller and if you are able to get insurance on the property. Many fixer uppers are not insurable. . Sellers may insist on a cash buyer as they can close faster and no issues with financing..

Can you get financing if your home is livable?

Banks want the collateral protected.. In some instances, you MAY be able to get financing IF the home is livable AND there is a existing tenant in the property. I personally have not found a way to finance a property that is empty and not livable. There are of course many other ways to come up with cash..

What is the difference between a rehab loan and an FHA loan?

The basic general difference between an FHA rehab loan and an FHA One-Time Close construction loan is that the purpose of the loan drives the type of loan you should apply for. ...

What is construction loan?

The construction loan is designed to address the needs of a borrower who wants to buy the land (or provide it) and have a house built according to the plans the borrower provides.

Can you remodel a home with a rehab loan?

Remodeling, renovation, or improvement on a property is possible with a rehab loan, but only construction work from the ground up is possible with a One-Time Close mortgage. Borrowers should be prepared for certain restrictions on the use of FHA loan funds for projects depending on the nature of your loan. For example, FHA rehab loans do not allow ...