7 Steps to Obtain an NJ Real Estate Fixer-Upper Loan

If you want to buy NJ real estate but are in need of more cash, consider purchasing NJ real estate that is in need of some repair

 

Potential homeowners who do not have a lot of cash should think about purchasing NJ real estate that needs some work. A Federal Housing Administration 203(k) loan is a unique offering for those buyers, but be aware of the challenges presented when applying for this type of loan when you are not an experienced home rehabber. Government regulations along with additional financial risks associated with inexperienced buyers can make approval for this particular loan very difficult.

Read on to learn more regarding the process of obtaining a 203(k) loan:

Have Adequate Cash Available

As of early 2011, you need to have a minimum of 3.5% of the property purchase price plus in order to qualify for this type of loan. For example, if you were buying a NJ real estate that had an asking price of $200,000 and that needed $10,000 in repairs, you would need 3.5% of $210,000, or $7,350, as your down payment.

Be Sure You Are a Solid Loan Candidate

Along with meeting the typical requirements of a good credit score and a steady income, you will need to make sure you are able to make the monthly payments on the NJ real estate in which you wish to purchase. Also, the property needs to be at least one year old, and for owner-occupants only, not investors.

Choose the Most Suitable Loan

Before you apply, you will want to determine which type of 203(k) loan you will need. There are two types of this mortgage; "regular,” meant for properties in need of structural repairs, and "streamlined" or "modified," designed for properties that need only nonstructural repairs. Your NJ real estate agent and/or lender can help you make this determination.

Choose a Lender

Any time you are applying for a government-subsidized mortgage, your choice of lenders will be limited. 203(k) loans in particular are uncommon, so many lenders either will not know how to process them or will not want to deal with the extra paperwork involved. Due to the fact that this is an involved loan process, it is best to choose an experienced, FHA-approved lender.

Create Your Proposal

In addition to the usual loan application requirements, such as proof of income, proof of assets and credit reports, the 203(k) application requires the creation of a rehab proposal, a description of the work to be done on the property with itemized cost estimates. Architectural exhibits, such as a plot plan and proposed interior plan, are required for any structural repairs, and remember that the work must be completed to professional standards and in a timely manner. Also, if you plan to do the repairs yourself, you cannot use the loan to pay yourself for your labor; you can only use it toward the cost of materials.

Get an Appraisal

The home you wish to buy must be appraised as it would be for any loan, except that the NJ real estate appraiser must estimate what the value of the home will be after the repairs and improvements are made. An as-is appraisal may also be required, but occasionally the purchase price can represent the as-is appraisal.

Hire Assistance

Some people choose to employ a 203(k) consultant to help them complete all the excess paperwork required for this type of loan. The fee to hire such a consultant can be included in the mortgage as long as it does not exceed HUD's established limits. For example, for NJ real estate requiring $15,001 to $30,000 of repairs, a consultant should not be charging more than $600, according to HUD.

 

The NJ real estate market is changing rapidly and expanding into new avenues almost daily. Sometimes it can be very difficult to find the answers you need on a specific topic or issue. In times like these, you need a real estate professional who will provide valuable information and trustworthy advice. For more information about NJ real estate, call us today or click here to be connected with one of our top real estate specialists.