Oregon and the real estate advantage of 203K Loans

In cities across Oregon and Washington, homes that are distressed and left in disrepair, are becoming a problem. Usually, a property can become victim to disrepair if a homeowner is unable to do necessary repairs or if they are in foreclosure or short sale affecting both the show ability and curb appeal. Most potential home buyers and investors may overlook the home. However, this could be a great option for Oregon home investors or home buyers with vision.

The Willamette Valley has many opportunities for these types of distressed or investment homes that would qualify with a 203K loan. They are great for investors and first time home buyers who are willing to wait, why repairs are made. We see a lot of homes both on and off the market that needs repair or would make great flip opportunities in areas like Lebanon, Albany, Brownsville, Eugene, Springfield, and some other smaller towns.

In Central Oregon and areas like Bend, Redmond, Sisters, Sunriver, and Prineville we don’t see too many of these homes due to the real estate market there. However, there are pockets in Redmond, La Pine, and Prineville that still have some of these types of homes available on a more frequent basis.

203k Loans

In communities across the United States, distressed properties are becoming an increasingly common problem.  When a home owner is forced out of their property by a foreclosure or an extended short sale, a home can fall into a state of disrepair making it unattractive to prospective home buyers.  Traditional mortgages only allow buyers to borrow against the value of a house and can not provide funds to renovate a home. This means that the costs of repairing a distressed property must either come from the buyer’s own funds or from an interim loan which often has unfavorable terms, such as high interest rates.  Many buyers are unwilling or unable to buy distressed homes due to these restrictions.  A FHA 203(k) mortgage offers an alternative.  These loans cover the price of buying the home, plus funds for repairs, providing an attractive mortgage for buyers who are willing to buy distressed properties and make them into dream homes.  The 203(k) usually carries a lower interest rate and because the cost of repairs is folded into the loan, a borrower can pay off the mortgage over a traditional 15 or 30 year amortization period.

With a 203(k) mortgage, buyers may borrow up to 110% of the value of a property once it is repaired or the current appraised value of a property, plus the estimated costs of repairs, whichever is less.  Additional funds may be granted for cost effective improvements in energy efficiency or the installation of solar panels, but the total price of these improvements, plus other repairs may not exceed 110% of the completed property value.  The property must have a minimum of $5000 worth of repairs or remodeling costs to be eligible for a 203(k) loan.  These may include repairs for safety, structural integrity, and certain cosmetic repairs, although using 203(k) funds for luxury items is prohibited.

The limitations and legalese of these mortgages may seem confusing or daunting to some buyers, but as borrowing a 203(k) becomes more common, many lenders are developing a streamlined process for granting these mortgages.  A real estate agent may also be able to provide pertinent information.  A 203(k) loan makes good financial sense, particularly when a home can be bought for well under its appraised value.  The sweat equity a buyer will be able to put into the home as a result of the renovation will likely end up netting them a sizable profit once the market has recovered.  The 203(k) also provides a great opportunity for buyers to put their own personal touch on a property.  These factors make the 203(k) an attractive mortgage, which smart home buyers should consider.