Agent: Sammamish Residents - Research Mortgage Options Well, Know There are Choices for Short Sales

Maneuvering through the maze of mortgage possibilities takes patience and research. It really is important to first know what you want and research the conditions even before speaking with a loan officer. A little online research will go a long way in preparing you for a productive meeting where you have the knowledge to understand the options and can compare costs from several mortgage brokers. E-loan.com is a good first step in gathering useful information that is directed specifically to your situation.

There are new types of loans that are available to all mortgage brokers and some loans that are specific to individual banks. Protect yourself by checking with several lenders.

Few loan options are available when a homebuyer wants to buy a house in need of repair or maintenance or to perform needed maintenance on an existing home. If available, required down payments and interest rates are usually higher. 

If you are thinking of purchasing a , there is a new loan option to consider. This just may be what you need to not only successfully purchase a fixer upper, a short sale or a bank-owned home, but also to include the cost of repairs. Many of the distressed properties have been neglected and are in need of maintenance. Buying this type of home could be economically feasible but could create financial problems.

 The FHA’s (Federal Housing Administration) 203(k) loan could offer a solution.

There are two parts to this government-backed loan. Because this is a government-backed program, there are rigorous rules, procedures and documentation required. The buyer can secure a permanent fixed-rate or an adjustable-rate loan which will finance both the purchase and up to a $35,000 rehabilitation of the property. The borrower must be approved for 203(k) financing, identify the property with contingencies for the loan, hire a FHA 203(k) consultant, request bids, hire a certified contractor and included some type of energy saving improvement. 

An appraiser will justify the purchase price based on the projected value of the property after the work is completed. The maximum loan amount is 110 percent of after-improved value. The rehab funds are held in escrow until after the home closes. Work must be completed within six months. This type of loan is offered by most lenders.

Key Bank’s Community Program also allows the cost of repairs to be included in the loan, but with less stringent requirements. The bank can finance up to 105 percent of the appraised value with improvements up to $50,000. The minimum borrower contribution is a small $500 which can be gifted and a maximum 3 percent seller contribution is allowed. Since the loan is manually underwritten by Key Bank, all of the paperwork and extra cost required by FHA is eliminated. Thom Kalmbach, a mortgage broker with Key Bank in Issaquah, believes that this is a great opportunity for first-time homebuyers as well as homeowners that are looking at necessary repairs: "My clients have been very excited about this program. With a minimum of a 620 credit score and no PMI(private mortgage insurance) which adds substantially to monthly payments, and the ability to finance a single family home, a condo or even a manufactured home, this loan opens the door to home ownership for many."

These are certainly not the only requirements for either of these loans. It is hoped that by reviewing the highlights, homebuyers understand that financing is available and there are options that will enable them to take advantage of the decrease in home values and purchase a home. 

Joan Probala is the managing broker for Issaquah Windermere (Windermere Real Estate/East Inc.). She has 30 years of experience in real estate, construction and sales.