A 203(k) loan might be the right solution for a house with a damaged foundation.
Homes that come with serious foundation problems often come at a serious discount. The problem is, it's often difficult to get enough money from a traditional mortgage lender to pay for the purchase of the house and the foundation repairs that are required to make it livable. Fortunately, buyers can apply for a 203(k) loan from the Department of Housing and Urban Development's Finance Housing Administration (FHA). A 203(k) loan provides not only funds for the house purchase itself, but for any repairs--including those targeting a home's sagging foundation--that are needed.
Instructions
1. Search for a mortgage lender or bank who has been approved to work with FHA loans. Once you find one with which you are comfortable, explain that you are interested in purchasing a house with a 203(k) loan from the FHA.
2. Make copies of the financial paperwork that your lender or bank will use to determine that you have a high enough gross monthly income to afford your new mortgage payments. These papers include the most recent copy of your federal income tax return, last two paychecks, savings and checking account statements, credit card bills and other loan statements. Your lender will want your monthly debt payments, including for your estimated new mortgage loan, to be less than 36 percent of your gross monthly income.
3. Hire a licensed contractor who specializes in foundation repair to give you an estimate of what it will cost to repair the home's foundation. Add this cost to the home's purchase price to determine how large of a loan you will need. This is the loan amount that you then apply for with your mortgage lender.
4. Give your lender permission to run your credit. This will provide your lender with your three-digit FICO or credit score. This number instantly tells lenders how responsible of a borrower you've been. A score of 720 or higher will qualify you for the lowest mortgage interest rates, while one under 620 can make it difficult to qualify for a 203(k) loan.
5. Hire an appraiser to determine how much your home will be worth once its foundation repairs are made. Your lender will want to make sure that it is not lending you more money than what the home will eventually be worth.
6. Set a closing date for your loan if your lender approves your application for a 203(k) loan. At the closing table, you'll sign the papers and pay the fees that make your loan official.
Tags: mortgage lender, foundation repairs, gross monthly, gross monthly income, home will, house with, lender bank