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 Looking to Buy a 'Fixer-Upper'? The 203k Program Can Help Make It Happen

In North San Diego Coastal real estate today's real estate market presents a lot of opportunity for interested home buyers-with the growing supply of foreclosure properties and short sales, there are certainly some great deals to be had.

Some San Diego home buyers find the problem in buying a "distressed" property, however, is that these homes are often damaged due to lack of maintenance or prolonged vacancy. So while the price tag might be right, the investment necessary to make the home livable might just push buyers well beyond their budgets. 

As a member of the Top 5 in Real Estate Network® and the vast experience that comes from serving hundreds of home buyers and sellers needs over the past 21 years, I have access to the latest information on mortgage and financing options. One particular option that is providing hope for many of today's home buyers is HUD's FHA 203k program, a loan that enables buyers to not only secure a mortgage, but receive the funds necessary to improve the home as well.

Here are five facts about the 203k program to help you determine if it might be the right fit for you:

1. The FHA Section 203k program was originally introduced by HUD in 1978 as a program to rehabilitate and repair single-family homes. The 203k is a single mortgage loan that provides funds to purchase a home and make repairs and improvements. A simpler version, the Streamline 203k, was introduced in 2005. This version offers less documentation and lower loan fees for renovations that don't exceed $35,000.

2. In today's market, conventional financing, which often requires 20% - 25% down on a home and a perfect credit score, is often hard to come by. However, with less-than-perfect credit and as little as 3.5% down, you can get an FHA loan, such as the 203k.

3. The 203k approval process is a little more complicated than a conventional loan. For example, you're required to secure renovation costs from an established, licensed contractor and deliver a package of the proper paperwork to the lender to secure FHA approval. Make sure you work with an agent-like a member of Top 5-who is well-versed in the 203k program, or who can connect you with a lender that is.

4. The 203k loan is not just for foreclosure or distressed properties. More than 80% of the homes in America were built before 1990-that's over 100 million homes that are 20 years old or older-and almost every one is in need of some amount of repair and updating. The 203k loan, therefore, offers advantages for almost any home purchase.

5. The 203k loan is not just for home purchases but can be used to finance a home improvement, as well!

For complete details on the HUD 203k program, you can visit www.fhainfo.com/fha203k.htm. Please feel free to e-mail me,  if you have further questions, or call Loren Sanders at 760-602-1000  

Check out these available North San Diego Coastal homes that are distress sales  

Another program you may want to consider if you are a home buyer looking for a low down payment option alternative to a FHA home loan, check out HomePath properties. These homes are part of FANNIE MAE's Homepath program, there is also a HomePath Renovation program as well.

The special financing available on Fannie Mae HomePath properties offer benefits that include:

 Closing Cost Assistance and Appliance Incentive for Fannie Mae Homes

Fannie Mae is offering a 3.5% incentive* for buyers who purchase and close on a Fannie Mae-owned home between January 28 and April 30, 2010. Buyers purchasing properties listed on this site that are closed within this period may receive up to 3.5% of the final sales price for:

• Closing costs;
• The purchase of new Whirlpool® appliances by Fannie Mae; or
• A mix of closing costs and appliances, at the buyer's discretion, up to the maximum 3.5%.

To be eligible for this incentive:

• Offers must be accepted on or after January 28, 2010
• Property sales must close before May 1, 2010
• Buyers must be owner-occupants, investors are excluded

*Lenders may impose their own limitations on the use of the 3.5% incentive, so buyers should consult their lenders for guidance.

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Short Sales in North San Diego Coastal Cities of Del Mar, Solana Beach, Cardiff by the Sea, Encinitas and Carlsbad are likely to rise significantly this year. If you are in the market to purchase a short sale or if you have questions about short short sales in general click here for short sale questions & answers

There were some very interesting points raised in this discussion today on CNBC. What do you think about the points the CNBC reporters were making? What about those made by Professor Brent White from the University of Arizona in his recent research paper ?

The lead in from the CNBC host was an interesting attempt to sensationalize Professor White's observations. Professor Brent White's basic point was corporate America and home owners are living by two different sets of rules. It is clear from all the bailout and intervention, there are two sets of rules. Financial institutions were given trillions of dollars and yet many of the banks have been unresponsive and unhelpful in countless situations with the average borrower. My thinking on this situation has changed over time due to the lack of good faith coming from bailed out banks. There is a story in the bible about a debtor that's large debt was forgiven only for that man to be harsh with someone owing him a much smaller amount of money. It did not go well for the harsh lender in that parable. It might be wise for the many "bailed out banks" to read Matthew 18.

There were 3 CNBC reporters pointing out why Professor White was wrong & they did a poor job in my opinion. I am curious to see what people think about this interview, lenders and borrowers alike. Also, was it just me, or were the looks and words coming from Michelle Caruso-Cabrera over the top? She said banks are paying too by absorbing big losses. This is true, but they have been given trillions of tax payers money with very few strings attached and they were the ones offering and approving these loans.

From a ground level perspective: In many of the short sale situations I have worked on representing home buyers & sellers alike, the banks are very slow to answer short sale request. They are very slow to answer loan modification request and it is unfortunate because everyone is suffering from the lack of commitment from lenders to accept their portion of the blame in these situations. 

There is plenty of blame to go around. In some cases, loan officers helped people select loans that were very risky & lenders made loans they should never have made. Buyers bought homes they should not have purchased and real estate agents sold homes to folks that would have been better off with smaller homes or renting. There are many borrowers that simply bought at a high price and are stuck in a bad situation, maybe a lost job or? There are many good people being hurt.

Obviously assigning blame is easy. The hard part is fixing the problem.

A couple things that come to mind are simply to make any financial firm that accepted tarp money hire enough people to get through the massive number of loan modifications and short sales that need to be completed. When a bank has been presented with a viable short sale package from a borrower the lender should be required to do an appraisal and give a price they will accept based on the market value. (If this were to happen banks would get a higher price for short sales) Also, some rules of the game would be helpful. Banks should also give borrowers and real estate agents the exact criteria they will use to accept or deny a short sale and make a commitment to have them closed in a timely manner. (This would help the banks net more money from the sale as well)

Real Estate agents should be required to be educated on short sales through some standard process and be certified to work these files. I am sure there are many more good ideas on what could be done to move through these issues and I would love to hear your thoughts...post it here or email me.

If you are looking for savvy ways to search and find the right coastal home, consider this link.  These are coastal pre-foreclosure and foreclosure deals that are through out North San Diego County coastal communities. We are happy to set up a detailed search of homes, that can include many filters, so the homes sent to you are most likely to fit your criteria. We can update you the minute a home is listed or once a week, twice a week...you decide. Here are homes from $350,000 to $750,000.

Interest rates are very low but many industry experts believe they know what will happen when the Federal Reserve slows, and eventually stop's, it's trillion dollar spending spree buying up mortgage backed securities. Mortgage rates are very likely to rise, some say as much as 1%.

Right now there are very good 5/1 adjustable rate mortgages in the 4% range with conforming 30 year fixed rates hovering around 5%.

It only makes sense that rates will be going up when the Federal Reserve completes it's massive purchases of mortgage backed securities. At this point there is debate at the Fed about what exactly to do. Recently the Wall Street Journal ran a story about the debate at the Fed. It seem that they will continue the purchases until March of next year. My guess is that rates will begin to rise in anticipation of the inevitable end to the program.

Foreclosure rates have bumped up in the higher price ranges lately, which should make for some bargains over the next year in higher dollar homes. Many of the prime coastal communities that held up pretty well are now feeling the pain. At the same time the upper tiers of the market are sinking the lower level homes are finding strength and a reduced level of foreclosures.

North San Diego County Real Estate Sales

September 2009 median single-family detached homes in North San Diego County

increased 6.28%, from $430,000 in September 2008 to $457.000. The median price OUTSIDE North County for single-family homes fell 0.01 percent from the $350,000 a year ago.

The average days on the market for September 2009 was 67 days, down from 72 the prior month.

There were 3,669 (active and contingent) SFD listings in North San Diego County

ending September 2009, and 7,173 (active and contingent) listings in San Diego

ending September 2009.

The number of North San Diego County SFD units sold increased 6.65 percent to

770 in September 2009 from 722 in August 2009, and increased 0.79 percent

year-over from September 2008.

Have you ever been in line at a store and discovered while you were at the cash register ready to buy something that you left your wallet at home? Now you are down to the cash in your pocket. I had one of these experiences just today and fortunately I had my checkbook in the car. So it all ended well at Albertsons this time.  

This got me thinking about the Jumbo Loan Market and sluggish upper end real estate sales in San Diego. The jumbo loan market has been in turmoil and higher priced homes have been slow to recover with many locations still going down. Many well to do buyers, with good credit, have likely been dragging their feet because of the high premium they have to pay over conforming mortgage loan rates (loans over $697,000 in San Diego County). The other issue with many entrepreneurs and retired people is, they were in line to buy a home, they were putting down 20, 30 or 40% and they were given rates that made them think twice or the rules changed while they were trying to get a loan and they just decided to forget about it all together. There is no doubt this is having an impact on the higher price ranges throughout San Diego and around the country. To be sure there are many of these folks that could pay cash for a home and that is exactly what many of them do, but the funny thing is...when we are paying cash for large items many times we lower the price of what we are buying because we take a deeper look at what we really need versus what we may want or can afford on a monthly basis. Many industries would be devastated if they were reduced to cash only sales.

The good news is that lenders are wading back into the jumbo loan market right now and while 30 year fixed loan rates still are not great there are some pretty darn good jumbo 5/1 ARM and 7/1 ARM loans in the 5% range.

The second bit of great news for those folks looking to buy a higher priced home there is an abundance of inventory to choose from in many locations which means there are going to be some very good deals had in the upper end in the next year. Lower priced homes have bottomed and are experiencing multiple offers in many coastal North San Diego neighborhoods. So if you are looking there you better be ready for action.

We have many great tools to help you find the right home and get a sense of what is happening real time where you want to live or are selling a home. If you want to know what exactly is happening in Carlsbad right now in the 1.2 million to 1.6 million range, or if you want to see how many months supply of homes there is for 5+ bedroom homes in Encinitas we specifically tailor a report to exactly what you are looking for. Get your snapshot reports that give you 8 data points, or pictures of your specific area of interest in the real estate market.  Search for homes on your iPhone or other mobile device too.

Million Dollar Plus in Carlsbad

We are here to serve and would be honored answer any of your real estate questions. Email Loren@Coastalhomefinder.com or call (760) 602-1000.

Below is the chart for months supply of inventory of 5+ bedroom homes in Encinitas over the past year, the months supply of inventory is down but it still sits at 10 months supply which is in the "Buyers Market" territory.

This is a pretty good explanation of the Housing and Economic Recovery Act,

if you are buying or selling a home You will want to understand this, so sit back

and enjoy the video. It was put in place July 30, 2009 and the effects will change the

game in real estate sales that involve a loan. I would think within the next three months

we will see if there is a negative impact, as many are predicting or people addapt and

we learn to live with it. I think in the end the real question should be is if the public

is better served by the new rules.

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