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Loan officers and brokers are scrambling to adjust to today’s real estate market and close more loans. Besides declining markets, credit tightening, and the disappearance of loan programs, some markets are filled with foreclosed homes that have suffered from disrepair and neglect. The majority of the banks that own these foreclosed properties are unwilling to repair these homes. As such, many of these houses do not quality for traditional loan programs because the property itself does not meet the minimum standards in order to quality as acceptable collateral for most conventional loan programs.

This potentially negative situation is a real opportunity to savvy mortgage professionals who use the Federal Housing Agency’s (FHA) 203(k) rehabilitation loan program.

This loan program provides the funds for both the renovation and purchase of a home. The maximum loan amount depends on HUD-determined loan limits which are set on a county by county basis. For example, on the low side, a single family home in New Mexico has a loan limit in most counties of $271,050; while in California, the maximum loan amount for a single family home is set at $729,750. You can find HUD county limits at https://entp.hud.gov/idapp/html/hicostlook.cfm.

Two reasons that someone might not suggest a 203(k) loan to a borrower is the belief that obtaining it is a hard and time consuming process. Although there is more involved in completing a 203(k) purchase than a normal loan, most 203(k) loans can still be closed within 30-60 days from start to finish. Additionally, though there is more work involved than on regular purchase loans, that extra work can translate into a sale that you wouldn’t have otherwise had. In this case, more work equals more money.

Here are some of the potential benefits of a 203(k) loan:

* Low Down Payment.

* Mixed Use Properties Eligible — Subject to maximum percentages based on number of stories and percentage of commercial use.

* SFR, Condos and Townhomes allowed.

If you are a real estate professional wanting to help more borrowers get into a home, the FHA 203(k) could be a key ingredient to your success.