The Search (Part 2)

Let me start off by stating the stats before I bought and closed on my house.

87 houses... from end of July until mid-October when I put an offer into a home.

of that...

23 were Foreclosures

12 were Pre-Foreclosures/Short Sales

5 were Estate Sales

14, I would actually consider as "Move-In Ready" under my terms.

33, the rest, were homes that had features I would love, but then features I couldn't stand that would cost $5K - $10K to fix.

My stack of listings... yes, I kept them all!

 1 home, I actually put an offer in (it was a Foreclosure) and lost the sales war.  Hindsight is 20/20, but now I am SO glad I did lose.  The buyers won by a mere $2,000.  The home actually is in the same neighborhood I ended up in; I walk by with my dogs every night to see, almost 2 years later, that the house is still very much in a renovation war zone.

At first, I saw a mix between Move-in Ready's and Foreclosures.  It wasn't until the latter half of my search when Michelle said,

"Miyu, you obviously need a project.  You're not going to settle for a home that is utterly and completely done."

When I announced to my friends and family that I am going to buy an old home and restore it... everyone's first reaction was... "How are you going to pay for it?"

Property Brothers, Love it or List it, Flip This House, those are some famous TV shows that take renovations into account before buying or selling a home.  However, the majority of Americans just don't have $30,000 saved up on top of what they save up to buy a home to do renovations on a house.  So, how do you fund a renovation?
 
Well, the answer is an FHA 203k Loan.  Most people are afraid to touch a loan that most realtors are unfamiliar with.  A lot of Banks don't do the loan, because of its complicated nature.   Some sellers are unfamiliar with the loan, so they reject your offer.  Yes, it also takes about a month more to close.

203k, in a nutshell, allows you to purchase a home that is valued less than what it could be worth (either because it is outdated, it's a foreclosure, or there's structural flaws to the house, etc.), then allows you to put restoration/renovation money all-inclusive into one mortgage.  Many years ago, before the real estate crash, people were allowed to put "construction fees" into their mortgage when closing, even with a conventional loan.  What happened?  People bought stuff with that extra cash that had NOTHING to do with upping the value of their home... vacations, new cars, etc; and when it came time to either sell their home, their home was way overpriced because of how much they owed on their mortgage.  So, what happens?  Short sales, foreclosures... those are to name a few.

With 203k, there comes some strict guidelines.  FHA will "micro-manage" you on how you use the renovation money by requiring you to hire an HUD inspector (on top of the regular inspections) who will come out and observe your renovations.  They will release money as the HUD inspector allows (honestly, my HUD inspector was awesome... he just let me have however much money I needed at the time to pay my contractor).  This is for the Full 203K loan, there is also a Streamline 203k loan, that I will write in another post.

Michelle and I decided to go with it anyway! (Did I mention that she's amazing?)  She and I did so much research on 203k loans our heads hurt.

So, here we were, in mid-October, standing in front of a gorgeous A-line Tudor style home.  The neighborhood was ideal.  I inhaled a deep breath of the crisp autumn air... I had a good feeling about this one.