“Right now, the minimum credit score is 620, which is still pretty liberal, and for the down payment, they’ll need to put down 3.5 percent of the sales price of the home plus the cost of repairs. … The interest rate could be higher (than a traditional mortgage) but just a touch; it’s at about 5.25 to 5.5 percent,” said Marsack of FHA loan terms that include a Department of Housing and Urban Development 203(k) loan to make repairs.
After doing a bit of homework, researching the options available — short sales, foreclosures, the less common deed in lieu of foreclosures, and auctions — and enlisting professional help, all it takes is some gumption and seed money, or a good enough credit score, among other requirements, to apply for financing.
Many lenders will not finance a home that is in disrepair, said Jeff Marsack, a loan officer with Great Lakes Mortgage Funding in Sterling Heights, so in many cases, would-be investors will need to either seek Federal Housing Administration financing or have cash on hand to purchase the property.
The 203(k) loans — the Streamlined Limited Repair Program is for repairs that total under $35,000, and the Full 203(k) for repairs exceeding $35,000 — do have some restrictions: They’re for primary residences only and can not be used for investment properties; and the work, which must be done by licensed professionals, must be completed and inspected within six months of closing.