Get A Loan At Closing To Repair That Foreclosed Minneapolis Duplex

masonry constructionOne of the challenges many first time home owners face when buying a foreclosed Minneapolis duplex is the cost of repairing and deferred maintenance or damage. 

After all, when you spend your savings on the down payment and have to wait several months to get your $8000 first time home buyer tax credit check, how can you afford to make the place livable?

It’s important to remember for the last several years FHA has offered a loan called a 203k construction loan. Basically, you can get a loan for up to 110 percent of the rehabbed value of the property, with the money left after purchase being allocated for construction and repairs.

The 203k is one loan, as opposed to a first and second mortgage.

There are stipulations to these mortgages, including that the improvements must be made by licensed contractors and the bank pays those vendors directly.

Historically, these loans have typically been more expensive than a straight FHA loan: as much as 1 – 1.5 percent higher.

However, a loan officer who specializes in 203ks told me yesterday in the last several months, interest rates on them have been just .25-.85 percent higher.

That seems like a pretty affordable way to finance the repairs and updates so many of these distressed properties require.