December 21, 2011 in Investing In Real Estate
One of the toughest things about the economy for rehabbers is not just getting the houses sold when they are finished, but finding buyers that can get financing.
Ken Corsini posted a great article on the Bigger Pockets Blog about this very subject. Everyone should know about these programs, so I am re-posting this informative article on my blog for my readers. I have provided a link to the original article at the bottom.
Here are 3 potential loan programs that all investors should be aware of as possible marketing tools for selling property:
203K Loan – HUD developed the 203K loan through FHA a number of years back as a tool to allow homeowners to purchase and renovate their primary residence through this rehabilitation loan. The guidelines are similar to an FHA loan except the 203K actually lends the money for the acquisition as well as the repairs with minimal down payment. As an investor, marketing a wholesale property that has not yet been fixed up in conjunction with a 203K loan is an excellent way to find possible buyers. I would suggest that an investor partner with a local loan officer who has a lot of experience and success with this loan program before marketing it with the property.
Federal and Local Grant Programs – Most metropolitan markets have benefited from federal and local grant programs such as the HOME, HOPE, and Community Development Block Grant Programs developed under HUD. As this grant money finds its way down to state and local municipalities, money becomes available for specific neighborhoods and individuals to help with down payments, closing costs, etc. As an investor, becoming aware of the various grant programs in your area can be an incredible tool in helping to market your properties. I have found that many of the larger lenders in a particular region, especially those that do a large number of FHA loans, have access to and knowledge of these types of grant programs. Aligning your marketing efforts with a lender who has access to grant money can be a very effective strategy.
USDA Loans – USDA loans, also called Rural Development Loans, are typically only available in slightly more rural locations. The program was developed to help rural communities thrive by making land and property more affordable for individuals. I have found that while it’s intended for rural communities, many locations qualify for these loans that are not as rural as you might think. The great thing about USDA loans is that borrowers can get 100% financing with some flexibility on credit requirements. Investors should always check the USDA website to see if their property may be eligible for a USDA loan. If so, it’s a great way to market a property with 100% financing.
As always, the more educated an investor can be in regards to financing, the better off he or she will be. Having the ability to present favorable loan programs to entice prospective buyers is an essential tool for any investor.
If you would like to see the original Bigger Pockets article you can find it here.