With the current real estate market inventory continuing to shrink, even the most qualified buyers are experiencing difficulties in finding homes for sale that fit their needs. This situation becomes even worse when the right home appears on the market, only to be snapped up immediately by another hungry buyer. If you are tired of dealing with an overly competitive buying situation and are willing to explore new possibilities, considering the purchase of a distressed home may be just what you need to help blaze a trail to successful home ownership.
Less competition from other buyers
The first reason to consider a distressed home is that there is likely to be far less competition from other buyers, especially when there are visible condition or curb appeal issues. This happens because a significant portion of those currently trying to buy a home need to do so quickly to meet work or family obligations. In addition, many buyers may not have the time, skills, or financial reserves to renovate a home or make repairs.
Prospective buyers who can overlook the initial condition of a distressed home and see its potential can broaden their inventory of available homes and increase their chances of success in a seller's real estate market.
Potential for customization
One of the most attractive points to consider when viewing a distressed home is its potential to be customized to fit the family who will live there. Unlike a standard home listing, where the sellers have carefully painted and prepared, a distressed home can be a blank canvas on which the buyers can choose the colors, designs, fixtures, and finishes they prefer.
Availability of special financing
If the two points mentioned above make sense, but you are still worried about having the cash to pay for the repairs on top of the purchase price of the home, you may not be aware of the availability of special financing for these homes. The Federal Housing Administration (FHA) offers attractive home mortgage options specifically designed to help buyers purchase and renovate homes that need significant repairs or renovations.
FHA 203k home loans share many of the features and qualifications of the more common FHA home loan. Limited to owner-occupant buyers (and some non-profit organizations), they cannot be used to purchase properties for the purpose of flipping them or homes to be used as rental investments.
Like standard FHA home loans, the 203k home loan is offered through local banks and mortgage lenders and guaranteed by the FHA. Credit requirements are also based on the ones used in standard FHA home loans, allowing buyers with less-than-perfect credit to successfully become a homeowner.
The biggest advantage of the FHA 203k home loan, however, is the fact that it allows buyers to secure financing for both the purchase and renovation in one process. In certain situations, FHA 203k home loans can also cover the costs of rent or mortgage payments on the buyer's current home during the renovations, to ease the financial stress of living in one home while purchasing or renovating another.
Searching for distressed homes
Distressed homes come from many sources, including local and national banks and mortgage lenders. Since most may be listed well below the amount they would normally sell for, using real estate apps to search them out by price range can be frustrating.
Prospective home buyers who are interested in purchasing a distressed home and want to learn more about the process required and about distressed home availability in their local area should start by sitting down with a competent real estate professional. The agent will be able to explain the process of purchasing a distressed property, including the importance of utilizing inspections, as well as offer more insight about the FHA 203k home loan.