Search for Good Value

After you've located 203(k) advisors who know what they're doing, search for a property that offers good value for the money. In Quentlin Henderson's case, his Realtor found him a bargain-priced, six-year-old house that was in a sorry state because its former owners had abandoned it as a result of foreclosure. "The good news for people who buy such houses," says HUD/FHA's office in Orlando, "is that purchase prices are generally low so that after repairs are made, the home's new value often produces instant equity."

Not surprisingly, the term "instant equity" was also used by John Evia-niak, a 203(k) homebuyer in Baltimore. "Not only can you buy a property and fix it the way you like," John says, "but you can buy a home for much below its market value, put some money into it, and create instant equity. There were a lot of other houses we checked out, but we were going by the profit margin."

Wanda Stokes, a 203(k) loan specialist in Indiana, says her typical loan is with buyers who spend $50,000 to $100,000 for a home, add $20,000 to $25,000 in improvements, and then end up with a home appraised at $100,000 to $150,000. But Wanda adds that she recalls one customer who borrowed $147,000 to pay $98,000 for a house and cover $50,000 in renovations. Upon completion that property appraised at $188,000. (In higher priced areas, larger amounts apply.)

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