Renovation mortgage helps couple revive foreclosed home

Mortgage lender: Terry T.

Terzakis.

Property type: Single-family home in Guilford.

Purchase price: $189,225.

Loan amount: $228,690.

Appraised value: $270,000.

Loan type: FHA 203-K renovation mortgage

Backstory: Terzakis often works with young, first-time home buyers. One such couple recently came to him looking to purchase a home in Guilford with a desire to keep their budget in the low $200,000s, but in Guilford, finding a move-inready home under $250,000 is a challenging task.

So Terzakis discussed with the buyers the idea of finding a fixerupper at a lower price point. With a little (or a lot) of TLC, they could renovate and customize a home to their taste and build instant equity.

The buyers explained they were not expecting to receive much, if any profit, from the sale of their current condo and only had a small savings for a down payment so they did not believe finding a fixer-upper would be an option for them.

The solution was a 203-K Renovation Mortgage. This government-insured program allows a home buyer to finance both the purchase and renovation costs for a new home all rolled in to one mortgage. And best yet, the down payment requirement is only 3.5 percent of the purchase price, plus the costs of the renovations.

With this information in hand, the couple began their pursuit for their new home and indeed found just the right house — a bank foreclosure. The location was perfect. The layout and space were exactly what they wanted. But the condition was little to desire: A kitchen partially gutted, the back deck in disrepair and there were damaged floors and siding.

Once their offer of $189,225 was accepted, they contacted a local contractor who provided a proposal for the desired renovations at a cost of $35,772 then returned to Terzakis to apply for their mortgage. Twenty-eight days later they closed and got to work on fixing up their new home.

They now have a kitchen they are proud to show off to their friends, a new deck for entertaining, other cosmetic updates and even new central air conditioning. Best yet, the home appraised in value for $270,000.

Since they only had to borrow $228,690, they gained more than 15 percent equity in their new home with only having to have a 3.5 percent down payment.