By Phil Smith, RE/MAX Editor

If you had an opportunity to close more sales, help your community and become a hero to your clients - all at the same time - would you take it?

By becoming an expert in the FHA's 203(k) loan program, you can accomplish all that.

Under the U.S. program, homebuyers who use an FHA-insured mortgage can combine money to purchase a home with renovation funds in one loan. In the process it can turn blighted properties into neighborhood assets.

The 203(k) program is one of the only feasible ways to get foreclosed homes in need of repair sold and out of inventory, says Sherri Hopper (CDPE, QSC) of RE/MAX Properties in Colorado Springs, Colo., who helped four buyers obtain 203(k) loans in 2009.

"The program is becoming increasingly valuable to homebuyers," Hopper says. "There are so many bank-owned homes on the market and they won't pay for repairs. The majority of HUD homes fall under 203(k) guidelines."

The 203(k) program is only for owner occupants or qualified non-profits, not investors. Buyers can use the loan for single-family homes, condos (interior only) or any dwelling up to four units, provided they're going to live in one of the units.

Althought the 203(k) process is a lot of work and there are a many hoops to go through, it's more than worth it in the end, Hopper says.

"An agent has to stay on top of the process every step of the way," Hopper says, "but it does endear you to your clients when they see how hard you're working for them."

The process is paperwork-intensive, Hopper says, starting at the beginning. Any contractors the homebuyer wants to use must be validated by the FHA. They fill out a questionnaire and undergo a background check. The lender may ask for additional documentation throughout the process, so the agent and buyer need to fully engaged throughout, Hopper says.

Here are Hopper's tips for helping your clients obtain a 203(k) loan:

• Be versed in all 203(k) rules and guidelines. Visit the FHA's 203(k) Web site for details.
• Make sure buyers are aware that closing a 203(k) loan takes longer than a more traditional loan. Prepare them for the extensive documentation it may require.
• Your clients very well might ask you to identify lenders that have expertise in the 203(k); not all do. Be familiar with such lenders in your market.
• Buyers may want help identifying contractors as well. You should have a list of approved contractors and/or advise buyers to have contractors fill out the necessary paperwork. "You need to have all your ducks in a row at the start," Hopper says. "Get the contractors on board and obtain bids before even starting the process." While the FHA doesn't require buyers to obtain multiple bids, it's in their best interest to do so; after all, they'll be paying it off over 15 or 30 years.
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