From the "Bradenton Herald". Distributed by McClatchy-Tribune Information Services and the Florida Association of Realtors

BRADENTON, Fla. – July 21, 2008 – The faltering real estate market has left many homeowners feeling trapped in homes that no longer suit their needs, but an under-utilized, government-insured loan may be the antidote for some.

An FHA loan established in 1996 known as a 203k rehab loan can help homeowners redo their existing home or even help interested home buyers buy a fixer-upper and rehab it without having to take out a second loan.

Experts think the loans could help those looking to get deals on foreclosed properties that were vandalized or stripped by previous owners.

"The main thing you've got to find out is what it is going to cost you to repair it," said Tami Dewey of Sunrise Financial in Sarasota.

Like other FHA loans and mortgages, the 203k requires a 3 percent down payment. FHA loans are often misunderstood to be government issued loans when in actuality, the government insures the loan given by a traditional lender.

Whether homeowners are looking to update a home they are currently residing in or a home they are purchasing, homeowners must be planning a minimum of $5,000 worth of improvements to qualify.

"Most lenders, when dealing with a HUD-certified consultant, are usually happy to do it," said Jim Shafer, owner of Shafer Enterprises, Inc.

Shafer's job as a HUD-certified compliance inspector is to make sure the lender and the homeowner are getting quality services at a reasonable price.

The 2004 storm season did a number on Nikki Yates' home in Myakka City and when she and her husband went searching for the best way to fix their 1972 ranch-style farm house, they found they could do more than just fix their leaky roof.

Dewey and Shafer worked with the Yates family, who, in addition to getting a new metal roof, added 1,000 square feet to their home and revamped the interior of the existing structure.

"For what we owe on the house, the value is twice that," Yates said.

She oversaw the work with Shafer's help and got additional upgrades from the original plans.

"We were able to get what we wanted," Yates said.

Participants have six months to get work done but can file for extensions if they run into problems, whether it's weather, health or the unforeseen, Shafer said.

"For those who are thinking, now is the time to remodel but how do we get it done, this is one option," he said.

The Yates' upgrades included storm protection options that have lowered their annual homeowners insurance costs by $2,000.

The 203K loan is a construction loan and a mortgage wrapped into one. HUD even requires a 10 percent reserve in case the homeowners or contractors find additional problems or costs that exceed the original estimates.

If not all the monies allotted for the repairs and updates aren't used, the remaining funds can be applied to the principle of the loan.

Dewey admits that the paperwork can take a bit longer than a traditional mortgage but says many Realtors and clients often think the process is more complicated than it actually is.

"We probably never would have gotten the house the way we wanted without that kind of loan," Yates said.

HOW TO APPLY FOR AN FHA 203K LOAN:

1). Get pre-qualified by a mortgage broker who works with FHA loans.

2). Find a property, if you are not updating a property you already own.

3). Have home appraised as-is.

4). Decide and price out the work you plan on doing.

5). There is a 203K packet that needs to be completed by a HUD-certified inspector.

6). Secure the loan and work with the HUD-certified inspector, who will help you every step of the way from start to finish.

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