Five Ohio cities made the “Top 15 List” of cities where homebuyers can find fixer-upper bargains, according to a new report from RealtyTrac. Overall, the Midwest dominated the list, with 10 of the 15 cities located in Midwestern states. Detroit was number one and Chicago ranked second for cities where homebuyers can find the best deals on fixer uppers. The state of Ohio had the most cities named, with Cleveland ranked at number three, Cincinnati at number five, Toledo at number nine, Dayton at number 11 and Columbus at number 12.
Residential Finance, a nationwide lender based in Columbus, Ohio, sees great opportunity for potential homebuyers willing to take on a home that needs repairs, but advises consumers to be aware of special financing considerations.
"Fixer-uppers are fantastic, but consumers should educate themselves on the options available for loan financing, including rehabilitation loans. Not all loans will work to finance repairs for a fixer upper because the present-value appraisal of the deteriorated house can limit the lending options," says Brandon Davis, branch manager.
A Federal Housing Authority (FHA) 203(k) renovation loan is one option, Davis notes.
"With a 203(k) loan, the lender looks at the home as though the improvements needed are already completed. For example, if a buyer is looking to purchase a home that has a leaking roof, the 203(k) loan amount is based on the value of the home as if the roof had been repaired," Davis says.
So far in 2013, Residential Finance has seen a steady increase in loan applications for FHA 203(k) financing, said Keith Zabrocki, referral desk manager with Residential Finance.
"Another great option is Fannie Mae’s HomePath program," Zabrocki said. "A buyer can purchase a home with only three percent down and no appraisal is required. Both the FHA’s 203(k) program and the HomePath program have been instrumental in helping consumers purchase fixer-upper homes."
However, homebuyers should make sure they are working with a knowledgeable mortgage expert familiar with the intricacies of rehab loan programs, Davis says.
"These loans are more complex, so they require a well-informed mortgage professional who truly understands how to originate and review the details of rehab loans, so they can go through without a hitch."