I recently heard real estate economist, Alan Nevin, say that, particularly in coastal communities, we have a lot of A and B borrowers, faced with C and D housing options.
What he meant was, there are a lot of young professional with good jobs, and dual incomes looking to buy their first home, but are limited in their housing search to older rundown properties. This rings particularly true in coastal communities and metropolitan areas, where new housing isn't being built.
Many buyers end up spending half a million dollars and end up with a home that needs a lot of work.
So after shelling out a large down payment, just to get your foot in the door (pun intended), how will you ever have access to $100,000 to remodel?
A home equity line of credit isn't an option because you don't have much equity. And even if you did, you're getting a second loan on your home, with likely a higher, variable interest rate.
Would you open up credit cards or unsecured lines of credit to renovate? That's not an ideal option.
This is why we are such strong advocates and believe that Fannie Mae HomeStyle and the FHA 203(k) are the perfect loan products. These products allow a buyer to get into a neighborhood that they might not have been able to afford otherwise. Buyers can buy the "worst" home on the block, gain access to money that they never would have had, renovate the property and build their dream home.