ATLANTA-CDC Federal Credit Union has begun participating in the "Buy and Build" mortgage program - and suggests that "every credit union should be doing this."
Buy and Build - also known as the 203(k) streamline loan, is made possible through the Federal Housing Administration (FHA) for homebuyers to finance up to an additional $30,000 on their mortgage to improve or upgrade their home before move-in.
"It's a loan where you can provide the purchase and the renovations in one loan. This type of loan is uniquely targeted toward homebuyers who have a specific need in the marketplace," said John Murphy, VP of mortgage services for the $164-million CU. "With our current economic situation, the loan is a viable option for those looking to purchase a foreclosure without the worries of additional financing. It is simply underwritten into one single loan amount."
The loan enables buyers - who would traditionally first purchase a home and then take out an additional line of credit union to make upgrades - to quickly tap into funds to pay for property repairs identified by an inspector or appraiser.
"The appraiser comes out and recognizes deficiencies and then the buyer gets a contractor out there," Murphy said.
How The Program Works
Once the loan is written, homeowners have up to 90 days to complete all work. The loan is written at a fixed rate for 30 years, without a second mortgage or line of credit, with a 3% down payment. The program can also be combined with various first-time homebuyer grant programs to satisfy down payment requirements.
The loan is designed for relatively minor renovations, Murphy noted, that are non-structural.
"It covers all the things usually found in foreclosure," he said. "They don't have to go back in and get a second mortgage. Every credit union should be doing this. It's the best loan program out there by far."
Murphy said there was no cost in launching the program other than staff hours.
"You have to have a staff that can do it or use a CUSO," he noted.
The first target for CDC FCU's marketing efforts is the local real estate community. Murphy hopes the loan will appeal to existing members, in addition to attracting new members.
For more info: www.cdcfcu.com.
