Have Bad Credit? How to Use FHA 203k to Purchase Distressed Real Estate

A hot topic here in Miami is distressed real estate. With all of the foreclosures and REO (real estate owned) properties on the market for sale, there are good deals to be had. The FHA 203k loan, sometimes called energy efficient mortgage or EEM for short, is a program that is available to help you purchase a distressed property and rehabilitate with energy-efficient “green” improvements.

It’s no secret that many of the foreclosures or REO properties have deferred maintenance. So it’s possible the electrical system does not work as it should, the hot water heater could leak, the air conditioner may need to be serviced or replaced with an energy efficient unit. Maybe the paint is dull and needs to be freshened up. All of these updates or repairs (and many more!) can be added into the cost of your mortgage, making your home more energy efficient and helping you to reduce your carbon footprint. Although there are tight lending guidelines that banks and lenders are required to follow, luckily enough there are still funds available to lend and bring these distressed properties back up to modern living standards with the FHA 203k loan. Even if you have less than perfect credit, FHA is on your side to help make your home ownership dream come true!

FHA loans are flexible when it comes to bad credit. If you have premature credit, FHA can approve a loan based on a single trade line and a single credit score, whereas conventional lending requires no less than two of the three credit scores. FHA is also great for first time home buyers who may have limited funds in the bank. The FHA 203k program allows buyers to put as little as 3.5 percent as a down payment (even though it’s a good idea to put down more). Another bonus of FHA is that you may still qualify whether or not you can demonstrate consistent work history over the previous two consecutive years. FHA loans are really forgiving.

Even prospective borrowers with more seriously damaged credit still have hope. Those with judgments, liens, collections, foreclosures or bankruptcies, who are interested in taking advantage of the distressed real estate market may still reach home ownership dreams. Here are some guidelines to follow:

–Collections – Not all collection accounts will be required to be paid prior to closing. Each collection trade line will be reviewed on a case-by-case base. If the collection still shows on your credit report, satisfaction might be requested in order to remove the negative trade lines prior to closing.

–Bankruptcy – Chapter 7 discharge of bankruptcy should be two of more years from loan application and show reestablished credit on all recent trade lines. Chapter 13 must show at least 1 year of payments to the courts after the restructure. No late payments are allowed since the bankruptcy started.

–Foreclosure – Foreclosures will not disqualify you from obtaining a FHA loan. However, buyers must typically wait a minimum of three years from the foreclosure date prior to purchasing (possibly less if you have extenuating circumstances and have established good credit).

–Liens – Federal liens are not eligible, such as a tax lien. Liens must be paid off or at minimum, a repayment plan must be established. Federal loans, such as student loans cannot be delinquent and must be brought current prior to application.

So, if you have been daydreaming about taking advantage of a good deal in the Miami real estate market, chances are that you might be in a better position than you think. You don’t need to be a bench warmer. You can play too!

How To Get Your Solar Energy Tax Credit

There are a lot of good reasons to go solar for your home or business. Many Bay Area homeowners have a solar system installed to protect themselves and their families against rising energy rates. While it is difficult to forecast exactly how much electricity costs will rise, or how quickly, one thing is certain – they will continue to go up. Conversely, an investment in solar for your home or business not only decreases or even entirely eliminate monthly electricity costs, it can also increase the property value of a home and lower the operating costs of a business. A third and very important financial incentive is the federal government’s generous solar energy tax credit.

The solar energy tax credit allows a homeowner to reduce the amount of income tax that they would otherwise have to pay the federal government. This credit is good for 30 percent of homeowner’s investment in their solar system, including solar panels, a charge converter, battery, and inverter, but only for the next three years. The credit will drop to 26 percent in 2020, and 22 percent in 2021. After 2021, the solar energy tax credit for residential customers will be eliminated entirely. While there is a chance the credit could be extended, many homeowners considering solar are planning to install their systems within the next few years to take advantage of the credit.

For commercial businesses looking to go more green, they can qualify for up to 70% off with solar tax incentives. Not only will you qualify for a 30% Federal Tax Credit but you can accelerate the depreciation of your solar system over 5 short years. These tax incentives are equivalent to 60%-70% of the system cost, leaving you needing only 3-4 years of energy savings to recover your entire investment.

In addition to the financial benefits of the solar energy tax credit, many people choose to go solar because they feel solar energy is a more environmentally responsible solution. Solar energy is both sustainable and renewable. Solar energy provides a zero-emission way to power buildings, and appliances, heat water, and refuel electric vehicles. The more popular and widespread that rooftop or carport solar panels become, the more they reduce the load on coal-burning power plants.

With buildings accounting for 38 percent of all carbon emissions in the U.S., going solar can significantly decrease our carbon footprint. A typical residential solar panel system will eliminate three to four tons of carbon emissions each year-the equivalent of planting over 100 trees annually. Going solar is not only a great way to go green, but taking advantage of the solar energy tax credit – before it expires – is a great way to save some green.