Resident Advatage & PRO Newark

The home buying process offers buyers many opportunities when buying a home. For some, that means a fully renovated, ready to move in property for their first home. On the other hand, the perfect home may be out there for you, you just have to put your personal stamp on it. At Newark Land Bank, we have options for you. No matter what type of buyer you are.    

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NLB offers buyers the opportunity to purchase Rehabilitation Homes in the Newark area to make their dream home. Some of the benefits of purchasing a Rehabilitation home include, allowing the homeowner to build equity, allowing the buyer to renovate at a lesser cost than buying a new build, allowing the buyer to personalize their home to suit their individual needs, and finally improving the community in which the home is purchased. In this case, your Rehabilitation home will help the community of Newark while also allowing you to put your personal stamp on your home.    

             
In order to qualify for a Pro Newark and Resident Advantage, you must be a first-time home buyer that will live in the home according to the guidelines. These guidelines can be found on our website. The home must be your principal residence and you must reside in it for 5 years. The buyer must show proof of an ability to finance, at minimum, the cost of acquisition and renovation.    

Applicants are encouraged to hire contractors to perform rehab on their behalf. Please note that NLB assumes no liability for contractors hired by applicants. With Rehabilitation Homes, properties are sold to the most qualified bidder.    

To register for this program, you will need to create a user account on the website, submit the application and the non-refundable application fee, schedule an inspection, and NLB will schedule a date to inspect the property.    

Once these steps have been done, you will then submit a bid package. It must be signed, dated, as well as notarized. It should include scope of work, as well as a budget that must be provided by the contractor along with the contractor’s license. At this time the buyer must also show proof of funds.    

When evaluating a property, the potential owner should do a walk-through inspection, express their renovation requests to the contractor they choose, or have multiple contractors along for the journey to get multiple bids. The contractor then will determine the cost of renovations including labor to complete. Once the numbers are agreed upon, then you would sign the contract with the GC regarding the timeline for the completion of the job.    

Finding the right contractor is very important with Rehabilitation homes. Contractors need an up to date contractor’s license. Please note, licenses are renewed on a yearly basis and should reflect the current year. Ensure that the contractor has a current insurance policy. Policies are also in yearly increments.    

Ask the contractor about their most recent projects to include pictures and reviews from other clients. Finally, it may be helpful if the contractor has completed a 203k project in the past as they will be familiar with the terms.    

Financing a Rehabilitation Home using an FHA 203k loan requires a pre-approval in which you will be evaluated based on four things: income, debt/liabilities, credit, and asset/down payment (at least 3.5 percent)    

A 203K loan is a government program that allows you to rehab a property with the opportunity to gain equity. With a 203k Loan you can build as much as 110 percent equity with the renovations of the home.    

It is important to find the right contractor to itemize the bid with material and labor cost. The right contractor will work with HUD inspectors to ensure they maximize their time at all stages of inspection, including knowing when to call the inspector out to sign off on jobs.    

The 203k loan allows the buyer to include mortgage payments into the loan when projects are projected to keep the home buyer out of the house during the renovation period which would result in the buyer paying the mortgage and rent for wherever they stay in the meantime.    

The loan has a 10-15 percent contingency. If the contractor quotes you a renovation budget of $100k, it needs to be $10k less for anything that could potentially go wrong.     Rehabilitation homes are available for purchase below market value and allows the home buyer to gain equity in the property once the renovation is complete. In order to qualify, you need a full 1003 application with signed disclosures, a purchase agreement, and a 203k maximum mortgage worksheet.    

Contractors get half the amount at closing to do the renovations for a limited 203k. It is important to go with a contractor who has the money to do the job. Family members are not permitted to do the work as it is a conflict of interest. Find a reputable contractor. Work to be done cannot be more than 110 percent of the appraisal value on the home. Renovations cannot include luxury items such as hot tubs and swimming pools.    

When budgeting for a Rehabilitation Loan, ensure pre-purchase costs, set aside a contingency of at least 10 percent, prioritize remodeling needs by what is necessary to ensure you stay within the budget, choose the right people, research what others have paid for work similar to work you want done, bring more than one licensed contractor on a walk through to have comparative pricing.    

Newark has a Closing cost Program called Live Newark Home Closing Cost program. It provides $10k no-interest loans to first-time homebuyers to purchase a home in Newark. In a five-year period, 20 percent of the loan is forgiven for each full year you live in the home. Visit https://www.newarknj.gov/card/live-newark-program for more information.    

Finally, with a rehabilitation home, here is a timeline. You have 6-12 months to complete renovations after closing. Staff will schedule routine check-ins throughout this process, at the 30, 60, and 90 day mark. There will also be a check-in at the 30-day prior to completion mark to ensure the project will be completed on time, and schedule final inspections at that time also. For more information on this and other home buying processes, please read through the website.

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