A hot topic here in Miami is distressed real estate. With all the foreclosures and REO (real estate ownership) properties on the market for sale, there are some great deals out there. The FHA 203k loan, sometimes called an Energy Efficiency Mortgage or EEM for short, is a program that is available to help you purchase a distressed property and rehab it with “green” energy efficient upgrades.

It’s no secret that many foreclosures or REO properties have deferred maintenance. So the electrical system may not be working as it should, the hot water heater may be leaking, the air conditioner may need to be repaired or replaced with an energy efficient unit. Perhaps the paint is dull and needs to be renewed. All of these upgrades or repairs (and many more!) can be added to the cost of your mortgage, making your home more energy efficient and helping you reduce your carbon footprint. Although there are strict lending guidelines that banks and lenders must follow, fortunately there are still funds available to lend and return these distressed properties to modern living standards with the FHA 203k loan. Even if you have less than perfect credit, the FHA is on your side to help make your dream of homeownership a reality!

FHA loans are flexible when it comes to bad credit. If you have early credit, the FHA may approve a loan based on a single business line and a single credit score, while conventional loans require no fewer than two of the three credit scores. FHA is also great for first-time homebuyers who may have limited funds in the bank. The FHA 203k program allows buyers to make a down payment as low as 3.5 percent (although it’s a good idea to make a larger down payment). Another advantage of FHA is that you can still qualify, whether or not you can demonstrate consistent work history for the previous two consecutive years. FHA loans are really forgiving.

Even prospective borrowers with the most severely damaged credit still have hope. Those with judgments, liens, collections, foreclosures or bankruptcies, who are interested in taking advantage of the struggling real estate market, can still achieve their dreams of home ownership. Here are some guidelines to follow:

–Collections: All collection accounts will not be required to be paid prior to closing. Each commercial collection line will be reviewed on a case-by-case basis. If the charge still appears on your credit report, satisfaction may be required to remove negative trade lines prior to closing.

–Bankruptcy: Chapter 7 bankruptcy discharge must be two or more years from loan application and show reestablished credit on all recent lines of business. Chapter 13 must show at least 1 year of payments to court after restructuring. Late payments are not allowed since the bankruptcy began.

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

–Liens: Federal liens are not eligible, such as a tax lien. Links must be paid for or, at a minimum, a payment plan must be established. Federal loans, like student loans, cannot be delinquent and must be current prior to application.

So if you’ve been daydreaming about grabbing a great deal in the Miami real estate market, you’re probably in a better position than you think. You don’t need to be a bench warmer. You can play too!