Buying a fixer-upper? Here’s one way to help pay for your home — and renovations, too.

For more than four months, Amina Thompson-Wright and her husband, Dannelle Wright, tried to buy a home in Southwest Philadelphia, where they had rented for a decade. But sellers kept rejecting their offers.

So they switched their strategy. They started considering homes that needed work.

“When you see something new and shiny, that’s what you gravitate towards,” said Thompson-Wright, a 44-year-old social worker for the city. “But those were the homes we could never seem to get.”

Through an estate sale, they closed in July on a vacant home that hadn’t been updated since it was built in 1965. It had a crack on the side that stretched from the foundation to the third floor.

“You could literally see inside the house from outside,” Thompson-Wright said.

The new homeowners didn’t have to come up with more money for the extensive repair or take out a second loan. They financed both the purchase and renovations with a single home loan through the 203(k) program offered by the U.S. Department of Housing and Urban Development, a program that can allow the average home buyer to rehabilitate a property. It’s a key part of a federal plan to preserve the nation’s aging housing stock.

Some local real estate professionals said more home buyers are considering fixer-uppers because the supply of homes for sale is so low. Mortgages that combine money to buy a home with money to fix it up, including loans offered through Fannie Mae and Freddie Mac, are one option for these buyers, depending on the property, extent of work needed, and buyers’ financials.

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Ed Fallon, a Chester County-based mortgage consultant at Prosperity Home Mortgage, gives presentations about 203(k) loans at the invitation of real estate firms and said, “I probably did more in the first few months of this year than I did all of last year.”

These types of loans still make up only a fraction of mortgages, and more interested borrowers and agents doesn’t necessarily mean more renovation loans. In the first three months of 2023, 26 Pennsylvania property buyers used 203(k) loans in the five-county region, compared with 61 in the first three months of 2022, according to the Department of Housing and Urban Development.

The department is trying to get more people to use its program and has been collecting feedback from lenders and consumers. In its call for public comment, HUD called the program “an important tool for community and neighborhood revitalization and the expansion of home ownership opportunities.”

Some reasons these loans are attractive:

Some reasons these loans aren’t more widely used:

Removing barriers to programs such as 203(k), according to HUD, “can help support HUD’s goal of increasing the available supply of affordable housing in underserved communities.”

In the competitive housing market of the last few years, buyers who wanted to use these types of loans had a hard time getting their offers accepted, said Art Verbit, Delaware County-based vice president of mortgage lending and a renovation specialist at Guaranteed Rate.

“As the market has started to cool a little bit over the last six months or so, you’re seeing more interest,” he said. “And sellers and Realtors that are more willing.”

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The loans work best when homes need major work, and ideal properties are those owned by banks or sold through estate sales, Verbit said.

“I tell people about 203(k)s all the time,” said Stacey Middleton, a Realtor with Berkshire Hathaway HomeServices Fox & Roach, Realtors based in Delaware County, “because it gives them an opportunity, like so many other products, that they don’t know about.” But Thompson-Wright was her first client to say yes.

In March, contractors finished her home’s major renovations, including a new kitchen and main bathroom and new flooring, ceilings, and lighting.

Thompson-Wright’s favorite part of the 203(k) program was the consultant who came with it and advised her throughout the renovation process, starting with an initial report laying out the work needed and estimated costs.

These consultants, who report to loan officers, also can recommend trusted contractors to bid on projects. Thompson-Wright’s consultant reviewed her contractors’ work and released funds periodically as work was completed to her satisfaction.

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As someone who had no construction background, Thompson-Wright said, she felt protected against scams.

“To have that added support, that security, it was like a comfort,” she said.

Catherine Hall, executive director of the National Association of FHA Consultants and a 203(k) consultant based in Bucks County, said buyers often make the mistake of contacting consultants too late, which delays closing. She recommends buyers find one as soon as they decide to purchase a home that looks like it needs work.

Consultants have been dropping out of the industry, and for the last three years, Hall has been trying to grow their numbers. She is in talks with HUD to get them raises, which she said they haven’t had since the 1970s.

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Hall said now is a great time for home buyers to look at these rehabilitation loans, since homes in general are less affordable to the average buyer, and “the less expensive the home, the more it needs repairs.”

Besides the crack running up Thompson-Wright’s home, contractors found cracks in the plumbing when they opened the ceilings to install lighting. Now that repairs and upgrades are finished, Thompson-Wright is glad she went with a fixer-upper.

“I have more house for less money than less house that’s newly renovated that’s overpriced,” she said.