Saturday, April 28, 2012

FHA 203K Mortgages - Light Rehab of Up to 35K in Repairs

The Federal Housing Authority or FHA also offers the 203k loan that is for light rehabilitation to a dwelling that requires $35,000 in repairs or less. This is called the Streamline 203k loan. This loan is great for buyers who may pass on a home because it needs minor repairs. This loan is different from major rehab version of the loan by the same name and eliminates paperwork and simplifies the rehab fund process.

How it Works

The 203k Mortgage for light rehabilitation works for homes for sales as well as improvements to existing homes. Its features include 30 year fixed or adjustable loans, 110% loan to value ratio, appraised value is given after the improvements are made to enhance the homes worth, and is great for minor rehabilitation repairs or revitalization.

You must occupy the home within 60 days after the repairs are completed and funds are disbursed to the contractor you pick in two stages. First, a 50% materials draw is funded and when the completion of repairs is 100%, the remainder of the funds is released.

Quick Facts

The Streamline minor rehab loan may be calculated into the original loan balance creating one loan. It can be an adjustable or fixed rate and the mortgage balance can exceed the purchase price of the property. Borrowers do not have to hire professional engineers or architects. A home inspector or an appraiser will create a list of needed or recommended repairs or improvements and you can do the repairs yourself, or hire a contractor.

Eligible Rehab Repairs

This loan is used mostly for light cosmetic repairs not exceeding $35,000 and includes roofs, gutters, and downspouts. It may also be used for HVAC systems, electrical, plumbing, minor improvements to kitchens or bathrooms, flooring, interior and exterior painting as well as new windows and door and weather stripping and insulation. The 203k light rehab loan encourages funds for handicap accessible improvements, energy efficient additions, removing lead paint, and the addition of decks, patios, porches, septic and well system. A buyer may also purchase new kitchen appliances and a washer or dryer.

Ineligible Rehab Repairs

Items not eligible are landscaping and yard work and major remodeling or rehabilitation to any dwelling. It is also not for moving walls, adding rooms or fixing extensive structural damage.

What Are the Terms?

With the 203k light rehab loan, no minimum loan balance is required; however, buyers must intend to occupy the property once the light rehab repairs are complete. The property may not be vacant for more than 30 days and all work must be completed within six months. You do not have to hire a HUD approved contractor; however, a professional must complete your light rehab repairs. All repairs must commence within 30 days after the closing.

Who Does the Work?

This type of mortgage allows the buyer to select their licensed contractor and the lender will review the contractor's experience. The lender will get a firm estimate from the chosen contractor and buyers may even arrange to complete some of the work themselves. If you go the do-it-yourself route, the lender will require documentation showing that you are qualified to complete the light rehab repairs.


The StreamlineK light rehab mortgage is great to make improvements to your owner-occupied home if the repairs are under $35,000. If the repairs fall below $15,000, the lender is not usually required to perform an inspection and a letter from the borrower is sufficient along with contractor receipts as notice of completion of work.

Perspective homeowners now have the option of buying a home in need of light rehab repairs and it's a lot less paperwork than the major rehab version. The 203k Streamline line loan may also be used as a home improvement loan. If the home you are looking at needs minor rehab repairs, ask your lender to check on this mortgage loans availability.

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Wednesday, April 25, 2012

Red Flags Of The FHA 203k Renovation Loan

Fixer-upper homes, foreclosures, short-sales and REO properties have flooded many housing markets across the country. This can be a great thing for home buyers looking for good deals. Unfortunately it also means a lot of housing stock is in need of some TLC. From simple upgrades and improvements to renovations and repairs, many homes need work. Fortunately there's a mortgage loan program that takes aim squarely at these less-than-desirable houses, and turns them into dream homes!

You may have never heard of the loan program backed by the Department of Housing and Urban Development (HUD) called the FHA 203k loan. The 203k hasn't seen much press since its inception in the late 1970's. Since then, lenders have been able to partner with state and local housing agencies, as well as nonprofit organizations to rehabilitate properties. Despite this great move, the 203k remains largely in the shadows. Some of the reason would be a stigma attached to the FHA 203k that it's a difficult loan to deal with. But that doesn't have to be the case. The Standard 203k from the 70's can have issues with difficulty or timing, but an experienced mortgage advisor should be well-equipped to handle this loan program.

Also, the 203k Streamline was added to the program a few years ago. Now home buyers have another option to finance home improvements, repairs, renovations, or rehabilitation.The basic difference between the Full and Streamline loans is the money you can roll into the mortgage (the Streamline covers up to $35,000) and the kind of work that's covered (the Full will cover structural repairs). So whether it's new paint, carpet, siding, appliances or windows that you want to replace, or it's something that you need to replace because it's a structural issue, the FHA 203k can help by rolling the cost into the mortgage.

FHA 203k Red Flags

The unfortunate thing about the 203k is that many people either haven't heard about it, or they've heard the loan program is bad. Let's take time to dispel the rumors and negativity about this mortgage loan.

Closing times are too long. Quite often the problem with the FHA 203k loan program is that those involved may not have a grasp on all of the inner workings of it. This starts at the top: your mortgage consultant should be a 203k Specialist. This person should work with other professionals who are well-versed in the loan and the work it takes. While getting the loan set up and closed could take a little longer than another program, it generally should not take more than a week or two longer. Getting the bids in on the work is often what adds to the process, which is why contractors need to know about the 203k. It's also why we work hard to offer continuing education to real estate professionals in our service areas. The more people educated about the program, the more powerful would-be borrowers we will have.
  • Bids, contractors, draws - it's just too complicated.. The 203k definitely has a of working parts. Working with your lender, a real estate agent and the contractors can be a huge undertaking. One way to take care of the stress is to work with a lender who's a 203k Specialist. A mortgage consultant should have a trusted network they work with to help get the job done efficiently.
  • Instant equity is a myth. Actually, the 203k can take the place of the old home equity loan. Whether it's a purchase or a refinance, the future value of the home after the improvements or repairs gets factored in, creating instant equity. Let's look at the number: a home for sale for $80,000 in an area with homes valued at $140,000 might need $40,000 in upgrades or repairs. That means a mortgage loan of $120,000 for the house and the work. You now have $20,000 in instant equity.
  • It costs less money and less work to just rent. There are costs involved whether you rent or own your home. Whether it's lawn care or utilities, you will need to do the work yourself or pay for it if you own your home. A landlord might cover all of that if you're renting. However, the equity you will build and the freedom from a renter's nightmare outweigh those perks. Also, it's a buyers market right now with home values low and interest rates still hovering at near-record low levels.
The FHA 203k is designed to help turn neighborhoods around, and build up housing stock from run-down homes to livable, desirable dwellings. While cutting through the government red tape can be a hassle, arming yourself with knowledge can position you to be a powerful, educated consumer.

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If you're interested in a 203k loan let the 203k expert, Mike Young, help you! With many years of experience working with and training others in the 203k loan, he will be able to help you every step of the way.

Sunday, April 22, 2012

Is a HUD 203(K) Consultant Required on Your Rehab Loan?

HUD is the acronym for the U.S. Department of Housing and Urban Development. HUD offers low-cost dwellings and grants to assist families in getting decent housing. FHA, or the Federal Housing Administration, is a division of HUD that provides mortgage insurance for loans on single-family homes that are the main residences for eligible families.
A 203(k) consultant has been approved to operate as a consultant by submitting the requirements requested by HUD and the FHA. These requirements mainly consist of experience in the construction and home inspection industry that allows the consultant to function in the capacity required in the 203(k) rehabilitation loan process.
Once the requirements have been met, HUD certifies the individual as a "203(k) Consultant". This certification allows the individual to operate as a consultant on loans insured by the FHA. The consultant is issued a certification number and the consultant's position can be researched on the HUD website by either looking up the certification number or the consultant's name.
The loans are typically originated by an FHA approved lender and once the borrower has met the requirements for the loan and the property qualifies for the program, the loan is issued and the repairs and improvements can be completed. See below for the HUD website that lists all approved 203(k) lenders by area.
What Does a 203(k) Consultant Do?
There are two kinds of loans under the 203(k) loan program. The first one is the "203(k) Streamline" and this can be used for minor repairs and cosmetic upgrades, but not for more extensive repairs or repairs concerned with structural repairs and upgrades. This loan has a maximum amount of $35,000. A 203(k) Consultant is not required for this type of loan, however it is recommended to make the procedure smoother.
The regular 203(k) loan covers more extensive repairs, additions and structural upgrades. The maximum amount for this loan varies by neighborhood.
Look into maximum loan amount by area here:
Check lenders in your area here:
On a regular 203(k) loan, a 203(k) Loan Consultant is obligatory. A consultant is involved from the inception of the loan process and continues to be involved throughout the construction until all the work is complete. The consultant inspects the property to assess its condition and evaluates what sort of repairs must be made per the HUD guidelines, called "Minimum Property Standards". If any of these requirements are in need of repair, the loan must have a budget amount to cover those repairs.
Above and beyond the minimum repairs that are required, the homeowner can borrow extra money to make repairs such as rehabilitate a kitchen or bathroom, or constructing a new addition. The consultant works with the borrower, the lender and the contractor to ensure the budget covers all the required repairs per HUD, the desired repairs by the homeowner and the various fees, such as permit costs and contingency budget to cover unforeseen items. Along with this budget, the consultant prepares all the necessary paperwork required by FHA and the approved lender to help fund the loan.
Once the loan funds and the construction has started, the consultant will visit the property to verify that the construction is being done per the specifications initially agreed upon and to verify that the contractor's billing is in line with the progress on the project. At this point the consultant will prepare a progress billing and present that to the lender for further processing and payment.
When the project is finished, the consultant will visit the property to make sure all the work has been completed properly, per the specifications and to make sure the permits have been signed off by the building inspector of record. When all these requirements have been met, the consultant forwards the final paperwork and billing to the lender and the remaining funds from the loan are paid out.
The 203(k) loan program is an terrific program for home repairs and when you have an experienced lender, contractor and a good consultant involved, it makes the process smooth. The loan is, to a degree, more complicated than a standard loan, but if you are working with experienced people, you will likely not run into any issues.

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Thursday, April 19, 2012

FHA 203(k) Loan Program Provides Money For Home Repairs and Renovations

Thinking about buying a fixer-upper, but worried about coming up with the money to pay for the construction costs? Or are you wanting to renovate your existing home but just don't have the available time or money? If so, the FHA may have a program to solve your problems. The section 203(k) program administered by the FHA provides funds to prospective and current homeowners to make repairs and/or do renovation work. A 203(k) loan combines a home's purchase price and cost of repairs into one FHA mortgage, with only a 3.5% down payment.
A growing number of people are taking advantage of this program, a reflection of the large housing inventory caused, in large part, by foreclosures resulting from the recent economic turmoil. The FHA reports that the number of 203(k) loans taken out in 2008 nearly doubled from the previous year, with 2009 experiencing a 40% year over year increase. Potential homebuyers, attracted by relatively low market prices on foreclosed properties, are often left to contemplate how (and when!) they are going to be able to pay for the repairs once they purchase the house. This is not an uncommon scenario as foreclosed homes, which are often left abandoned, typically need extensive repairs. The 203(k) loan program solves this problem by enabling homebuyers to finance the construction work and start repairs on the home immediately after a loan closing. All residential properties, not just foreclosed homes, are potential candidates for the 203(k) loan program.
What is the FHA 203(k) Program?
The FHA 203(k) program is a home rehabilitation and repair program, designed to revitalize neighborhoods and spur homeownership. It can be used by people who are looking to purchase a new home, or by existing homeowners wanting to do repair or renovation work on their current home. What consumers end up with is a single FHA insured mortgage - the loan amount consisting of the home's purchase price (or current loan balance in the case of an existing homeowner) plus the estimated costs of the construction work.
Normally, someone purchasing a home that is in need of repairs has to first obtain interim financing for the rehab repairs and then additional financing to purchase the home. In this scenario - once the repairs are complete the homeowner must then take out a new mortgage to combine the two loans. With the 203(k) program, on the other hand, a borrower need only obtain one mortgage, which covers the home purchase and the property rehab.
The 203(k) program comes in two flavors; a standard version and a streamlined version. With the standard program, the construction costs must be at least $35,000. The maximum construction costs are limited only by the estimated "as-improved" value of the house (i.e., the value an appraiser estimates the property will be after repairs/renovations are completed). All FHA mortgages, with or without a 203(k) loan, are subject to mortgage loan limits. The mortgage amount can range from $271,050 to $729,750, dependent on where the home buyer resides. The total mortgage amount, which would include any cost of repairs, cannot exceed 110% of the "as-improved" home value. The streamlined 203(k) program is used for situations where the construction costs are under $35,000.
To be eligible, properties must be one to four family structures that are at least one year old. Condominiums may qualify, though there are some added restrictions and limitations. Additionally, FHA allows "mixed use" properties (i.e., properties with both residential and commercial use) to be eligible for the program.
A partial list of what you could use a 203(k) loan for include; replace a roof, add a room, remodel kitchen or bathroom, landscaping, update appliances, repair termite or water damage, update electrical and/or HVAC systems. It's also important to keep in mind that the program requires certain repairs (if needed) to be made. These mandatory repairs deal specifically with bringing the energy efficiency of the property up to code.
The FHA 203(k) loan does not come without some added costs and other potentially negative factors. Consumers need to carefully weigh the pros and cons in order to decide if this program is right for them.
o Homebuyer will incur fees up and beyond the normal mortgage closing costs. A supplemental origination fee - which is the greater of $350 or 1.5% of the portion of the mortgage that is being used for rehab purposes - is required. Additionally, a fee consultant (who is HUD approved) must visit the site prior to the appraisal to ensure compliance with program requirements. Expect to pay $100-$200 for this service.
o Takes longer time to close on mortgage loan - up to 4 weeks longs than a normal conventional mortgage
o Have to use an FHA approved lender. Though many such lenders exist- not all lenders will participate in the 203(k) program.
o Some lenders may prefer to deal with a home buyer who is able to pay cash for a home (versus someone using the 203(k) program) due to getting a quicker loan closing turnaround.
o Expect more paperwork than a normal conventional or FHA loan
o Access to funds needed to complete repairs and/or renovations
o Convenience - homebuyer does not have to find separate financing for construction, plus construction begins immediately after loan closing
o Speed of construction - the process of completing construction work is typically quicker than if the homeowner were to conduct renovations on their own
o The 3.5% down payment - conventional mortgages typically call for 10-20% down payments.
o Ability to finance up to six monthly mortgage payments.
The 203(k) Loan Process Step by Step
The 203(k) process has more paperwork and steps than one would experience in a conventional mortgage process. The steps are as follows:
  1. Borrower finds a home to purchase and repair/rehab (or seeks to repair/rehab current residence)
  2. Borrower and their real estate agent completes a preliminary feasibility analysis to determine the extent of work required, along with an approximate estimate of the cost and expected market value of the home once all work is completed
  3. Sales contract is executed
  4. borrower selects and works with a FHA-approved lender
  5. Borrower, contractor, and an FHA-approved consultant meet at the property to determine "required" vs. "desired" improvements
  6. The fee consultant prepares the write-up
  7. Home buyer enlists contractors to make bids - then selects a contractor
  8. Lender gives the construction plan to FHA-approved appraiser to determine "as-improved" value
  9. Lender determines maximum insurable mortgage amount for the property based on the "as-improved" property value
  10. Loan is underwritten by lender- if approved lender issues a "firm commitment" and a loan closing is scheduled
  11. Loan is closed. Funds are set aside in escrow accounts. The loan is FHA insured after loan closing
  12. The work begins. Contractors are paid in draws as FHA fee consultant approves each phase of completed work. Homeowner has six months in which to complete the entire work
  13. After work is completed - and the borrower states that all work has been completed to their satisfaction, a HUD inspector conducts a final inspection. If the inspection proves OK - the lender pays the remaining draw to the contractor. A final 10% may be held back for up to 35 days to ensure no liens are placed on the property
It should be apparent that the FHA 203(k) program offers a viable solution for some home buyers seeking funds for home repairs or renovation. Each individual needs to consider the pros and con's and apply it to their own unique situation.

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Monday, April 16, 2012

Contractor's Guide to the 203k Loan Program

This handy guide provides a remodel contractor all the information they need to get more construction projects going than you might want. It is on you to tell us to slow it down a bit if you get swamped with work. HUD has increased the loan limits across the country so this loan can be used in most any neighborhood in the USA.

With all of the foreclosures on the market that require some repairs the 203k is at an all time high volume. I'll show you how to avoid the pitfalls and gain access to the most powerful remodel product on the market today.

HUD increased the loan limits in "high cost" areas for a single family home to $729,750 and over $1.4 million for a four-plex. While the limits are lower in other areas this still lets you work in just about any neighborhood in the USA. Want to know what the limits are in your area go to the HUD website and type in your county and state.

I'll also show you how to take the work you already get and bump it up. I mean when a customer calls for a bath or kitchen remodel, I'll show you how easy it is to take that smaller job and turn it into a project while giving your customer a greater service and turn this into a whole house remodel project. Your customer gets a low cost rehab loan. A 5-6% interest rate is typical. 

Mike Young
1.707.812.7668 Office
1.704-451-1599 Cell
FAX 1.831.603.9482 FAX

Friday, April 13, 2012

Fast Track Your 203k Loan

Fast Track Your Loan!

Want to get your loan to close faster? Of course you do. It is easy if you put together all of your financial data and have it ready to hand to your lender upon application. You can even get your 1003 application form filled out in advance. Don't wait till the last minute, find a house, then start gathering this info... it may take you a week to get it together. The loan application period starts after you turn this info in to your lender.

Click here for an application kit

Tuesday, April 10, 2012

FHA-HUD 203(k) Loan Program

One of the biggest misconceptions about the FHA 203K loan process is that it is a difficult and time consuming. It is only difficult if your loan officer and realtor are inexperienced with the process. As far as being time consuming, whenever you involve third party consultants and contractors you increase the amount of time a loan takes to close. However, on most renovations there is no reason the process cannot be completed in 30-45 days. I have seen them close in 20 days from the initial consultation to closing. This is true on both the traditional 203(k) and the 203K Streamline. Although the streamline does not require a HUD 203K Consultant, I have found myself consulting on them. At the end of the day, it is still construction and if a homeowner lacks the skill and/or construction background and knowledge, then it is key to have a consultant working in your corner to assure the process remains smooth to completion.

To better understand the process you need to understand there are two different kinds of FHA 203K loans:

The FHA 203K Streamline. This loan is for repairs under $35,000 that do not involve any kind of structural renovations. For Streamline 203K's, the lender may release 35-50% upfront and 50% when the work is completed. The lender will require a final inspection to make sure the work is complete. However, be sure that the maximum of $35,000 is enough to complete the work you want to have done. You do not want to run short of funds before the work is actually done. This can sometimes happen with unforeseen damages during the construction process. In some cases you may only go back to the lender for an additional $2,000. This is depend on your lender and the circumstances.

Full FHA 203K: loans exceeding $35,000 in repairs, the process becomes slightly more intricate. Many times on these when you are doing more extensive repair you will want to involve a 203(k) consultant. He is the key to the project's success. Primarily, the 203(k) consultant is all that is required. The Consultants role is clearly defined at the initial consultation. Obviously, the process can vary from loan to loan and the need to retain an Architect or engineer could arise depending on the complexity of the project.

End Result of the 203K Process

The end result of any process can rarely be guaranteed, but when done correctly a 203K purchase loan with an experienced 203(k) consultant, loan officer and knowledgeable Realtor, home buyers can successfully use a 203K financing to create a custom designed home with substantial equity from day one. And don't forget, you can refinance your existing loan with the 203(k). The key to the success is the 203(k) consultant.

The 203(k) consultant you select should have met the minimum of three years experience as a remodeling contractor, general contractor or home inspector and be listed on the 203(k) Consultants roster at

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Saturday, April 7, 2012

FHA 203K Loan Makes Financing a Home in Need of Repairs Simple

The FHA 203K loan is a type of financing that is insured by the Federal Housing Administration. It is a unique type of financing that allows homeowners to obtain both a purchase loan and rehabilitation financing in the same transaction. Before this transcendent loan program, a homeowner had to obtain an initial, temporary loan to purchase the home and a separate rehabilitation home loan to make any necessary repairs. Only after the repairs were complete could the homeowner gain permanent financing for their newly improved home.

FHA 203K: How does it work?
The FHA 203K loan was designed to streamline the process of buying a home in need of repairs. In order to provide funds for the repairs, the loan amount is based on an expected future appraised value that takes into consideration how much value the completed repairs will add to the current value. Up to $35,000 over the purchase price of the home can be financed into the loan to cover the cost of repairs.

The contractors chosen by the borrower to do the repairs will receive the money for their work in two draws. One draw is for 50% of the work and is disbursed at the beginning of the repairs while the remaining 50% will be disbursed after the work is completed. The repairs must begin within thirty days of the closing of the loan and must be completed within six months. The amount paid to the contractor(s) must be determined before the loan closes by obtaining written bids on material and labor costs. The homeowner can do the work himself provided that he is a licensed and bonded contractor.

What types of repairs will the FHA 203K cover?
Some of the repairs eligible to be completed with the funds from an FHA 203k loan include: roof replacement, electrical or plumbing work, kitchen remodeling, accessibility renovations, appliance purchases, and painting. Although many cosmetic renovations are allowed, luxury items and upgrades are not permitted. Also, any funds needed to repair to any detached structures, like sheds, swimming pools, and gazebos, may not be included in this loan amount.

FHA 203K: Qualifications
The FHA 203K program has the same types of eligibility requirements that exist on any FHA home loan. A homeowner must qualify on the basis of both credit and income to be eligible and the property must be FHA approved. As a general rule, the monthly mortgage payment cannot exceed 41% of the borrower's monthly income and most lenders require at least a 620 credit score. Homes that qualify include: FHA-approved condos, 1-4 unit homes, and planned urban development homes (PUDs). The construction of the home must have been completed at least one year prior to financing in order for the home to qualify.

The FHA 203K program can be a great tool for any homeowner looking to renovate or repair his or her home. In a housing market that has seen foreclosures reach record highs, the FHA 203k loan can not only provide potential home owners with more opportunities to purchase a home, but can also help rebuild the housing market by facilitating the rehabilitation of foreclosed properties.

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Wednesday, April 4, 2012

FHA 203k Loan Guidelines and Requirements

FHA 203k loan requirements and guidelines for qualifying: What buyers and homeowners should know before applying
The FHA 203k loan requirements and guidelines for renovation has the same qualifying requirements as a standard FHA 203B loan which has the most flexible guidelines with minimal down payment than any other type of loan at this time. The difference between the two is that the FHA 203K will allow for the repairs, rehab or remodeling of your home to be included into the new loan while the FHA 203B won't.
So, what are those qualifying guidelines:
Credit and Credit Scores:
Although lower credit scores are acceptable with FHA loans most lenders will require a minimum credit score of 640. Depending on the lender the minimum credit score can vary and exceptions could be possible.
Bankruptcy and foreclosure:
Chapter 7 is allowed if it has been 24 months after the discharge date, provided that good credit has been re-established.
If the Chapter 7 is less than 24 months (but not less than 12 months) it may be allowed provided the reason for the BK was due to extenuating circumstances. Along with that the buyer or homeowner should be able to exhibit the ability to manage financial affairs currently and that the BK isn't likely to recur.
Chapter 13 is allowed after 12 months of the pay-out period provided the performance has been satisfactory and customer receives court approval to enter into the mortgage transaction.
Foreclosure or Deed-in-Lieu is allowed after three years. Court ordered judgments and tax liens must be paid. For existing homeowners Tax liens may be included in the refinance.
Income and qualifying ratios:
The FHA 203k like all FHA loans are full documentation loans meaning proof of income is required.
Full or part-time income can be counted with two years of continuous history with some exceptions for schooling, training, maternity leave etc.
Self-employed /1099 income must be stable with a two-year history.
Rental income is also acceptable with a two-year history
Miscellaneous income is acceptable, including child support, alimony or maintenance payments and Note income but must show a 12-month history and evidence that the income will continue for the next three years
Qualifying ratios are 31/43% which means up to 31% of your gross income ( for w-2 earners) or (net income after expenses for 1099 & self-employed) can go towards the total house payment and up to 43% of your income can go to both the total house payment and other revolving & installment debts. These ratios are bench marks but can be exceeded with an automated approval or compensating factors.
Flexible Down Payment, Source of funds and Reserves:
3.5% minimum down payment is required and can come from checking, savings or other depository accounts such as 401k's. Down payment and closing costs can also be a gift from relatives, significant others or cash-on-hand with paper trail.
Contributions up to 6% for closing cost can come from interested parties involved in the transaction such as the seller and cash reserves are not required on 1-2 unit properties
Well, I hope this helps in giving you a general idea on what the FHA 203k guidelines and requirements are for qualifying. Keep in mind that each lender can have their own variation when it comes to qualifying so the sooner you get started the sooner you will know what to expect.
If you think an FHA loan is right for you then a FHA 203k loan lender who can do both the FHA 203B and FHA 203K will give you even more options and possibilities.

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Sunday, April 1, 2012

What is a FHA 203K Mortgage? Buy a Foreclosed Home With a FHA 203K Mortgage!

With a record number of homes being foreclosed all across the country, you may have investigated purchasing one. But since most of them need some fixing up, you may have thought against it, thinking the savings on the house would be more than eaten up in the cost of fixing it up. Or perhaps you want to keep your home, but it requires a lot of repair. The Federal Housing Administration (FHA) offers the FHA 203K Mortgage that can be used for both of these purposes.

This type of mortgage not only prevents neighborhoods from becoming blighted by a large number of foreclosures, it can also be used to help save the environment by altering homes so that they can become more energy efficient. Some of the green additions you can make include windows, furnaces, appliances, floors, landscaping, solar panels and insulation. Certain repairs can be made by the borrowers themselves and not a contractor.

Although not a loan from the government, a FHA loan is guaranteed by the government.

FHA 203K Mortgages have existed for decades, and have regained popularity in the wake of the sub-prime loan meltdown. Because some banks and mortgagors are struggling to survive due to unprecedented loan defaults, conventional loans are now requiring a 20 to 30 percent down payment. First-time home buyers are hard pressed to come up with this large amount of money.

However, a FHA 203K Mortgage only requires 3.5 percent down. These loans also offer more favorable terms and easier qualification than do conventional loans. If you have at least a good credit rating, even a prior bankruptcy, you could qualify for a FHA loan.

If you want to purchase a home, the amount of money you can borrow will be based on the comparable price of homes in the area. The amount of the loan will be the lesser of its present value plus the cost of rehabilitation, or 110 percent of the appraised value after rehabilitation.

There are a few restrictions on these loans. The homes that qualify for a FHA 203K Mortgage need to be at least one year old and the cost of the needed repairs used be at least $5,000, but that no longer apply. There are additional fees associated with this loan, including a supplemental origination fee, fees to cover the rehabilitation plan documents and appraisal fees.

The time to close can take as many as 60 days, but usually takes from 30 to 45 days.

So, if you see a foreclosed home or maybe a HUD Home for sale don't let the necessary repairs stand in your way of getting a bargain. Talk to your lender about a FHA 203K Mortgage and buy the home of your dreams!

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