Tuesday, July 24, 2012
Using an FHA 203K For Home Improvement
The FHA or Federal Housing Administration is an important part of HUD, which stands for the Department of Housing and Urban Development. Through the FHA, people are provided with a number of mortgage loans for new and existing homes, refinance loans, and even loans that can help with the repair and rehabilitation of a single family home. In the last case, the program known as the FHA 203K is available.
With the FHA 203K, property owners can take a home in disrepair and transform it. In addition to being beneficial for the owner, this is also beneficial for the neighborhood. The Department of Housing and Development has a number of goals but one of their priorities is to create an opportunity for homeownership by offering loans for people with poor credit, those with a low down payment, and owners that need money for home improvement. The goal of the FHA 203K is to help homeowners revitalize the community and neighborhoods by repairing and remodeling homes to improve the community environment. HUD sees this as a very important program to communities around the US.
The FHA 203K loan is a very important option and because of this most lenders provide full support. For lenders that have already secured this particular home improvement loan, the outcome has been sensational. With this loan, local and state housing agencies, as well as nonprofit organizations benefit too. In fact, many lenders will secure an FHA 203K loan, with a variety of other financial options that make rehabilitation easier for the borrower.
Many of the local and state home agencies that deal with finances have designed new programs wrapped around the FHA 203K loan. Then, depending on the agency involved, some will actually stay involved with the property during rehabilitation. With this loan, there is a commitment specific to lower income communities. HUD supports the Community Reinvestment Act and by offering FHA 203K loans, they are being supportive.
In addition to the FHA 203K loan showing communities that HUD is supportive, it also shows communities that the property owners are serious about cleaning up homes and areas that need rehabilitation. With this type of loan, a home can be improved in three ways. The first is for the home, as well as land to be purchased and rehabilitated. Second, the home would be bought and then moved to another foundation to be rehabilitated. Third, existing debt would be paid off and then rehabilitation would occur.
The 203K mortgage financing process is different in that it provides permanent financing. This means that the lender will not close on the loan and release the mortgage proceeds unless the property has been rehabilitated to the point that it will provide adequate loan security. Through this method, the lender is able to assess the risk and require improvements be made until their risk is low enough that the long-term mortgage can be completed.
This program takes away the use of numerous loans that previous home rehabilitators would have to take out on a home to repair it. With the FHA 203k, the buyer simply takes out one mortgage loan and uses that loan to purchase and rehabilitate the property.
Article Source: http://EzineArticles.com/2662201
Posted by 203konline