Wednesday, October 10, 2012
Section 203K Rehabilitation Mortgage Insurance
For home owners or home buyers who are looking for additional finance over their mortgage for rehabilitating the old home that they are purchasing, Section 203K rehabilitation mortgage insurance offer a convenient option of a single long term assistance, thereby saving them the time involved in finding another lender.
Among the various government loans given out in the US, the Department of Housing and Urban Development (HUD) has a specific financial assistance that is offered to home owners or buyers to either refinance the cost of rehabilitating, modifying or altering the house or to buy a house. This form of financial assistance is called Section 203K rehabilitation mortgage insurance and falls broadly under the category of housing loans offered by the US Government.
When a home buyer wants to buy a house that is not new, there are often repair and rehabilitation costs associated with the purchase. In most cases, it becomes difficult for him to get additional finance at reasonable rates for making improvements to the old building and Section 203K rehabilitation mortgage insurance is designed specifically to assist with this situation. Under this loan program, HUD insures the total amount incurred towards mortgage of the home and its rehabilitation. Thus, the lender is assured of recovery of his money in case of default of repayment while the home buyer gets the benefit of just one long term loan with a predetermined fixed or adjustable interest agreement, for the entire cost of the building and the renovation. This type of housing loans assistance also saves the buyer time as he does not have to find another lender for the additional loan towards home rehabilitation.
Once the Section 203K rehabilitation mortgage insurance loan is sanctioned, a part of the loan amount is given to the seller and the remaining held in an escrow account until the repair and rehabilitation work is complete. In the case of refinance, the earlier mortgage is paid off and the remaining amount transferred to the escrow for release after completion of rehabilitation work.
There are certain criteria to be met for a person to be eligible for this category of the Government Loans program. Any individual who is capable of making mortgage payments can apply for this assistance. The valuation of the property must meet the guidelines set by FHA with regard to the mortgage limit for that particular locality. The value is usually computed as the lower value of either the original value of the home and the cost of rehabilitation or 110% of the value of the rehabilitated home. The estimate for rehabilitation costs should be a minimum of $5,000. The home has to be at least one year old.
Applications for assistance under this housing loans program need to be submitted through a lender on the approved list of FHA. For further details on this financial assistance program, you can log on to the HUD website and locate an approved lender in your local area. Besides this, any further information about this loan program can be received from the online FHA resource center.
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Posted by 203konline