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
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
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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