FHA 203k
You may have heard of an FHA 203(k) loan but are not quite sure what it’s all about. We would like to shed a little light on that for you as these loans are becoming more popular. The FHA Section 203(k) Mortgage Program enables borrowers to finance the purchase of a home and the cost of its rehabilitation through a single mortgage. Rehabilitation construction must begin within 30 days of closing, and all work must be completed within six months of closing by a contractor licensed with the ROC.
There are two types of FHA 203K loan programs – Streamlined and Standard.
Under the Streamlined FHA 203(k) program there is a minimum $5,000 and a maximum of 35,000. Allowable repairs under this program are as follows:
- Repair/Replacement of roofs, plumbing, electrical systems, heating, air conditioning or flooring.
- Minor remodeling that does not involve structural repairs. No additions are allowed.
- Exterior and interior painting and weatherization.
- Purchase and installation of appliances.
- Improvements for accessibility for persons with disabilities.
- Lead-based paint stabilization or abatement of lead-based paint hazards.
- Repair/Replacement/Addition of exterior, patios and porches
Under the Standard FHA 203(k) program there is a minimum $5,000 requirement for the eligible improvements on the existing structure of the property. Allowable repairs are as follows:
- Structural alterations and reconstruction, such as repair or replacement of structural damage.
- Additions to the structure such as installation of an additional bath.
- Changes for improved functions and modernization.
- Elimination of health and safety hazards.
- Reconditioning or replacement of plumbing, heating, air conditioning and electrical systems.
- Installation of well and/or septic system.
- Repair or replace roofing, flooring, tiling or carpeting.
- Energy conservation improvements.
- Improvements for accessibility to the handicapped such as remodeling for wheelchair access, lowering kitchen cabinets, or installing wider doors and exterior ramps.
- Major landscape work and site improvement, patios, decks and terraces that improve the value of the property equal to the dollar amount spent on the improvements or required to preserve the property from erosion.
- Interior and exterior painting.
- The repair of a swimming pool not to exceed $1,500.
All borrowers must qualify for a 203K loan based on FHA’s income & credit guidelines. If you have any questions or are wondering if this might be the right kind of loan for your buyer please feel free to call or email me.
The Benefits of FHA 203(k)
FHA 203k benefits:
- Only 3.5% down payment required, which can be gifted by family members
- More flexible qualification requirements allow those with less than perfect credit to purchase a home at competitive rates
- A single loan for both purchase and improvement of your home means you make only one loan application and pay one set of closing costs – saving you time and money
- FHA loans are assumable and there are no prepayment penalties
- An FHA Energy Efficient Mortgage (EEM) can allow you to qualify for a larger mortgage to add additional improvements that will lower your utility expenses.
- By including cost of renovation in your home mortgage, you pay for these improvements over time at a much lower interest expense than conventional alternatives
- Rather than paying a premium for a home in “perfect” condition, take advantage of the great prices available on foreclosures or other homes on the market that are in need of repair or remodeling
- Instead of paying for a previous owners improvements you may not desire, invest instead in exactly the features, colors, styles, etc. that suit your tastes and needs
- Enjoy the opportunity to live in an up-to-date home in a great location closer to work, shopping, cultural activities and more!
Please click on link for a better understanding.
