Financing a Home with an FHA 203k Mortgage

Posted on September 22, 2009
Filed Under Florida Mortgage Update, Florida real estate - Investor Insights | 1 Comment

Homeowners continue to snatch up foreclosed properties across the country as lending institutions look to unload backed-up inventories. The government has even rolled out a national program to help people purchase these troubled properties.

But some prospective buyers are running into problems during the appraisal process. Foreclosed properties can present a nightmare for buyers, who might have to contend with all kinds of health, safety or structural concerns that can knock the lending process off track.

In this climate, the FHA’s 203k loan program is becoming even more critical for home buyers. The Federal Housing Administration’s traditional home loan program remains one of the most popular in the country. But the FHA has a specialized program that guarantees loans specifically for the purchase and rehabilitation of properties.

The 203k program provides borrowers with a single mortgage loan, which can be either fixed or adjustable rate. The loan amount is based on what the agency believes the home will be worth after the rehabilitation is complete, including the cost of the repair work. Eligible borrowers can buy and rehab a one- to four-family dwelling, as long as it’s been completed for at least 12 months.

Homes that have been demolished, or will be razed as part of the rehabilitation work, are eligible provided some of the existing foundation system remains in place. In addition to typical home rehabilitation projects, this program can be used to convert a one-family dwelling to a two-, three-, or four-family dwelling. An existing multi-unit dwelling could be decreased to a one- to four-family unit.

The 203k program doesn’t cover things like luxury improvements, which homeowners have to pay for from their own pockets. But borrowers can use the 203k program to pay for a significant amount of rehabilitation work, from decks and painting to room additions.

On the whole, FHA loans are among the most flexible and buyer-friendly on the market. There are no income or credit score restrictions and buyers with foreclosure and bankruptcy in their past can still qualify for an FHA loan.

Down payments are as low as 3.5 percent. Some borrowers can eliminate the need for a down payment all together by combining their FHA loan with other specialized loans.

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Author : Brandon Laughridge - Posts:1

Comments

One Response to “Financing a Home with an FHA 203k Mortgage”

  1. Ashlee on September 22nd, 2009 8:18 pm

    The 203k program is really nice just hard to get repairs approved. Like you said, it cant be used for cosmetic repairs so that leaves lots of people still having to come up with money. I did one loan that way and it took forever to close bc of all the inspections and paperwork that had to be done for the repair work.

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