Monday, December 29, 2008
FHA 203K Home Improvement Loan
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The FHA 203k loan program is the Department’s primary program for the rehabilitation and repair of single family properties. Basically a home improvement loan.
This program can be used to accomplish rehabilitation and/or improvement of an existing one-to-four unit dwelling in one of three ways:
· To purchase a dwelling and the land on which the dwelling is located and rehabilitate it.
· To purchase a dwelling on another site, move it onto a new foundation on the mortgaged property and rehabilitate it.
· To refinance existing indebtedness&rehabilitate a dwelling:
To purchase a dwelling and the land on which the dwelling is located and rehabilitate it, and to refinance existing indebtedness and rehabilitate such a dwelling, the mortgage must be a first lien on the property and the loan proceeds (other than rehabilitation funds) must be available before the rehabilitation begins.
To purchase a dwelling on another site, move it onto a new foundation and rehabilitate it, the mortgage must be a first lien on the property; however, loan proceeds for the moving of the house cannot be made available until the unit is attached to the new foundation
What is the minimum amount of repairs required on a FHA 203k home improvement loan?
There is a minimum $5,000 requirement of eligible home improvement loan projects on the existing structure of the property. Minor or cosmetic repairs may be included after meeting the first $5,000 worth of repairs.
What are some of the repairs that qualify for the first $5,000?
Structural alterations and reconstruction: (Repair or replacement of structural damage, chimney repair, additions to the structure, installation of additional bath(s), skylights, finished attics and/or basements, repair of termite damage and the treatment against termites)
The qualifications requirements are the same as a typical FHA mortgage loan. The only additional item that the borrower needs is either enough cash reserved to paid for materials and labor until they are reimbursed through a draw, or a credit card with an adequate available balance. If there is to be a contractor involved, the contractor may choose to cover these costs.
The interest rate on a typical FHA 203k mortgage loan is a little higher than a standard FHA or conventional 30/15-year fixed-rate loan. The cash requirements are the same as an FHA loan, 3 percent to 5 percent, which is less than a typical conventional loan. There are a couple of additional fees which pertain to the construction aspects of the FHA 203k loan.
In the Reno/Sparks real estate market with all the foreclosed homes, this loan makes it possible to buy a house and fix it.
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