The FHA 203K loan program is designed to help finance the rehabilitation and repair of run-down properties. It has been utilized as a primary tool in revitalizing run down neighborhoods.
What is the FHA 203K loan program?
Purchasing a home that needs major repairs can be a difficult proposition because most banks won't lend the buyer the money to purchase the home until all the repairs have been completed. Also, you can't repair a home that you don't own. Thus, the FHA created the 203K loan program to alleviate these problems by facilitating the lending of the funds needed to buy the home before it is repaired. For more general info on FHA loan requirements see this article titled: FHA loan requirements.
Requirements and highlights of the FHA 203K loan program.
- Property must be one- to four-family structure and can be Condominiums or Town-homes.
- Proceeds of the loan can only be used for interior rehabilitation of the property.
- The mortgage amount maximum cannot exceed 100% of the value after the improvements are complete.
- Appraisal is required for the "After Improved Value".
- Some lenders may require an "As Is" appraisal as well.
- Borrower cannot own more than 7 units within a 2 block radius of the property they wish to purchase.
- Minimum amount required to borrow is $5,000.
FHA Streamline 203K Loan
The FHA streamline 203K loan is designed for homeowners who want to make home improvements to their FHA financed home. The FHA 203k loan is quite similar to the normal FHA streamline refinance loan. Below we have highlighted the key points:
- You must use at least one qualified contractor. Remodeling by the homeowner is generally not allowed.
- You must get a detailed estimate from the contractor that includes all costs.
- The contractor must sign an agreement to perform all the work at the cost estimated and in the time alloted in the estimate.
- The maximum loan amount is $35,000 and the minimum amount is $5,000.
- You cannot use the FHA 203k loan for major structural improvements.
Qualifications for FHA loans vary by location. If you are interested in an FHA loan, Lending Tree has recently expanded its service to allow borrowers looking for new loans or refinancing to check their eligibility for FHA loan programs based on their local county-level loan limits and loan-to-value ratios.
You can find out more information about FHA 203K loans at the HUD website: www.hud.gov/offices/hsg/sfh/203k/203kabou.cfm
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