All About FHA 203k Loan

FHA 203k Loan

Are you willing to buy an existing property and renovate it according to your needs? Does your home require repairs and improvements? The FHA 203K loan will be the perfect home improvement loan which allow you to borrow money for the home ownership and home improvement through one loan.

Several properties, which were not maintained properly due to the poor financial condition of the owner or deliberately forbidden by the owners since they faced foreclosures, are available for sale. Buying such properties can be beneficial since you can buy them for a low price and then repair the property to make it habitable.

About FHA 203K Loans

FHA 203k loans is one of the FHA’s rehab loan products, which is especially designed for people willing to buy and repair old and used properties, so that the properties can be used as primary residences. These loans are insured by the federal government to encourage private lenders to offer financing for such deals.

Qualification for an FHA 203k Loan

FHA 203k LoanUnlike other rehab loans, the FHA 203k allows the borrowers to combine the renovation costs into the mortgage as one loan and with one closing. This means the amount provided to you includes the cost of the property and the estimated cost of the repairs (including material and labor) for the property.

The down payment amount will be 3.5% of the total loan amount (house price +cost of repairs) and the monthly installments will be higher since the total loan amount is higher. To qualify for the FHA 203k loans you will have to satisfy the lenders qualification requirements. This means you are required to have a minimum credit score of 640 or above and the debt-to-income ratio of 43% (including the new loan payments). Also make sure the total loan amount (house price + cost of repairs) is equal to or less than the maximum loan limit for your area. Ideally the maximum loan limit is $417,500.

You will have to provide all the documentation of your monthly income, credit history, assets and savings to the lender. Along with these, you will also have to submit a detailed proposal of the repairs and improvements including the cost estimates. An appraisal is essential to qualify for FHA 203k loans. So an FHA approved appraiser would determine the current value and post renovation value of the property to be financed.

Benefits of FHA 203k Loans

FHA 203k loans offer several benefits to the borrowers, the major benefit being the capability of bundling the property’s purchase price along with the cost of repairs. The other benefits of this program include:

  • Savings: you don’t have to exhaust your savings to have the home improvements done. FHA 203k Loans provide the financing required for the repairs and improvements, so you can save your money for other important works.
  • Low Interest: like any other FHA loans, the FHA 203k loans are available with low interest rates and these rates are significantly lower than the other rehab loans available in the market.
  • Buy Your Dream Home: FHA 203k loans allow you to buy a property that you can transform into your dream home. Moreover, you can buy this property at a lower than the ready to move in home of the same class.

If you want to know more about FHA 203k Loans, give us a call and we’ll have all your queries answered.

FHA 203k Loan

Property Eligibility for FHA 203k Loans

FHA 203k Loans are available for properties that will be used as primary residences and not as investment properties. The following property types are eligible under the FHA rehab loan program:

  • FHA approved condos
  • Single family to four family dwellings
  • Moving an existing house to a new foundation
  • Damaged properties as long as some portion of the foundation remains
  • Transforming a mixed used property into a full residential unit.

If you want to know more about FHA 203k Loans, give us a call and we’ll have all your queries answered.