When purchasing a home, making a few repairs to the property is often a common endeavor, especially when the buyer takes on a “fixer-upper.” According to HUD (the US Department of Housing and Urban Development, FHA 203(k) loans are mortgages that are backed by the Federal Housing Administration. These loans enable the home buyer to borrow enough money so they can purchase the home and make any repairs that may be required including the cost of labor and materials.
FHA 203(k) Loans Benefit The Buyer and The Lender
Certain types of 203(k) loans often include enough funding to handle up to 6 months of the buyer’s mortgage payments. Keep in mind that the FHA doesn’t lend the funds. Instead, they provide financial protection for the lenders that do. Section 203(k) helps the borrower and the lender by insuring a single, long-term adjustable rate or fixed rate loan that takes care of the purchase and rehabilitation of a home and property. Plus, 203(k) loans save the borrower considerable money and time. It helps to know if you are eligible for it before you file for the loan.
How Does an FHA 203(k) Loan Compare to an FHA 203(b) Loan?
FHA 203(k) loans are designed to help individuals who are buying a home in need of significant modifications, renovations, or repairs. On the other hand, 203(b) loans are primarily used for purchasing move-in ready homes. In order to qualify for a standard 203(k) loan, the home would need $5,000 in structural additions or repairs. Also, the property’s total value must meet the FHA’s mortgage limit for that particular area. So, if you’re looking for a fixer-upper, a 203(k) loan is the way to go.
Furthermore, it’s important to understand that the FHA’s Limited 203(k) program only allows you to finance a maximum of $35,000 for improvements, renovations, repairs, or upgrades. Additionally, there is no minimum amount required. All repairs prior to closing. However, the buyer can open an escrow account to fund the repairs should the seller refuse to make them. At that point, the buyer can refinance this through the FHA’s Limited Section 203(k) program.
Get In Touch With Your Trusted Mortgage Expert Today!
So if you want to avoid making any major renovations or repairs to the home prior to moving in, the FHA’s 203(b) loan program is one kind of loan you should consider. It’s important to remember that 203(k) loans can only be obtained FHA-approved lenders. To learn more about 203(k) loans, call Florida State Mortgage Group, Inc. today at (954) 359-3000. Our financial experts are available to walk you through the available options and help you choose the best loan program. Call now!