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Barb Lanis

Refinance with a 203K Home Improvement - OVERVIEW

Sunday, September 9, 2012 - Article by: Barb Lanis - The Federal Savings Bank is a member FDIC and Equal Housing Lender - Message

If selling right now is not an option, you can improve your existing home, love it while you can, then sell later--having a superior property to market in the future... With this loan, you can literally change the structure of your home, upgrade it, build up or add on.

The 203K loan has been available for years through FHA. It's been relatively under-utilized over the years, but given the state of the current housing market, it's being rediscovered as a fantastic tool for homeowner's to improve their existing home.

A growing family can be even more of a challenge to manage if you are running out of space. Whether it's fitting around the table, storing children's toys, workout equipment, or the inevitable accumulation of stuff that we all succumb to over the years.

In days not so long ago, the first line of defense would be to get your home ready to sell and start shopping for that bigger, more updated home. As we all know, this strategy may not be feasible in today's real estate market. Many homeowner's feel a little stuck, wondering just how long before they can sell and move into a larger home.

The 203K Rehab Loan is a great loan program may be the solution to your space issues. Here is just a sample of what you can do with the 203K loan:

Windows - Repair or Replace Kitchens - Total gut is OK!

Garages - Repair or Build

Central Air - Repair or Install

Roof - Repair or Replace

Flooring - Repair or Replace

Plumbing/Heating/Electrical Siding - Repair or Replace

Build a Fence

Finish your Basement!

Well & Septic

Driveway repair

The process for obtaining a 203K is much like any other FHA refinance in terms of qualifying for the mortgage payments, meeting credit requirements, etc. You then will obtain an estimate from a contractor for the repairs and/or improvements. Important Note: Before beginning the process, you will want to meet with your loan officer because the contractor you select does need to be approved by your lender. Depending on the proposed amount of the improvements, your loan officer will determine whether a 203K Streamline is best or a Full 203K. The Streamline version of the program is for improvements that amount to less than $30,000 and require just a few payouts to 1-3 contractors performing the work. The Full 203K is used for much larger projects when the amount of improvements are above $30,000 and there will be multiple payouts to contractors.

It's important to locate a lender in your area who has experience with 203K loans so that you receive proper guidance up front. Besides assisting you with getting your contractor approved, your loan officer will also submit your proposal to an appraiser. In general, an appraiser will determine whether the improvements "make value sense" in your area. This means that he/she will look at comparable properties in your area that have recently sold. You cannot over-improve your home as it relates to other properties. For example, if the majority of homes in your neighborhood have 3 bedrooms and you want to increase yours to 5 bedrooms, this probably won't work because the comparable home square footage and values don't measure up. On the flip side, a classic use of the 203K works very well when your home is currently under-improved in comparison to other properties. This could be the need for replacement windows, new roofing, flooring, or perhaps even an out dated kitchen.

Again, it's important to get with a qualified loan officer so that you can discuss your ideas ahead of time. With the help of a loan officer, you can do your homework together and determine whether your current home can be your dream home.

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