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Todd Mummert

What is an FHA 203k loan?

Wednesday, October 3, 2012 - Article by: Todd Mummert - Secured Funding Corporation - Message

What is an FHA 203k loan?

A common obstacle potential home buyers run into is the prospect of buying a home is need of repair. Traditionally, banks are wary to lend money for the purchase of a home that requires renovation. However, the needed repairs cannot be attended to until the home is purchased. In order to overcome this stalemate, the Federal Housing Administration offers a federally insured loan designed specifically for rehabilitation properties.

The FHA 203k renovation loan program is just that solution. Much like a standard FHA loan, an FHA 203k loan provides insured funding for the purchase or refinance of a property, but unlike conventional loans, it requires a lower down payment, less stringent credit requirements, and lower all-around cost. Additionally, the cost of the repairs on the home are included into the loan and rolled into one mortgage, allowing not only the purchase of the home with the benefits of an FHA loan but the ability to renovate a home in need of repair. The needed repairs on the home are pre-determined by a renovation contractor that is FHA approved, and then the funding for repair is held in escrow.

There are two versions of the FHA 203k loan. More intensive projects, such as structural modifications, additions, or repairs that prevent you from living in the house fall under the Standard 203k. Less intensive repairs that do not exceed $35,000 and do not require consultants, engineers, or architects fall under the Streamlined 203k, which generally is the simpler and less expensive of the two.

Anyone who would be eligible for a standard FHA loan can apply for a FHA 203k rehabilitation loan, provided that the property meet the 203k requirements and that the borrower will occupy the home themselves. Factors such as loan limits, down payment, credit score requirements and other specifications are the same as with a regular FHA loan, with the specific guidelines of the 203k loan laid out for the renovation purposes. For a property to be eligible for the 203k loan, it must be a one to four family dwelling or a single family home which has been completely project for at least one year. The loan may be used to cover the conversion of a building into four or less units, and under particular guidelines, condominium units can be eligible for interior improvements.
The FHA 203k rehabilitation loan is available through FHA approved lenders across the nation and I can provide

FHA 203K loans in Maryland


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