AFFORDABLE CUSTOM HOMES
PURCHASE YOUR HOME AND CUSTOMIZE IT TO YOUR LIKING ALL WITH ONE LOAN....WHAT A CONCEPT!!
What Is an FHA 203(k) Loan?
An FHA 203(k) loan is a type of government-insured mortgage that allows the borrower to take out one loan for two purposes: home purchase and home renovation. An FHA 203(k) loan is wrapped around rehabilitation or repairs to a home that will become the mortgagor’s Primary Residence.
How Does it All Work?
- An FHA 203(k) loan is a government-backed mortgage that is essentially a construction loan that finances both the purchase and repairs of a home.
- These loans are intended to support homeownership among lower-income households, allowing them to improve and update older properties as their primary residence
- The FHA offers different varieties of the 203(k) loan depending on the extent of repairs needed
WHO QUALIFIES?
If you are currently working for the past 2 years and can provide 2 years of W2's, able to put down 3.5%, pay 6% closings costs and have atleast a 620 FICO score this may be the loan program for you!
UNDERSTANDING FHA 203(K) lOANS
The FHA 203(k) loan is meant to encourage families in low- to moderate-income brackets to purchase homes that are in dire need of repairs, especially homes that are situated in old communities. The program allows an individual to buy a home and renovate it under one fixed rate or adjustable rate mortgage. The amount that is borrowed includes the purchase price of the home and the cost of renovation, including materials and hired labor
The loan may also cover temporary housing funding (if needed), which could be in the form of rent for the period that the house is under rehabilitation. The dual-purpose loan eliminates the need for a borrower to make two separate applications for a mortgage and a loan for home renovation, either of which may not be approved by the bank or may come at a higher combined cost.
Normally, lenders are unwilling to offer a mortgage for a property in need of major repairs due to their safety and livability standards. FHA 203(k) loans, which are backed by the government, provide reassurance to lending institutions because the cost of renovating the home is included in the mortgage package. The renovation fees are placed in an escrow account and disbursed as payment to the contractors as the work is completed. Complete renovation of the home should not take more than six months, as outlined by the FHA guide for a 203(k) loans.
TYPES OF 203(K) LOANS
There are two types of 203(k) loans: limited 203(k) and standard 203(k).
The loans apply only to individuals and families who intend on making the property their primary residence. This means that real estate investors and house-flippers do not qualify. The work carried out must be contracted to a licensed handyman. If the mortgagor qualifies as one, they may act as their own general contractor and do the repair work themselves, using the money saved for cost overruns or additional improvements. They cannot, however, be reimbursed for their labor.
Limited 203(k): Minimal Repairs
A home that does not require much work would usually be paid for using the limited 203(k). This option does not include structural work on the home, such as adding new rooms or landscaping, and the home must be habitable throughout the renovation period. Repairs under the limited 203(k) are capped at $35,000
Standard 203(k): Extensive Work
The standard 203(k) includes any extensive repairs and structural work that need to be done in the home with no capped repair cost. The minimum amount that can be borrowed is $5,000, but the total value of the property must still fall within the FHA mortgage limit for the area.
Some of the repairs that an FHA 203(k) loan covers include plumbing, flooring, painting, heat and air-conditioning systems, bathroom and kitchen remodeling, improvement of health and safety standards, landscape improvements, implementing access tools for disabled persons, the addition of energy conservation systems, and window and door replacements. Renovations that are considered extravagant or luxurious—such as tennis courts, gazebos, and new swimming pools)—are not covered under an FHA 203(k) loan.
Affordable custom homes
PURCHASE YOUR HOME AND CUSTOMIZE IT TO YOUR LIKING ALL WITH ONE LOAN....WHAT A CONCEPT!!