FHA 203k loan Refinance Property Requirement
FHA offers an excellent program known as a FHA 203k loan refinance for a home at least one year old. The purpose of this loan covers refinancing and renovation of your home. A portion of the proceeds is used to pay off the existing mortgage, and the remaining funds are placed in an escrow account and released as rehabilitation is completed. The cost of the rehabilitation must be at least $5000 but the total value of the property must still fall within the FHA mortgage limit for the area. The value of the property is determined by either: Whichever is less.
- The value of the property before rehabilitation plus the cost of rehabilitation.
- 110 percent of the appraised value of the property after rehabilitation,
FHA 203k loan RefinanceEligible Activities
The range of rehabilitation covered by a FHA 203k loan range from relatively minor (must exceed $5000) to major reconstruction is eligible. However a home that has been demolished or will be razed as part of rehabilitation require the existing foundation system remains in place A FHA 203k loan can also finance the rehabilitation property that also has non-residential uses, they can cover the conversion of a property to a one- to four- unit structure. Some of the types of FHA 203k financing include:
- structural alterations and reconstruction
- modernization and improvements to the home’s function
- elimination of health an safety factors
- changes that improve appear and eliminate obsolescence
- reconditioning or replacing plumbing, installing a well and/or septic system
- adding or replacing floors and/or floor treatments
- adding or replacing roofing, gutters, and downspouts
- major landscape work and site improvements
- enhancing accessibility for a disabled person
- making energy conservation improvements.
*** All properties financed under the FHA 203k loan program must meet certain basic endure efficiency and structural standards.
Types of FHA 203k Loans
There are two types of FHA 203k loan programs:
The first type of FHA Streamline 203k loan:
- Maximum construction amount is capped at $35,000
- Cannot do any structural changes or room additions with a Streamline FHA 203k
- You Can do basement remodeling, attic remodeling, new windows, new siding, new roofing, new kitchens, new bathroom, new HVAC systems and new appliances.
The second type of FHA 203k loan:
Is a full FHA 203k loan where you can do everything that you can do with a Streamline FHA 203k loan plus do structural changes, room additions and any other type of repairs including a total rehabilitation.
FHA 203k Loan Refinancing
Whether a borrower currently has a USDA Loan, VA Loan, Conventional Loan or even a current FHA Loan, a FHA 203k loan refinance can be done. Every borrower and every FHA approved bank or Mortgage lender must follow all FHA Guidelines to include meeting the minimum credit score requirements and debt to net income (DTI) requirements. Do not be surprised that many lenders have additional more stringent requirements guidelines above the FHA minimum guideline. These are known as overlays. For example, most FHA 203k mortgage lenders will require a 640 credit score and will have debt to income ration cap of no greater than 43% DTI. Many mortgage lenders will want all all old unpaid collection accounts or charge off accounts paid off before considering making a loan. However, FHA does not require that you pay off outstanding collection accounts or charge off accounts. The Larry Stepp Team at Gustan Cho Associates does not have any overlays. We follow FHA minimum guidelines, if you are a borrower that has ran into this problem then please call us. Our Team is available 7 days a week, holidays and weekends.