FHA 203K Loans

FHA 203k loan Property Requirement

A FHA 203k loan covers the purchase or refinancing  and rehabilitation of a home that is at least one year old.  A portion of the proceeds is used to pay the seller, or, if a refinance, 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.

  1. The value of the property before rehabilitation plus the cost of rehabilitation.
  2. 110 percent of the appraised value of the property after rehabilitation,

FHA 203k loan Eligible Activites

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.

TWO Types of FHA 203k Loans

The first type of FHA 203k Loan is the FHA Streamline 203k Loan where the maximum construction amount is capped at $35,000. You cannot do any structural changes or room additions with a FHA 203k Streamline Loan, however you can do other improvements such as 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 2o3k Loan is a full FHA 203k where you can do everything that you can with a Streamline FHA 203k loan plus do structural changes, room additions, and any other type of repairs including a total renovation.

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 can be done.  A borrower and FHA approved bank or Mortgage lender must follow all FHA Guidelines to include meeting the minimum credit score requirements and debt to net income requirements.  Most lenders have FHA Lender Overlays, an overlay is an additional more stringent guideline above the FHA minimum guideline.  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 n collection accounts or charge off accounts on FHA 203k mortgage event though FHA does not require that you pay off outstanding collection accounts or charge off accounts.  The GREAT news is the Larry Stepp Team at The Money Store do not have any mortgage overlays on FHA Loans and minimal overlays on FHA 203k Loans.

The Larry Stepp Team at Gustan Cho Associates is available 7 days a week, weekends and holidays.

Larry Stepp     407-922-4755     LarryS.HomesNetwork@gmail.com