The FHA 203k mortgage program has helped many to home ownership. With increase in foreclosures this program has helped a great deal. Learn why this program is a great one to use especially if your home purchase is in need of repairs.
Over the years, FHA has helped so many to navigate their first home purchase. They give practical home loan rates for those of the middle class and those with a meager income by making it affordable to purchase a home instead of renting. One way they have done this by creating a program so individuals can finance a home that may need improvements. This program is called the FHA 203k mortgage.
Another reason to use this type of program is the down payment is only 3.5 percent. So individuals who are still going to school or are newly married can realize their dream of home ownership. Most conventional mortgages require up to 20% for the down payment. For some this is just too steep so they give up on buying a home. But FHA makes that possible by requiring a lower down payment.
The FHA 203k mortgage is among the most favorite FHA home loans. It allows people to borrow anywhere up to 96.5 percent of their entire mortgage loan and it is a fixed rate loan. Thus a lower down payment and lower closing costs.
There is a requirement that you need to take into consideration. You have to meet the minimum income guidelines. Be sure you meet this minimum before applying for the FHA 203k loan.
The debt ratios can be very specific, based solely upon the state the individual resides in. What makes the FHA 203K mortgage so cool is you can purchase a house in need of repairs and simply have the repairs added into the mortgage. This can be very useful when you are looking at a foreclosure. Many times these type of homes have been damaged by the previous owner or they badly need upgrades. It is possible to finance these too.
You can even use the FHA 203k mortgage to improve a condominium. There are some restrictions but the possibility to rehab a condo is there. There is even the prospect of using this loan product to rehab a mixed-use residential property. The versatility of this product is amazing.
Many hear that only a first time home buyer can use the FHA loan products. So what is the definition of a first time home buyer? It is an individual who has not owned a home during the three years prior to their application. This would include their spouse.
You have to meet a minimum amount of rehabilitation to use the FHA 203k mortgage. That minimum requirement is $5,000 for eligible improvements on the existing structure. It is true minor repairs are unacceptable, but it is possible to include them once you meet the $5000.
Now there are some restrictions. You have to begin the work within 30 days of signing the agreement and the work must not stop for no more than 30 days. You also must stick to the original budgeted amounts. You cannot ask for an increase in your mortgage just because the costs went up. So make sure you get your estimates in writing and that the contractor will honor his estimates.
Of course you can be your own general contractor if you are actually qualified to do the work. You still have to complete the work in the specified time frame. But you cannot be paid for your labor. Only can be reimbursed for the materials.
So, if you are looking at a foreclosure and are wondering if you can finance the repairs, then consider the FHA 203k mortgage. It may be a perfect fit for you!