What is an FHA 203(k) Loan?
An FHA 203(k) loan permits homebuyers to finance the repairs or improvements into their mortgage. With a 203(k), homebuyers can easily tap into cash to pay for property repairs or improvements. These repairs/improvements can be listed by a home inspector, HUD consultant, FHA appraiser or the homebuyers. Some of the replacements can be of existing countertops, appliances, floor coverings, new roof, paint, new additions, energy efficient improvements, etc.
There are two types of FHA 203(k) Loans:
Standard 203(k) - minimum of $5,000 up to 103% of the after-improved value - Required when the property is a foreclosure, short sale, and abandonded property. An FHA Consultant is required.
Streamline - No minimum and work is less than $35,000…up to 103% of the after-improved value - Requires 2 to 3 specialized contractors to do individual projects. Typically if the project exceeds $15,000, scope of work will likely move it to the standard k loan.
What types of properties qualify for an FHA 203(k) Loan?
An FHA 203(k) Loan can be used for one-to-four unit dwellings, such as Single Family Detached Homes, Duplexes, Triplexes and 4-plexes.
Who qualifies for an FHA 203(k) Loan?
The 203(k) is a primary residence loan only. No investor purchases are allowed.
Are there benefits using the FHA 203(k) Loan?
Yes, the purchase of a home that needs repair is often a sticky situation. Banks will not lend out money on a homes that need repair, and the repairs can’t be done until the home has been purchased. HUD’s FHA 203(k) loan program can help you with this predicament and allow you to purchase or refinance a property to allow the cost of making the repairs and improvements inside the loan.
Can I refinance my existing mortgage loan into an FHA 203(k) Loan?
Yes, you can refinance your existing mortgage into an FHA 203(k) loan. These are a little more detailed, please consult CMC for further details.
Is there a minimum or a maximum repair amount for an FHA 203(k) Loan?
There is NO minimum repair amount required for an FHA 203(k) Streamlined Loan. The maximum repair amount for an FHA 203(k) Streamline Loan is $35,000 or 103% of the after-improved value, or whichever is less. The minimum amount for the FHA 203(k) Standard/Rehab Loan is $5,000 and the maximum is limited by lesser of the borrowers approval limit, the FHA maximum mortgage limit for the area or 103% of the after-improved value.