FHA 203K LOAN PROGRAM
How Can Renovation Loan Help You?
Much of our present listing inventory consists of bank-owned properties.
Many of those properties are in unacceptable as-is condition for traditional mortgage financing.
Therefore, absent a renovation loan program, they may only be sold for cash, usually at a substantial discount.
The FHA 203k renovation loan program permits buyers to finance those homes in their present as-is condition with low money down.
What is a Renovation loan?
A Permanent Mortgage that provides funds for both Acquisition (or Refinance) and Renovation.
* The cost to purchase the property;
* The cost to fix-up the property; and
* Other costs such as consultant fees, mortgage payments during the construction period, permits, contingencies, etc..
* After settlement the borrower can fix-up the property to modernize, repair, etc.
Loan amount is based upon what the property will be worth after it is improved. You may close As-Is!
FHA 203k Loan
FHA 203k Mortgage Loan
The FHA 203k loan is a permanent mortgage which allows for the acquisition (or refinance) of a residential or mixed-use property and the escrow of funds for repairs, remodeling and/or improvements after closing, eliminating the need for short-term construction financing.
Types of FHA 203k Loans
* 30 or 15 Year Term
* Fixed Rates
FHA 203k Eligible Borrowers
* Non-Profits Not
* Investors Not
203k Eligible Properties
* Single family dwellings
* Limited Condo/Townhouses & Mixed-Use
* 2 - 4 Unit Buildings - you can increase or decrease the number of units with this loan.
Note: Unfinished new construction not permitted.
FHA 203k Down Payment
* 3.50% down, based upon the total cost of acquisition and renovation.
FHA 203k Loan Limits
* The loans that FHA will insure are limited in amount, by county/ by state and by the number of units in the subject property.
203K Loan Amount
Loan Amount will be based upon lesser of:
* Purchase Price of property plus renovation costs.
* 100% of the after-improved value.
Maximum Loan Amount is further limited by FHA loan limits.
FHA 203k Mortgage Insurance
* Same as regular FHA programs.
* Upfront mortgage insurance (MIP) with FHA 203k, same as regular FHA loan (1.75%).
* Monthly mortgage insurance of .55% per annum
FHA 203k Underwriting
* Same as FHA 203b
* FHA Credit Flexibility
* Qualification Ratios 31/43
* 2 - 4 Unit Properties - will use 85% of appraised rents to qualify, NO Leases
required prior to closing.
Eligible 203k Fix-Up Costs
* Structural alterations and reconstruction.
* Changes for improved functions and modernization.
* Elimination of health/safety hazards.
* Changes for aesthetic appeal.
* Plumbing, heating, air conditioning, and electrical.
* Well and/or septic repairs.
* Roofing, gutters and down spouts.
* Flooring, tiling and carpeting.
* Upgrades of all kinds (kitchens, baths, etc.)
* Energy conservation improvements.
* Major landscape work and site improvement.
* Access for the disabled.
, the cost of construction/renovation can be estimated by an FHA approved 203k Cost Consultant (home inspector). The Cost Consultant estimates the scope of repairs and the costs budgeted for renovation and compares them to the construction contract submitted by the borrow.
, for smaller renovation (i.e. around $30,000 or so) with no structural work contemplated, you may use a regular home inspector to determine the scope of work needed and sub-contracts to determine the renovation amount.
Source: Bank of America Renovation Lending Group
For more information about FHA 203K loans, please contact:
BBT Real Estate Group, LLC
affiliated with Keller Williams Preferred Properties
9701 Apollo Drive, Suite 102
Largo, MD 20774