FHA home loans, which are insured by the Federal Housing Administration (FHA), are great financing options for any homeowner who wants to purchase a house or refinance his or her current mortgage. These loans have low interest rates and usually only require down payments of 3.5 percent! FHA loan requirements are simple, so current and potential homeowners are more likely to qualify for these loans than other types of loans.
FHA 203k Rehabilitation Mortgage Insurance Program
The FHA has a specific loan program to help homeowners who want to make improvements or repairs on their home, but do not have the funds to do so. These loans are called FHA 203k loans and can be used for either a purchase or a refinance. There are two types of loans in this program, one loan is for repairs that cost less than ,000 and the other loan is for repairs that cost more than ,000.
A streamline FHA 203k option is also available to homeowners who are interested in doing non-structural repairs or improvements. This loan requires less documentation and can be less costly. It allows a homeowner to finance up to an additional ,000 into his or her mortgage in order to make improvements to the home. An FHA home inspector or appraiser can identify home repairs that need to be made.
How the Loan Can Be Used
Although there are some restrictions on what the loan can be used for, there are plenty of renovations and home repairs that the loan does cover. In general, these include modernization, eliminating safety or health hazards, making a home more accessible for individuals with disabilities, or making a home more energy efficient. More specifically, the loan can be used for roofing, plumbing, flooring, painting, minor remodeling and more.
There are certain requirements with this type of financing. Homeowners must spend at least 00 on their home repairs in order to be eligible. Homeowners must get cost estimates from a licensed and insured contractor(s) before signing the sales contract. The total cost of the mortgage, including the repairs, must remain within the FHA loan limits for the county in which the home is located.
This loan cannot be used to flip houses, and the homeowner must use the loan on the home in which he or she lives. The work being done on the house must begin within 30 days of the loan closing. All work must be completed within six months to comply with the loan requirements.
If a homeowner wants to make repairs to his or her home and needs additional financing, this type of financing could be the best option. Many of the same eligibility standards used for standardFHA home loans apply to the FHA 203k loan. Most lenders will require that the borrower have a credit score of at least 620 to be eligible. To qualify for the loan, certain energy efficiency standards, as well as certain structural standards, must be met.
This loan could be great solution for homeowners who want a better way to finance home repairs and improvements without depleting their savings.
Written by Rafael Borba Castro
tags: 203K, Information, loan