September 15, 2015
Not all borrowers want to get an FHA home loan for a home that is perfect and fully ready to occupy. Some are interested in fixer-upper properties, and we commonly receive reader questions in our comments section about them. Here’s a good example of a recent query:
“… If I was interested in purchasing a property below market value and having a contractor repair the existing home on the property is there a loan that could potentially work in this situation?”
The FHA/HUD official site has a page of information about the FHA 203(k) rehab loan that addresses this issue directly. According to the FHA official site:
“Section 203(k) fills a unique and important need for homebuyers. When buying a house that needs repair or modernization, homebuyers usually have to follow a complicated and costly process. The interim acquisition and improvement loans often have relatively high interest rates, short repayment terms and a balloon payment.”
However, the official site states, the FHA section 203(k) loan offers borrowers a mortgage” that helps both borrowers and lenders, insuring a single, long term, fixedor adjustable rate loan that covers both the acquisition and rehabilitation of a property. Section 203(k) insured loans save borrowers time and money. They also protect the lender by allowing them to have the loan insured even before the condition and value of the property may offer adequate security.”
There is even a 203(k) loan for borrowers who want to make less extensive improvements. This loan is called a Streamlined 203(k). How does this loan work? According to FHA.gov, “FHA’s Streamlined 203(k) program permits homebuyers and homeowners to finance up to $35,000 into their mortgage to repair, improve, or upgrade their home. Homebuyers and homeowners can quickly and easily tap into cash to pay for property repairs or improvements, such as those identified by a home inspector or an FHA appraiser.”
Furthermore, under the Streamlined 203(k), you are allowed to, “make property repairs, improvements, or prepare their home for sale. Homebuyers can make their new home move-in ready by remodeling the kitchen,painting the interior or purchasing new carpet.”
We will examine the FHA 203(k) rehab loan in more detail in another blog post.
Do you work in residential real estate? You should know about the free tool offered by FHA.com. It’s designed especially for real estate websites–a widget that displays FHA loan limits for the counties serviced by those websites.
It is easy to spend a few seconds customizing the state, counties, and widget size for the tool; you can copy the code and paste it into your website with ease. Get yours today: http://www.fha.com/fha_loan_limits_widget
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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