FHA 203k Mortgage

FHA 203k Mortgage Rates, Guidelines, Lenders and Information

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Do I need Great Credit to Qualify for a 203(k) Mortgage Loan?

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Do I need Great Credit to Qualify for a 203(k) Mortgage Loan? 2
Most people assume that any loan program requires great credit, including the 203K Mortgage Loan program, and they can even check this next page if they need more information on loan services. The good news is that no program requires “great” credit. Every program looks at the overall picture of your loan profile to determine your risk level. Most programs do have minimum credit score requirements, including the 203K program, which prefers credit scores over 580, but as you can guess, a score of 580 is far from great, which means that this FHA-backed program does not require you to have great or even good credit, as long as you have other compensating factors, and if you want to get other ways to make money you can learn to trade gold which is a great option for this as well. If you do have a credit score as low as 580, it is preferable that the derogatory credit is at least 12 months behind you, but certain lenders will make exceptions if you can show that you have recovered from the period of derogatory credit, check this link right here now to check if you are eligible for a mortgage.

Housing History is Important

One of the largest factors the FHA looks at is your housing history, whether mortgage or rental history. The cleaner your housing history, the more likely it is that you will get approved for the 203K mortgage loan. So what does a clean housing history look like? Typically, no more than one late housing payment in the last 12 months is allowed. If there is more than one late payment, you need to have good reasons for those late payments. The FHA rules do allow for up to three late housing payments in the last twelve months, but not too many lenders will allow that many late payments without adequate reasons for the late payments. Your housing payments can be verified by your credit report if you have a mortgage right now and wish to refinance into a 203K loan or it can be verified by your landlord and canceled checks if you currently rent and wish to purchase a home that needs to be fixed up.

Other Trade lines and their Importance

Your other trade lines should be in good standing as well, even though they do not hold the same level of importance as your housing payments. Any late payments can hurt your ability to get the 203K loan, but if you can show that your late payments were a one-time occurrence and that you have since brought your payments current and have paid them on time. Any trade line that reports on your credit report plays a role in your ability to get the 203K mortgage loan, so do not take any chances with any of your accounts. The more liabilities you can pay on time, the better off your chances of getting approved will be. If your credit history is more than a little blemished, it is a good idea to fix it up before applying for the FHA loan just to increase your chances of getting approved with lower interest rates.

Compensating Factors

So what happens if you do have “bad” credit? Are you ineligible for the 203K loan? The good news is that you can probably still be a good candidate for the loan, but you have to have compensating factors. This could mean many different things, depending on the circumstances surrounding your application. A few examples of compensating factors include:

  • Low debt ratio – The lower your debt ratio, the lower the risk you pose to the lender. The FHA guidelines for the 203K loan are 29/41, but that does not mean that you should have ratios that high. The lower your ratios, the better you can afford a new loan.
  • Plenty of reserves – Money in your bank speaks volumes to lenders. The more money you have on hand, the better chances you have of getting a 203K loan. Reserves are money you have set aside in a liquid bank account that can be used to pay your mortgage if your standard income becomes unavailable. Lenders measure your reserves based on the number of months the money you have set aside will cover – the more months you can cover, the better your chances of getting approved.
  • Good housing history – You can have a low credit score and have a good housing history if you have made your revolving or installment payments late. The FHA puts the most emphasis on the housing payments, which can be a compensating factor if your credit score is low. As you work to increase your credit score, having on-time housing payments can work in your favor.
  • Stable income – The general rule is to hold the same employment for at least two years in order to be eligible for an FHA loan, but there are ways around that requirement. However, the longer you have the same employment and stable income, the less risk you pose to the lender. On the other hand, if you have any employment issues, you can visit hand hkm.com website for some best help options!

Apply with Different FHA 203(K) Lenders

The best thing to do when you do not have great credit and wish to use a 203K mortgage loan is to apply with different lenders. Lenders can add their own requirements on top of the general FHA rules, which state that you must have:

  • A credit score higher than 580
  • Debt ratios around 29/41
  • No more than one late payment in the last 1 months
  • Stable employment/income that can be verified
  • 5% LTV or lower

If a lender tightens the requirements in order to qualify for the 203K mortgage loan, it might disqualify you if you do not have great credit or have enough compensating factors. But because every lender has different requirements, you might find a lender that is better able to provide you with a loan approval. Every lender has their own level of risk that they can accept, making different borrowers eligible or different programs.

The 203K mortgage loan is a great way to purchase a home and have the money you need to fix it up. If you do not have great credit, do not assume you are not eligible for the loan program. Shop around with various lenders to see who will accept your level of risk and provide you with the most favorable terms for your loan!

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Can a 203(k) be Used to Reconstruct a Structure on an Existing Foundation?

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Can a 203(k) be Used to Reconstruct a Structure on an Existing Foundation?
The 203K loan enables homebuyers or existing homeowners to make changes to a home with the use of the proceeds from the loan. This loan, which is one program, provides homebuyers or homeowners that are refinancing with the money necessary to not only purchase or payoff an existing mortgage, but also the funds necessary to fix up the home.  These changes can range from changing the paint color in a home to completely demolishing an entire home and starting from scratch. If the change is related to the home’s foundation, one can instantly Click here.

Reconstructing a Home

What are the requirements in order to be able to reconstruct a home with the 203K program? There is one big requirement – you cannot change the foundation but you can visit https://www.aaafoundationservice.com/service-areas/pearland-tx/ and consult with the experts to find out the best solution to increase the strength of your old foundation. The foundation that is existing must be what is used to build the new home. The foundation must meet the following requirements:

  • Structurally sound
  • Able to hold the new structure being built

The loan consultant in charge of the 203K loan will secure approval from a structural engineer that can attest to the fact that the foundation is capable of meeting the above requirements before moving forward with the loan. You can click here to read the article on foundations! This is an added step that is only necessary on 203K loans that do not need foundation repair bloomington and are restructuring a home on an existing foundation.

What Changes can you Make?

Reconstructing a home basically means that you are starting from scratch. You are able to make as many changes to the home as you see fit as long as they fit within 110% of the future value of the home. Then also, the use of ready mix concrete during construction projects ensures a consistent quality and reduces material wastage, visit Carters Concrete who are a reputable supplier in Bournemouth to learn more about their offerings.

The home can be as close to new construction as you could get without building a new foundation or getting foundation repair champaign. You cannot, however, use this loan for new construction – the home must be existing for at least 12 months in order for the 203K loan to be used.

How to Start

If you wish to reconstruct a home with the 203K loan, you must meet the FHA requirements. The basic requirements to qualify for this program include:

  • 580 credit score
  • Debt ratios around 29/41
  • Adequate housing history, whether rental or mortgage history
  • Stable income and employment for the last 2 years with the probability of continued employment in the future

Once you know that you might qualify for FHA financing, you can apply with a lender that offers 203K loans. This requires two things:

  • A lender that is FHA approved
  • An FHA lender that offers 203K financing

Not every lender will offer 203K financing, so you may have to shop around to find a lender willing to work with you. Once you find a lender, the hard work begins.

The first step is for the lender to figure out the post-renovation value of the home. This is done with the help of a loan consultant and appraiser. You will need to provide the lender with a list of the renovations you plan to make, even if that means tearing the house down and starting again. A detailed list will provide the appraiser with the information he needs to come up with the future value of your home.

In addition to the work to be done, the lender will need to know the extent of the work, who will do it, how much it will cost, and how long it will take as this all plays a role in your ability to obtain an approval for the 203K loan. For the most part, you cannot do the work yourself; you must hire contractors to do the work for you. Your loan consultant and lender will have a say in which contractors you use as they will need to look at the work write ups and how much everything will cost. It helps to have estimates from several contractors to help you find the one that is not only the most cost effective, but has the most experience in the work you need done.

Once you have approval for the loan, the remainder of the loan process is the same. You must get a clear to close on the loan before you can start working on the home. This means that you meet all of the requirements of the lender, supplying all of the necessary information to show your worthiness for the loan. This means supplying pay stubs, W-2s, bank statements, employment information, and any other information the underwriters needs for your loan. Once the loan closes, the lender requires you to start the work within 30 days. If you are completely renovating the home, you will not be able to live in it; this means finding somewhere else to live for 6 months, as that is the length of time the FHA allows for the work to be completed on the 203K loan.

If you wish to demolish a home and start from scratch, the 203K loan is a good option. It allows you the money you need to get started without having any capital. It is one of the most fluid ways to get the cash you need to make the changes you desire on a home you wish to purchase or a home you already own.

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What Types of Homes are Ineligible for a Full 203k Loan?

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What Types of Homes are Ineligible for a Full 203k Loan?
The full 203K loan allows you to make major renovations on a home that you purchase or refinance, giving you all of the funds necessary to purchase the home and have the work completed. The guidelines regarding what can and cannot be completed on the home are rather flexible, allowing you to go as far as completely knocking portions of the home down and starting from scratch. That being said, there are certain restrictions regarding the types of homes that are eligible for the full program. Some of these restrictions can also apply to the loans on inherited assets. For more information, you can read about it at their blog .The ineligible homes include:

  • Homes that are still being built
  • Homes that have been in existence for less than 12 months
  • Co-op homes
  • Homes that you do not occupy as the borrower
  • Homes purchased by charities or non-profits
  • Homes that are both commercial and residential

The list of the types of homes that are eligible for the full 203K loan include:

  • Single family residences
  • Condos, but there are strict restrictions, including that only the interior can be remodeled and included in the loan
  • Townhouses
  • 2, 3, or 4-unit properties as long as you occupy one of the units

The Changes you can Make

The experts from the website says they are many changes you can make to the approved list of homes with a full 203K loan. The changes range anywhere from minor to major in nature and include:

  • Additions to the home
  • Complete remodel of a room including the bathroom or kitchen
  • Bringing a home up to FHA and city/county code
  • Replacement of windows, doors, roofing, and siding from the best site
  • Repair or replacement of utilities
  • Replacement of flooring
  • Replacement of appliances
  • Basement remodeling or finishing
  • Waterproofing by roofers in the Boise area
  • Addition of porches, patios, or decks
  • Addition or replacement of a garage

The changes you make to the home can be structural or cosmetic, giving you plenty of opportunities to make the home you purchase exactly how you want it. For financial details you could try this out  for the best banking services. The amount of the loan you are allowed to take out equals up to 110 percent of the future value of the home. This means that the appraiser values the home as-is and then takes into consideration the work write-up completed by the loan consultant and chosen contractor to determine the future value of the home. This future value is how your loan amount is determined, giving you leeway to have a large amount of work done to the home. As long as your qualifying factors, especially your debt ratio allow for the large loan amount, you can get a great amount of work done to your home while not having to use much money out of your own pocket. When it comes to plumbing one can get a toilet plumber to get their issues fixed.

Before you apply for a full 203K loan, it pays to make sure that your qualifying factors are in good standing. Take a close look at your credit score because if it is between 619 and 580, you will have to put down 3.5% of your own funds, not gift funds and if your score is below 580, you will have to put down 10% on the home, rather than 3.5%. In addition, you should make sure that your debt ratio is low enough to allow for the larger 203K loan amount to ensure that you can get all of the work done that you desire. Planning ahead for the full 203K loan purchase can help you qualify for the largest loan and have the home that you desire. With the right lender, loan consultant, and contractor, your quest to create your dream home can become a reality!

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Is there a Limit to How Much I can Borrow with the 203k Loan?

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Is there a Limit to How Much I can Borrow with the 203k Loan?
The FHA 203K loan is a great opportunity to either purchase a home that needs fixing up or to fix up your own home while staying on a strict budget. Because this loan program offers flexible guidelines and low down payment requirements, it is easy for the average borrower to qualify for, allowing him to create the home of his dreams without having to save up thousands of dollars on his own. The options to fix up or completely remodel your home are endless. In order to figure out the limit on what you can borrow, you will have to consider two distinct factors: the FHA loan limits in your particular area, the changes you want to make, and the type of 203K you use.

The FHA Loan Limits

Determining the FHA loan limits in your area is the least complicated component of how much you can borrow with a 203K loan. The answer is found on the FHA website, under the FHA Mortgage Limits page found here. On this page, you will enter the following information:

  • State
  • County
  • FHA loan type
  • 2016 as the year

With just this little bit of information, you will be able to find out the loan limit for your area. The website breaks it down into the number of units – 1, 2, 3, or 4-unit properties, so that you know the limit for multi-units in addition to a single-family unit. They also detail the median sale price for the area so you have an idea of where you stand. This maximum loan amount is non-negotiable – you cannot go over this amount for any reason.

The Desired Changes

Once you know the loan limit for your area, you have a framework to work within. If you are purchasing a home, you will need to work the purchase price and the desired changes into that maximum loan amount. Of course, the appraised value plays a role in what you are allowed to borrow. The 203K loan works a little different than a standard purchase loan, though. Depending on the changes you are making, the appraiser will provide an as-is value before the changes as well as an anticipated value after the changes are made to help the lender determine your exact loan amount. The appraiser determines this amount based on the bids received from the contractors regarding the work to be completed. Once the final appraised value is determined, the loan amount is allowed to reach up to 110 percent of that value, assuming it falls within the loan limits for the area.

The Type of 203K

In addition to the desired changes you want to make is the type of 203K loan that you choose as there are two choices: streamline and full 203K.

  • Streamline 203K – The streamline product of this FHA loan allows you to make non-structural changes to the home, such as additions, new construction, extensive repairs or rehab. You can, however, complete projects that include minor remodeling of kitchens and bathrooms, paint, bring the safety features of the home up to code, replace the siding, and update or repair the plumbing, as a few examples. If you choose the streamline version of this loan, your repair expenses cannot exceed $35,000 and they cannot require any architectural plans; there is no minimum required for this type of loan.
  • Full 203K – The full version of this loan has a $5,000 minimum requirement for repairs, but does not have a maximum, with the exception of what is required for the loan amount for the area or what you qualify for given your qualifying factors. The sky is the limit regarding the types of repairs that can be done with the full loan – you can completely restructure a home as long as you have the approval of the lender after they receive the bids and architectural plans from a professional architect.

The loan limit for the 203K loan is dependent on many factors. The most important factor, of course, is your qualifying factors. The higher your credit score, the lower your debt ratio, and the more stable your employment and income are, the better your chances are of getting approved for the full amount of the changes you desire to make to your home. This loan is backed by the FHA, so it does have a great deal of flexibility, but having compensating factors to make your loan less risky is definitely a step in the right direction for approval on this type of loan.

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How to Refinance your Home with the FHA 203K Renovation Program

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How to Refinance your Home with the FHA 203K Renovation Program

Are you tired of the way your house looks? Maybe you would love to change the interior color of the entire house or you would love to add an island to your large kitchen. All of these things and more are possible with the 203K refinance program. This FHA based program enables you to refinance your current mortgage at its loan amount and finance additional money to make the necessary or desired changes to your home. You can choose to use the streamline 203K program and limit your changes to a dollar amount of $35,000 and avoid any structural changes or you can make as many changes as you see fit up to the cost of 110% of the predicted future value of your home.

Start with the FHA Approved 203K Lender

The first step is to find an FHA approved lender that offers the 203K loan program. Not every FHA lender offers them, so you may have to shop around a bit. Once you have a lender, you will go through the standard pre-qualification process to see if you are a good fit for the FHA program. The standard requirements for an FHA loan are what apply to the 203K refinance program. In general, you need:

  • Credit score above 580 (some lenders like it higher)
  • A debt ratio no higher than 31/43
  • Consistent employment
  • Stable income
  • No collections, bankruptcies, or foreclosures in your recent past

As long as you meet the minimum requirements, the lender will move onto the next step which means figuring out what changes you can afford to make to the home. This next step is a multi-step process as there are more people involved in the decision.

Find out the Appraised Value

The lender will need to know the appraised value of your home as it is right now. This value will help to determine the future value after the desired changes are made. The appraiser can predict the future value based on your initial plans for changes as each change has a designated impact on your value. With the predicted future appraised value in hand, the lender can determine what 110% of that amount is to come up with your maximum loan amount. This is an important number as it will be what helps you determine which contractors you can afford to use for the work you wish to have done. Contact experts from Trade Wise to help with trading.

Find 203K Contractors

Once you know the amount of money you have to work with, it is time to find contractors. These are the people that will do the work on your home. Generally, homeowners are not qualified to do the work, unless it is something simple like painting the interior and you can prove to the lender that you have the supplies or the money to purchase the supplies as well as the time to get the work done within 6 months or the designated time frame. A majority of the time, however, you need to find contractors that can do the work for you. The lender will have a say in who you use for your contractors, so it pays to shop around. You must find professionals that have the appropriate licensing and insurance as well as the experience to do the work. In addition, the estimates the contractors provide must be in line with the money you have available to have the work completed. Sometimes, you will have several contractors bidding for the job and the lender can help you determine who would be the best fit for the job.

203K Refinance Loan Processing

Once you have all of your ducks in a row, it is time to get the loan processed. This means that you provide the lender with the following documents:

  • Last 2 paystubs
  • Last 2 years’ W-2s
  • Last 2 years’ tax returns (if you are self-employed or work on commission)
  • Information on your existing loan that the 203k loan will pay off
  • Estimates from the contractors
  • Contract from the contractors to do the work

Every loan is different, so your lender might require a little more information from you as they process the loan. The quicker you provide the documentation they need, the quicker the loan can close.

Closing the Loan

Closing the loan works a little differently than any other loan type. With the 203K refinance program, the new lender will pay off your existing lender as a typically refinance works. After the lender is paid off, the remaining money is placed in an escrow account, minus any money the contractors requested up front to get the work started. A small percentage of the money is typically disbursed right away – the remaining money is put away and disbursed only as the contract states and as the work is completed. The lender has complete say in when the money exchanges hands and will not release the final payment until it is certain that all mechanics liens are off of the property and the work is done to the lender’s as well as your satisfaction.

The final step is when the work begins! The contractors typically have six months to get the work done with specific check-in points with the lender to determine that everything is on schedule. The lender and the FHA hold tight to that 6 month maximum, so it is important to get the work done on schedule by choosing a reputable contractor.

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FHA Loans and Flipping Homes

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FHA Loans and Flipping Homes

Flipping homes is a way that many real estate in Ormond Beach investors make a quick profit. They purchase a house for an amount that is lower than its value and turn around and sell it for an inflated price after working with an appraiser to increase its value. This practice, known as “flipping” is not allowed by the FHA and, in fact, is looked upon extremely poorly by them. They do not take any chances dealing with any type of investor that could potentially flip a house and have put forth strict rules to ensure that this does not happen, not allowing FHA loans anywhere near house flippers. There are ways around the stipulations as a buyer, but you have to be patient and wait out the time periods that are strictly set forth by the FHA.

The Time Frame

The first way the FHA prevents flipping houses is by setting a specific length of time that the home seller must own the home before he can sell it to a borrower with FHA financing. That time period is 90 days, but that is not the end of the road, there are more specifications following. Basically, what this means is if a seller were to put his house on the market between 1 and 90 days from the date of his closing when he bought the home, no FHA buyers can purchase the home. This limits the market to which the seller has to sell his home too, but it is the FHA’s way of protecting themselves and their borrowers. The FHA sticks hard and fast to this rule, eliminating any FHA buyers from the pool with this requirement.

The Longer Time Frame

Now, if the home you wish to purchase is outside of the 90-day window, you might think you are home free and can use FHA financing for the home, but there are still strict rules to protect everyone involved in the transaction. If the timeframe when the seller acquired the home is between 91 and 180 days, the lender must determine if the new price which the seller is turning around and asking for the home is more than 100 percent over the price that he paid for the home. If it is, then the FHA lender will require that another appraisal be performed. This new appraisal will then get compared to the original appraisal; if the value on the 2nd appraisal is more than 5 percent lower than the first value, the lower value must be used. This is another way to protect the buyer from purchasing a home that is not worth the value that the seller is asking – the FHA assumes the seller is trying to make a quick buck and they do not want to guarantee a loan for that type of transaction.

Exceptions to the Rule

As with any other FHA rule, there are exceptions to the flipping rule. Because the rule was put in place simply to protect borrowers and lenders from purchasing a home with an inflated value, these exceptions are meant to make it easier to finance homes that might be sold quickly, but have a different reason for doing so, rather than just to make a quick profit:

  • An employee that purchases a home from their company after the company bought the home recently from an employee that they transferred elsewhere
  • Sales that are handled by the United States government
  • Sellers that did not purchase the property, but rather inherited it and now want to sell it

Backing up the Higher Cost

Any seller that wants to turn around and sell their home within the 91 to 180 day window will need to have ample proof of the reason that they are asking the higher price for the home, especially if the second appraisal does not back up their reasoning. The reasons should include proof, such as receipts for any upgrades performed or work done on the home as well as a detailed listing of what was done to the home to help back up the reason for the higher cost. This reasoning cannot include any repairs that were done to the home – strictly new improvements, such as additions or remodeling that was done to the home to make it better. In addition, the seller should anticipate paying for the 2nd appraisal as it is not allowed to be charged to the FHA borrower.

Homes are Available

This anti-flipping rule might seem to really limit your pool of homes that you have to choose from, but in reality, this is not the case. What the FHA is trying to do is protect you from purchasing a home that is not worth the asking price. They would do this in any situation, not just one that the home is being flipped rather quickly. If a seller really wants to sell a home, they will wait the 90 day waiting period to enable FHA borrowers to have access to the home. If they do not wait the required 90 days, chances are that they know the 2nd appraisal would not align with the price they are asking for the home, so they would not be able to market to FHA buyers anyways.

If there is a home you really want to purchase and FHA loans are your only option, you can try to wait the time period out to see if the home is still on the market. Most sellers so not turn around and put the home on the market on the second day the own it – they will typically do some work to the home to try to have reasons for the higher price of the home. That being said, it is typically rather easy to hit that 90-day mark, allowing you to have FHA financing as an option on the home. As long as the value of the home checks out, you will be able to purchase the home you desired after all.

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The Method to Get 203K Work Done Yourself

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The Method to Get 203K Work Done Yourself

You found your dream home and you want to get the repairs or remodeling done, but you know that you can do it yourself for less money than a contractor would cost and want to save the money on your 203K loan if you can. Most lenders frown upon this activity, but some will allow it with certain stipulations. In order for you to qualify with the lender, there are certain requirements that you must meet.

The HUD Requirements

HUD will not let just anyone do the rehab work on a 203K loan project. You have to have certain qualifications. In order to prove these qualifications, you will have to go through HUD. They will require you to provide a letter in writing stating your qualifications along with the necessary proof. The proof they look for includes:

  • You have the necessary license for the type of work you will be performing. For example, if you are redoing the plumbing in a home, you need to have a plumber’s license. If you’re looking for a licensed plumber narellan you can always seek help from Walker Assured Plumbing. If you are doing the electricity, you need an electrician’s license.
  • You have to prove that you have the time necessary to complete the rehab in a timely manner. In general, all 203K work needs to be completed in 6 months. If your job takes up a majority of your time and you have a large family, most lenders will assume you do not have the time to complete the work and will deny your request to do the work yourself.
  • You must have any tools that are needed to complete the job. If you do not have a certain tool or tools, you will have to purchase them with your own money; the lender will not allow for disbursement of funds for tools.

FHA Lender Overlays

The above guidelines are strictly the guidelines set forth by HUD.  Each lender can have their own requirements on top of these. Every lender will differ, which means you can shop around with various lenders should you not get the results you desire. A few of the most common lender overlays include:

  • You may be required to have a certain amount of assets in the bank in order to cover any extra expenses or the need to bring in a professional should you be unable to complete the job as planned.
  • Proof of the number of hours you work per week or your other obligations in order to determine the amount of time available for the project.
  • Proof of your ability to do the job that goes beyond a standard license. The lender may want to see proof or hear of your past experiences to know what you are and are not capable of completing.

Remember, any lender can deny your request to do the repairs on your own. It is up to each lender whether or not they are comfortable with you doing them. The reason that the lenders are so leery is because the value of the home they are providing a mortgage on is dependent on the work that you complete. If you do not do the work appropriately, the value will not be nearly as high as was anticipated, which means the entire mortgage is thrown off. The lender’s money is at stake, which is why they are very choosy on who they allow to do the work. More often than not, self-work is not approved and the chosen route is to have professionals do the work to ensure that it is done correctly and in a timely manner.

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Eligibility for the 203K Loan

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Eligibility for the 203K Loan

The FHA 203K loan is the perfect way to purchase a home that needs fixing up. Many people think that they would not need to qualify for such as loan, since they are helping the community by purchasing a rundown home, but the opposite is true. You do have to qualify for the loan, but it the requirements are not as harsh as they would be with a home that was not going through the rehab process. The basics of an FHA loan still exist for this loan and are rather flexible in the end, giving you more opportunities to purchase a home that you can fix up the way you want it to look.

Credit Reporting

Your credit scores will be pulled in order to determine your risk level. Unlike conventional financing, however, emphasis is not put on the score itself. In general, no lender will talk to you if your score is lower than 580, but an overall evaluation of your credit history will take place for every person. They are looking for responsibility when it comes to repaying your loans. If you have a low score, yet have a good 12-month mortgage history, you could be eligible.

Income Reporting

Just like any other loan, the lender will evaluate your income. They usually look at a 2-year history, taking an average of your income over that time period. They will document your income by your most current paystubs that covers a 30-day period as well as the last two years’ worth of your income tax returns. If you are self-employed or on a fluctuating income, your income that is used to qualify for the loan might be lower than you would anticipate, but this is to gauge for those times of the year that your income is lower than others. The lender wants to make sure you are not getting in over your head.

Down Payment and Leftover Funds

The FHA 203K loan is just like any other FHA loan; you need to put 3.5 percent of the purchase price of the home down. The good news is that this money can be gifted from a friend or family member, meaning that essentially, you do not have to put any of your own money down on the home that you are fixing up. If there are funds that are left over after the repairs are complete and the entire process is over, the money can be used to pay down the principal balance of your 203K loan, making it easier to gain back the equity in your home in the long run.

Property Qualifications

In addition to borrower qualifications are property qualifications. You must live in the property that you are taking the loan out on with the exception of a 6 month period where you can live elsewhere if the home is not livable during the process. The home can be a 1-4 unit property or a townhome, but must be at least 1 year old in order to qualify. The amount of the loan cannot exceed the maximum for your area, which differs for every state and county.

The 203K loan is not hard to qualify for as long as you have decent financial history and a stable employment/income history. Less emphasis is placed on your credit and more is on how risky you look now. The loan does take some more work and should be done in conjunction with professionals that have been through the process before simply to ensure that you are not being taken advantage of in the end.

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Things you Need Before Choosing a Contractor for FHA 203K Renovation Work

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Things you Need Before Choosing a Contractor for FHA 203K Renovation Work-FHA203KMORTGAGE.COMIf you are looking to get a 203K loan, whether streamline or standard, you need a contractor to the work. The only exception to this rule is if you have the experience yourself to do the job and you can prove it. But you also have to prove that you have the time to complete the work in less than 6 months. If you have a full-time job and the repairs are extensive, this could be hard to prove, which is why most homeowners use a contractor for the job. Before you hire just any 203K contractor, however, you need to know what they need to provide in order for the process to run smoothly.

License

Every contractor needs to provide proof of proper licensing for his profession. Every state and even county within that state will differ in what is required, so make sure that the contractor meets the minimum needs of your area. Hiring a contractor that is licensed works to your advantage anyways as it allows you the peace of mind knowing that the person has sufficient experience in the job he will perform as well as in business management. Since time and organization are crucial to the success of the 203K project, using a licensed contractor makes the process much less stressful.

Insurance

The contractors you use will also need to provide proper proof o insurance. This means liability, workmen’s compensation, and/or property damage insurance. This protects the lender as well as yourself in the end. For example, if a subcontractor were to get hurt on the job, he could come after you as the homeowner for the costs of his medical bills and loss of wages if the proper insurance is not in place. Another example occurs when the contractor makes a mistake during the remodeling process and causes damage to your property. If he does not have insurance, you would be responsible for the damages, which could make it impossible to finish the work, putting the 203K loan at risk. At a minimum, lenders need liability and workmen’s compensation insurance to protect everyone involved.

References

If the work being done on the home is extensive, the lender might want to confirm that the lender can do a satisfactory job by contacting business references. Typically lenders ask for around 3 references. These can be other contractors that have worked with the one you are trying to employ or past customers that have had work done by the contractor that can vouch for his ethics, quality of work, timeliness, and organization. The lender is protecting you and themselves when asking for references, so don’t be offended when you have to ask the contractor for them. Most reputable contractors will have references ready to go – if you come across one that does not have references and does not want to provide them, you should proceed with caution.

Cost Estimates

Everything that is done with the 203K loan needs to be in writing, including the estimates for the work to be done on your home. A verbal agreement with the contractor is not enough as the lender needs to see line by line what the contractor is charging and what he agrees to do to the home. Because you are going to have to supply several estimates, the lender will be able to compare them side-by-side to see who is offering the best deal and what work they are offering to do. Some contractors will try to pull the wool over your eyes and only do a so-so job on the home while charging you full price. The lender and/or loan consultant, if you are using a full 203K will oversee the process so that you do not get taken advantage of during this overwhelming process.

Homeowner/Contractor Agreement

Once the 203K contractor is chosen, an agreement needs to be drawn up and signed by both parties. This agreement will show the work that will be done, the timeframe in which it should be completed, the materials needed to complete the job, and the process for any change orders that may come up. When everything is in writing and submitted to the lender, everyone has to abide by the agreement in order to ensure that the process goes smoothly.

Shopping for a 203K contractor can seem like a lengthy process, but it is worth it in the end. There are many contractors out there that run scams, taking advantage of unsuspecting homeowners. The lenders that offer 203K loans will not allow that to happen to you though, which is why they are so strict with the entire process, requiring the five items above before approving anyone to do the work on your home with a 203K loan.

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Three Reasons “Bad” Credit May Still Qualify you for a 203K Loan

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Three Reasons “Bad” Credit May Still Qualify you for a 203K Loan- FHA203KMORTGAGE.COMGetting a loan today is tough business. Lenders want to see perfect credit, long standing employment histories, and steady income, not to mention a low debt to income ratio and high down payments. In a perfect world, we would all have this, but unfortunately, that does not happen. So how do you get a loan, such as a 203K loan without having perfect credit? There are ways – you just have to know the ins and outs of this popular FHA program.

Several years ago the FHA started a program called the “Back to Work Program.” This new program was put together to help people that suffered a negative impact to their credit due to issues that were not their fault. Because the economy as a whole went down the tubes, many people suffered even though they did not do anything to jeopardize their job. These people were left without their standard income and were forced to file for bankruptcy and some even had to give up their homes. In such cases, people can consult a leading law firm like Karen Ann Ulmer, P.C., who will give guidance and assist these people through the process of filing bankruptcy. P.C.Rather than leaving these people homeless or forcing them to rent, the FHA created the “Back to Work Program.” This program enables people to get a mortgage just 12 months after their negative financial issues, but there are stipulations to this rule. Here are 3 reasons you can get a FHA 203K loan just 12 months later. Here are the firms filing for a bankruptcy cases that you need to have a look at and get help with financial aid.

You Lost 20 Percent of your Income

You have to be able to document that you lost at least 20 percent of your income. This is fairly easy to prove with W-2s from the time period that you lost your job or were downsized. If you cannot provide W-2s, many lenders will accept a verification of employment from your previous employer showing the decrease in income and the reason. The most typical reasons are a company closing or the need to downsize. Maybe you did not lose your job, but you were given a lower paying job just to keep you employed. Regardless of the actual event, you need to prove that your income was decreased by 20 percent and that it lasted for at least 6 months. If you can tie the decreased income into the time period when you suffered bad credit, whether a bankruptcy, foreclosure, or just late payments, you might be able to get a FHA loan sooner than you thought. If you got a lawyer’s help with filing for bankruptcy, a lawyer can help you with the remaining procedures as well. Make sure you get legal guidance in every step.

You Filed for Bankruptcy

If your bills got to be too much and making ends meet was near impossible, bankruptcy was probably your only option and it has become so difficult to find lawyer for bankruptcy cases these days. While it might make you feel guilty or as if you are chained to your bad credit for the next 7 years, there is light at the end of the tunnel. With the acquaintance from the Philladelphia law firm helping clients with bankruptcy, all the bankruptcy issues will be solved before you know it as they handle the client’s problem as their own to fight for the good cause. You can purchase a home that needs fixing up and finance it with a 203K loan just 12 months later as long as you can prove that the BK was a result of the bad turn the economy took; this ties into the need to prove that you had a 20 percent decrease in your income. If the two issues took place simultaneously, then you can typically get a 203K loan just 12 months after the discharge date. It is best to work hard to bring your credit score back up so that you can get a lower rate, but generally, FHA loans are not incredibly expensive, which means even with a BK in your past, you can still get a decent rate.

You Lost your Home

Losing your home is something no one wants to experience, yet thousands of Americans suffered from this issue not too long ago. If the bank had to take your home back, you are not stuck being a renter for the rest of your life. The FHA 203K loan is available just 12 months after the foreclosure if you are able to prove that the foreclosure was out of your hands. If you were not directly responsible for losing your home, which means things like getting fired or mismanaging your money, then you can get some reprieve in order to be a homeowner again. Because the 203K loan enables you to fix up a home with the first mortgage, you can purchase a less expensive home that needs some work in order to save yourself some money as you try to build yourself back up.

The 203K loan is a great way to get back into the swing of things as a homeowner without a huge commitment. Yes, you are taking on a new mortgage, but it is one that will allow you to fix up a home, which means your ability to purchase a less expensive, run down home is greater. You can purchase the cheaper home and fix it up for less than what a home that does not need any fixing up would require. As long as you have the proof that the bad credit you have was no fault of your own, getting a new FHA loan is not impossible.

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