FHA 203k Mortgage

FHA 203k Mortgage Rates, Guidelines, Lenders and Information

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Simple Ways to Use the 203K Streamlined Loan

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Simple Ways to Use the 203K Streamlined Loan

You found a house you want, it is in good condition, yet there are just some things that are not jiving with you. This is the perfect example of a great home for a 203K loan. The streamlined loan does not require nearly as much work as the standard 203K and it allows you the opportunity to change those little things that you do not like!

What is the 203K Streamlined Loan?

The 203K Streamlined loan is a simpler version of the standard 203K. The stipulations are a little different, namely how much you are able to borrow. The standard 203K allows you to borrow as much as 110% of the projected value of the home, which is the value after the work is completed. The streamlined version is maximized at $35,000 in repairs, which if you are making minor repairs, is more than enough! Another major difference with the streamlined version is the lack of a need for a loan consultant, which you can decide if you want or not. This professional is required in the standard version because of the major work that is completed, but with the streamlined version it is not a necessity because there are not architects, engineers, and structural changes involved in the plans.

Ideas for a Streamline 203K

There are many ways that you can use this version of the FHA loan. It is mostly used for cosmetic changes. For example, if you love the layout of a home and it does not need any rehab work, yet the paint colors make you cringe, you can use this loan to have the entire home repainted – either inside, outside or both! Other ideas include changing out the flooring, new appliances in the kitchen, lighting changes, adding a porch or deck, finishing a basement (non-structural changes) or changing the windows.

Each of these ideas will make the house exactly what you want and not require you to have two separate loans or come up with large amounts of cash. As you can see, the changes do not need to be major, but can still qualify you for these great FHA loan.

This opens up many opportunities for home buyers that would otherwise walk into a home and hate one thing about it, forcing them to pass on the home because they cannot afford to make the desired changes with money out of their pocket at the moment. With the streamlined 203K, you are able to roll the cost of the repairs into the loan, allowing you to pay it off over the life of the loan, which is typically 30 years. With low interest rates and minimal closing costs, this turns out to be the most effective way to rehab a home, making it exactly what you desire.

No Structural Work

The largest caveat with this loan is that no structural work can be completed. This means no tearing down walls, fixing damage that affected a structure, room additions, or having any type of work done that requires an architecture or engineer. The work should be simple in nature and simply enhance the cosmetic appearance of the home.

If you are shopping for a home, don’t forget about the 203K streamline process. It is a great way to make changes to a home that you would otherwise love if these minor cosmetic issues were changed. It is amazing how much a coat of paint, a new floor, or new lighting can change the entire appearance of a home, and if you’re looking for a professional in painting, commercial painting Manchester is the best choice for you. Try to overlook the minor things and think of the big picture – if the layout and structure is suitable to you, the rest can be changed with the streamlined 203K loan.

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Refinancing A 203K Loan

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Refinancing A 203K Loan

One of the best ways to get into a home that needs work is with a 203K loan. This loan, which is backed by the FHA, enables you to purchase a home that would otherwise not pass the appraisal process. This process which is a mandatory component of any mortgage determines the stability of the home. If there are any structural or hazardous issues with the home, it will not pass the appraisal and will therefore be ineligible for any type of financing. The only way you could purchase the home would be with cash, unless you obtained a 203K loan. Many people frown upon the idea of financing home repairs for 30 years or even 20 years if they are able to get approved for a shorter term. The good news is that there is a way around it – refinance the 203K!

Refinancing Helps

Many people think that refinancing is not possible a year or so after purchasing a home, but oftentimes it is, especially with the 203K loan. The largest benefit of obtaining this FHA loan is the ability to increase the value of the home within the six month period that the work is being completed. There is nothing better than purchasing a home for $100,000 and having it be worth $200,000 when you are done! For many borrowers, this instant equity means a drastic change in their loan-to-value ratio. This means that they may be eligible to refinance into a conventional loan down the road.

If the loan-to-value ratio and the poor status of the house were the only things keeping you away from conventional financing, the 203K loan gives you the opportunity to grab it. The higher amount of equity you have in the home makes refinancing much easier. Why would you want to refinance? The main reason most people want to do it is to get rid of the mortgage insurance that is paid upfront and on a monthly basis. While you won’t get any of the insurance back that you paid, you can eliminate it from your payments moving forward. You can then use that extra money to pay the loan down faster, which helps to eliminate the number of years that you end up paying for the renovations on your home.

The good news is that you are not stuck with the loan that you obtain to do the repairs on your home. It is like a win-win situation for you. To begin, you are able to purchase the home you want despite its structural or hazardous issues. Once you own the home and make the repairs necessary, you can then refinance out of that loan and into the traditional conventional financing you want because the home should pass a standard appraisal once the renovations are complete. Of course, you will need to have good credit, a low debt-to-income ratio, and stable income in order to qualify for conventional financing. FHA financing, including 203K financing, is much more lenient when it comes to obtaining a loan. The credit guidelines are more flexible as are the requirements for employment history, income, and debt-to-income ratio.

Consider the 203K Loan

If you want to get into a home, consider the 203K loan. It gives you the financing you need while allowing you to work on your credit and/or income in order to be eligible for conventional financing down the road. In the end, you get the home you wanted with the renovations that were necessary or desired and the financing that helps make it all possible. If you end up having to stick with the 203K financing, it is not the end of the world – the insurance is imply the protection for the lender in the event that you were to default. That is a small price to pay for the value that they have provided for you!

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5 Reasons to Buy a Starter Home with a 203K Loan

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5 Reasons to Buy a Starter Home with a 203K Loan

A starter home is typically a smaller home that needs some work. Many people end up settling for this type of home, thinking it is all that they can afford. The good news is that there is another way to frame that “starter home.” With a 203K loan you can buy a starter home that needs work and do that work so that you have a house that you love! Could you imagine buying your first home and not having to sell it or “upgrade” in a few years? That’s what 203K financing can do for you. If you are not convinced, here are 5 reasons why you should purchase that starter home with this FHA financing.

  1. You can make the house look just how you would want it to look. This means making cosmetic and structural changes. Do you hate the paint color? Have it painted! Do you dislike the flooring? Change the flooring! These are just a few ideas on how you can make the house look how you want – with 203K the sky is the limit.
  2. You can finish the basement! This is a once in a lifetime opportunity to be able to finish the basement on your starter home. Imagine the space that will add to your home! Now you will not have to rush out to move when your family starts expanding.
  3. You can make energy efficient changes. Windows, roofing, and solar panels are just a few of the ways that you can make your home more energy efficient. If you have the room in the loan-to-value ratio, it is well worth the investment to make these changes now.
  4. You can add a patio, deck, or porch to the home. The best way to add a patio and deck at home is by simply hiring a balcony waterproofing contractor. This is another great incentive for a starter home that likely does not have any of these features as this is an add-on that typically takes many years to save up for, with most people moving out of their starter home before ever even building their deck or patio.
  5. Get a new roof! What better way to secure the stability of your house than making sure the roof is brand new? Now you not only have a stable roof, but also one that you picked out, which can greatly impact the curb appeal of your home.

These reasons are just the start of why a 203K loan makes sense when you are purchasing your first home. The FHA financing is very easy to qualify for and is fairly straightforward to obtain. If you go to a lender that has experience with this type of lending you will not have any problems going through the process. Just make sure you are using a professional that has done many of these loans as there are different aspects to it than a standard FHA loan. If your revisions are going to cost less than $35,000 you can opt for the streamlined version of the loan and not have as much work to do. But if you want the standard 203K loan, you will need to have a loan consultant, professional contractors, and a six month period in which the work can be done.

You have a say in how everything is done in the home, enabling you to move into a home that is stunning right from the start – this is not an opportunity every first time home buyer gets to take advantage of – don’t lose your chance!

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How Investing in a 203K Loan Makes Sense

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How Investing in a 203K Loan Makes Sense

Many people, especially financial planners, will tell you not to finance home repairs into a mortgage. Who wants to pay for that mold removal for the next 30 years? In reality that sounds like it makes sense, but the 203K loan is different. Yes, if you financed the repairs on a home in any other type of mortgage, such as a cash-out loan, you would be paying for those repairs for the next 30 years or whatever the term of the loan is at that time. There is a major difference with the 203K loan that you should understand though. If you want a profitable option to generate money and avoid loans, read this post about fx trading online.

The Future Value Matters on a 203K Loan

The equity in a home financed with a 203K loan is based off of the future value. What does this mean? It means that the current value of the home “as is” is figured in order to determine the appropriate sales price for the home, but the actual LTV of the loan you are taking out is based on the value of the home after the repairs are done. Chances are if you are taking out a 203K loan, you are making extensive repairs. These repairs should have significant impact on the value of the home. Unless you are borrowing the maximum LTV amount, which is 110%, you are getting instant equity in your home. Let’s take a look at an example:

You purchase a home for $100,000. The current value is $110,000, so you already have almost 10% equity in the home. You took out a 203K loan for $1450,000 because you are doing $40,000 in repairs and need to have that 10% cushion should something go wrong with the repairs. Once the repairs are completed, the value is estimated to be at $175,000. Once the work is completed, only $42,000 needed to be disbursed because everything went just about as planned, so the extra $3,000 went towards the principal of your loan. Based on the new value, you now have 19% equity in your home, which helps to decrease the burden of paying for those repairs for 30 years.

The alternative to this type of loan would be to pay for the repairs outright or take out another type of loan. Typically a personal loan or even home equity loan will have more fees and higher interest rates than the FHA 203K loan. If you chose to pay for the repairs outright, you are likely going to wipe out your savings, which puts you at risk for defaulting on your mortgage in the future should something happen. You always have the option to pay the principal of your 203K loan down should you have a windfall and be able to pay it, but if you don’t, it is perfectly acceptable to make the monthly payments and enjoy the house the way that you fixed it up!

The 203K loan makes it possible to purchase a home that others might look right over. Whether it is a foreclosure or just a home that was not kept up, it can be yours for a lower price and with the added value of being able to fix it up just how you want it. Don’t overlook the possibility of this type of loan when you are shopping for a home. It is easy to qualify for and provides you with many benefits that other loans are not able to provide. Instant equity is not something that you will find in any other loan – and is something well worth exploring in order to ensure that you love the look of the home you purchased to live in for the next many years.

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