FHA 203K Program
HUD’s Section 203(k) loan is one of many FHA programs that make mortgage credit available to borrowers when buying or refinancing a house that is need of repair or modernization. Unlike conventional rehab programs, the 203k has the same relaxed credit and income qualifying and low down payment guidelines as other FHA loan programs. This program works great for those who may not otherwise qualify for conventional loans due to income, credit and/or down payment requirements.
The 203k offers a solution that helps borrowers by providing a single, long - term, fixed rate or adjustable rate loan that can cover both the acquisition and rehabilitation of a property. 203k loans save borrowers both time and money.
Any one-to-four-family owner occupied home is eligilbe as long as the property is zoned for the applicable number of units. Condominium units are eligible but Cooperatives are not. Mixed use property is also eligible with some restrictions.
A 203k mortgage can be used to convert the number of units a dwelling has. A five unit dwelling for example that would not otherwise be eligible can be converted to an eligible four, three, two or one unit using 203k financing.
Most improvements are eligilbe under this program with the exeption of those considered Luxury items or improvements. For example you can not put in a new pool but you can repair an exisiting pool with 203k funds.
A minimum of $5,000 in repairs and/or improvements must bd done. Painting, carpeting, adding a deck or adding a new room can be done even if the house needs no other improvements.
• The home must meet minimum FHA property standards at the time of completeion.
• New construction must meet local building / housing codes.
• Improvment of thermal efficiency using cost effective energy standards such as weatherstripping, caulking, sealing, insulation and veltilation where missing or needed.
• Smoke Detectors must be added where necessary
FHA 203k Features
• Higher level of supervision of homeowner than other programs
• Loan amount based on Completed Value but capped at FHA maximum mortgage limits in your county. *adjusted annually
• Very Low 3.5% minimum down payment
• Relaxed Credit and Income qualifying guidelines (compared to conventional programs)
• Some Limits on types of repairs
• Investors (non-owner occupied) prohibited
• Fixed or Adjustable rates (ARM’s) available
• Can be combined with FHA’s Officer Next Door and Teacher Next Door home ownership programs.
• Can finance up to six months of mortgage payments for owner-occupied properties to cover non-occupancy costs during construction.
For example, if you have to spend six months renting an apartment while your home renovation takes place, you can roll those expenses into your loan amount