Discover the FHA 203K Loan Program
Is your budget short for your home improvement plans? The clear answer for your home rehabilitation ideas is the FHA 203K loan or the “fixer” loan program.
The 203K loan program is courtesy of the Federal Housing Administration (FHA), to provide assistance in home improvements as well as in purchasing a shabby property. The FHA is a part of the Department of Housing and Urban Development (HUD). This government agency does not provide the loan but rather offer the assistance in finding authorized lending institutions that could provide the funds. The FHA grants assurance to institutions regarding the repayment of mortgage loans.
Preparation of the necessary requirements, however, is not simple. The borrower has to meet the qualifications for the 203K loan program before applying. Below are some of the basic qualification guidelines:
Stability of employment – At least 2 years of stable employment. If possible, with the same employer.
Steady or increasing salary – The salary for the last two years have to be the same or increasing.
Foreclosures and bankruptcies have to be two years old and acquired a good credit since.
Credit report has to have below two thirty lates in the preceding years.
The current mortgage payment should not go over around 30% of your gross income.
Also, take into account that the eligibility for a FHA 203K loan could differ by location. So be sure to still check the qualification guidelines in your area to ensure approval.
This FHA loan program is not restricted among single family properties. It is also available for four-family structures, condominiums, and town homes. Questions like, "could you do repairs yourself?" arises. The borrower could repair the property as long as it is has been approved just before the deal is closed. Qualifications are set before approval. And if you are going to do the rehab yourself, everything has to be done in a workmanlike and timely manner.
What are the advantages of a FHA loan program?
First and foremost, FHA loans are not for everyone. But what is so great about their programs is that their loans could be assumable. There is also the compassion during financial misfortunes and they have no prepayment penalty, which definitely good news for sub-prime borrowers.
The 203K loan program is just among the many loan programs offered by FHA. With this loan, you can borrow funds for your home rehab needs while having a very low interest rate. Great benefits with lesser paperwork, how great can that be? So, if you are ready for a FHA 203K loan, follow these simple instructions in preparation for the said loan program:
Find the ideal lending institution that provides the said loan program. Also, be sure to get a skilled loan officer to handle your loans.
Present the required documents on time to avoid delaying the loan officer. Requirements include: tax returns, bank statements, two current pay stubs, driver’s license, and your social security card.
Go through the proper bidding procedure.
Review contractor bids and as much as possible, compare them. Once you have decided which contractor, ask for at least three recommendations, license details, as well as insurance information on all companies involved. Have all these information submitted to your loan officer.
As soon as the home improvement cost has been submitted, an appraisal will be made. And with the lending institution’s approval, the deal will be closed and work shall begin within 30 days of the final closing.