What every Homebuyer needs to know about 203k
Great info on the 203 K program for anyone interested in purchasing and making repairs and having only one loan in the process. I thought this might be helpful for some....
What is 203(k)?
The 203(k) program is the Federal Housing Administration’s program for the rehabilitation and repair of single family properties. It's goal is to revitalize communities and to expand homeownership opportunities.
How does 203(k) work?
When you buy a home, most mortgage financing is based on the appraised value of the property. If a property requires repair, the homebuyer usually has to obtain financing first to purchase the dwelling and then additional financing (usually at a high interest rate) to do the construction. With 203k, the borrower can get just one mortgage loan to finance both the purchase and the rehabilitation of the home. The mortgage amount is based on the projected value of the property with the work completed, rather than just the appraised value.
What properties are eligible?
203(k) can be used to purchase any one- to four-family dwelling that has been completed for at least one year. Homes that have been demolished, or will be demolished as part of the rehabilitation work, are eligible provided some of the existing foundation system remains in place.
203(k) can also be used to convert a one-family home to a two-, three-, or four-family dwelling or to decrease a multi-family dwelling to a single family home.
Condominiums can be purchased with 203(k) loans with some restrictions. Only the owner/occupant is eligible for the loan and the planned rehabilitation must be limited to the interior of the unit.
What improvements are eligible?
Improvements considered "luxury" improvemetns are not eligible but painting, room additions, decks are all eligible.
Are any improvements required?
All properties purchased with 203(k) funds must meet energy conservation standards and must meet smoke detector standards.
How do I apply for a 203(k) loan?
See our post "Applying for a 203(k) loan."
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