Updates to the FHA 203(k) Program-How it is different

Education & Training with Corcoran Consulting & Coaching

Most mortgage financing plans provide only permanent financing. That is, the lender will not usually close the loan and release the mortgage proceeds unless the condition and value of the property provide adequate loan security. When rehabilitation is involved, this means that a lender typically requires the improvements to be finished before a long-term mortgage is made.

When a homebuyer wants to purchase a house in need of repair or modernization, the homebuyer usually has to obtain financing first to purchase the dwelling; additional financing to do the rehabilitation construction; and a permanent mortgage when the work is completed to pay off the interim loans with a permanent mortgage. Often the interim financing (the acquisition and construction loans) involves relatively high interest rates and short amortization periods. The Section 203(k) program was designed to address this situation. The borrower can get just one mortgage loan, at a long-term fixed (or adjustable) rate, to finance both the acquisition and the rehabilitation of the property. To provide funds for the rehabilitation, the mortgage amount is based on the projected value of the property with the work completed, taking into account the cost of the work. To minimize the risk to the mortgage lender, the mortgage loan (the maximum allowable amount) is eligible for endorsement by HUD as soon as the mortgage proceeds are disbursed and a rehabilitation escrow account is established. At this point the lender has a fully-insured mortgage loan.

To get the details of this FHA Program we have posted the information HERE or simply visit my website at www.CorcoranCoaching.com/blog/



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David Wang
Prudential California Realty - Millbrae, CA
Prudential | 650.504.8190

Bob, good article, Thank you for the info.  I will do more research on this.

Dec 01, 2008 11:45 AM #1
Erika Rogers
Re/Max First Realty - Saint George, UT
St George Utah Real Estate & local info.

HI Bob,  Thanks for the good information.  Good things to know as a buyers agent.

Dec 01, 2008 11:49 AM #2
Vickie Nagy
Vickie Nagy, Broker Associate Realty ONE Group BMC Associates | BRE#01363932 - San Ramon, CA
Broker for San Ramon, Danville, Dublin, Pleasanton

We are seeing more and more homes at auction that will not qualify for traditional financing. There were owners and flippers in the middle of a re-hab when they ran out of funds. Said homes cannot be occupied and the FHS 203(k) is the only solution when this occurs.

Dec 01, 2008 12:03 PM #3
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