A Loan Officer that I work with at Bank of America was discussing with me the benefits of 203K FHA Loan and I just wanted to pass this along to everyone.
The FHA 203K Loan Program has increased in its importance with so much of the present listing inventory consisting of bank REO. The 203(k) loan permits buyers to purchase and finance homes in their "as-is" condition, NO MATTER HOW POOR! Both the 203(k) loan and 203(k) streamline loan are now being offered by Bank of America.
The 203(k) loan is a renovation loan that permits buyers to finance homes that would normally be rejected for purchase financing because of health and safety issues such as mold, missing kitchens and baths, working heat pumps, roof repair, etc. However, it is also important to note that the repairs built into a this renovation loan need NOT be only FHA required improvements. Buyers may also finance their "wish list" items into the loan, such as granite countertops, hardwood floors, new windows, etc. Although pools are not allowed to be constructed with the renovation loan, repairing an existing pool is permissible!
My Loan Officer mentioned that Bank of America has DE (direct endorsement) underwriters and are, therefore, allowed to offer both the full and streamline 203(k) loan by FHA. So, it would be important to know if your Lender had the direct endorsement underwriters. This is important because many of you may know that the streamline only allows $35,000 in repairs. However, the full 203(k) loan allows the full FHA statutory loan limit for our area. , with no maximum repair limit.
For example, a buyer may purchase a bank foreclosure in our area for $100,000. The repairs to this home may then be $180,000 as the maximum loan limit for FHA loans in our area is $271,050. The $100,000 purchase price plus the cost of repairs would make the acquisition cost $280,000. The borrower would make their normal FHA down payment of 3.5% (which can come from their own funds or gift funds from a relative) to make a total base loan of $270,200.
The FHA 203(k) loan is eligible for single family homes, townhomes and multi-unit homes (up to 4 units). Manufactured homes and condos are not allowed. All other FHA rules apply for the borrowers for credit purposes and primary residence occupancies. So, unfortunately, it's not for investors.
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