The 411 on the FHA 203(k) Mortgage Program

The 203(k) Mortgage Program
You should consider an FHA 203k home loan if you are considering a home requireing rehab  expenses greater than $5,000. The top three benefits of an FHA 203k program include:
1. Higher Loan Amounts:
The FHA 203k offered by HUD is an FHA mortgage based on the home's potential value (after repairs), not the current value. This means you can be approved for a higher loan than if you were taking out a mortgage based on your home's current worth.
2. Simplicity:
Without an FHA 203k mortgage, if you wanted to buy a house in need of structural, mechanical repairs or rehab, you would have to finance every step of the purchase and rehabilitation separately. This means you would first have to get a loan to buy the home, and then find additional financing (or cash)to cover the rehabilitation costs, and finally obtain a permanent mortgage after completing the rehabilitation. With the FHA 203k, you roll all these loans into one easy-to-manage mortgage.  This is similar to the construction loan but designed specifically for an owner occupant FHA borrower.
3. Better Security:
Without the help of an FHA 203k mortgage, you have to just hope that all the money you spend on rehabilitation costs will be less than the value of the home after repairs are complete-and that you won't have to cover any unexpected costs out-of-pocket. An FHA 203k mortgage covers the cost of repairs from the outset. Typically, the mortgage usually carries a long-term-fixed rate, is insured as soon as the loan funds, and has an escrow account set up for the repairs.

4. Eligible Improvements

Luxury items and improvements are not eligible as a cost rehabilitation. However, the homeowner can use the FHA 203k program to finance such items as painting, room additions, decks and other items even if the home does not need any other improvements. All health, safety and energy conservation items must be addressed prior to completing general home improvements.

Are there Restrictions?
There are some restrictions. For example, the home you want to purchase must be a one-to four-family dwelling that has been on its foundation for at least one year. The number of units must adhere to local zoning requirements. Any newly constructed units must be affixed to the existing home.

Homes that have been demolished, or will be razed as part of the rehabilitation work, are eligible provided some of the existing foundation system remains in place.

This program can be used to accomplish rehabilitation and/or improvement of an existing one-to-four unit dwelling in one of three ways:

	To purchase a dwelling and the land on which the dwelling is located and rehabilitate it.
	To purchase a dwelling on another site, move it onto a new foundation on the mortgaged property and rehabilitate it.
	To refinance existing liens secured against the subject property and rehabilitate such a dwelling.

For more information on FHA 203k Loans or other mortgage programs, contact Renee Keshishian, Associate Broker with RE/MAX Realty Group at 443.305.2844 or Mike Archer, Loan Officer with Met Life Home Loans at (Cell) (443) 226-2030, E-mail: marcher@metlife.com

Renee M. Keshishian, Associate Broker, RE/MAX Realty Group, Certified Distressed Property Expert (CDPE), CAS, HUD, RCC, SRES, e-PRO, ABR, Five-Star Cert., RES.net Cert., REOTrans Cert, Default School Graduate

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