Can an FHA 203K loan be used for a refinance project?
The short answer is absolutely yes. Is a couple scenarios that we're seeing prevalent in today's marketplace.
1) the first scenario is that you, as a Realtor, may have sold a home to somebody who needed work. It wasn't quite the house they wanted, but they felt they could get by with it and fix it over some time. You and I both know that won't likely happen. This family likely has a life, and life goes on. In the hustle and bustle of everyday life, you have to decide what will get done and what won't be done, and quite often, the home doesn't get repaired as quickly as everybody had hoped or thought it might be.
This is ideal for a FHA 203K refinance project. The owners of this home can refinance and get the money to repair the house on an all-in-one low-interest loan. We specialize in this, and we are finding more and more situations like this exist than you might think. If you sold the home recently, any time within several years, you may want to touch base with those people and see if they could fix that home the way they wanted. If not, you might suggest the FHA 203K to do that. If they have any equity in this home at all they likely won't have to come out-of-pocket for any costs and fees. Remember FHA is only 3 1/2% down payment so if they have equity equal to that, they may not have to come out-of-pocket.
2) the second scenario we see is that you just sold your home to them a couple of months ago or less, and it needs work. If we refinance that home into a 203K within six months of the original close of escrow we get to count the money they put down originally as money they now have in this project and again we could very well refinance with no more money out of their pocket and get the money to make all the repairs they need.
3) the third scenario is that the home has been well used over a long period with very little maintenance or upgrades. The owners have opted to repair and update their home rather than sell it and move. Again, this home likely has equity, and we might be able to refinance it with a 30-year fixed rate and get the money to renovate the house all in one low-interest loan.
4) The fourth scenario is when a family inherits a home that requires lots of work. There are a couple of choices: if some family member is going to move into the house, they can do an FHA 203K refinance and get the money to fix it up all in one low-interest loan. Suppose they only want to fix this home and get the top dollar for it. In that case, they might consider a Fannie Mae HomeStyle loan, which allows investment properties and second homes to be refinanced and renovated in a low-interest loan program.
In any case, both of these renovation loan products are viable alternatives to purchasing already fixed-up homes and often leave considerable equity for the owner.
Downtown
Comments(24)