FHA guidelines still evolving - financing repair costs.

For those who are not up on FHA it is a good time to look at this type loan. There is no reason not to unless you are always above the FHA loan limit.  

In 2004 FHA was a last resort for many.  In 2008 it should be the first loan type considered. This is even more true if your credit score is below 700. 

 

HUD just issued new guidelines regarding non traditional credit that you can learn about here: http://www.hud.gov/offices/adm/hudcl...ee/08-11ml.doc

I usually read HUD mortgagee letters: which you can find here:
http://www.hud.gov/offices/adm/hudcl...ers/mortgagee/

If you work with anyone wanting to do limited rehab look at mortgagee letter 2005-50.

That said,  before going for a mortgage as rehab loan consider just getting rehab financing after settlement in cases where that will work.  It can be much cheaper because when you use a 203k type loan product you end up paying a much higher interest rate (.5% higher or more) on THE ENTIRE LOAN. 

Suppose you need 15000 in repairs.  Do a 203k streamline on a 300,000 loan and it may bump up your rate by a half percent. That is going to cost you 1500/year.  1/2 % of 300,000.   Every year.   Instead if you got a loan after purchase of 15000 and it even cost you 10% it would only cost you 1500 per year.  Any rate under that is savings.  AND you would not have to refinance your entire mortgage to get rid of it.