FHA 203K Rehab Mortgage Qualification Requirements

This Blog On FHA 203k Rehab Mortgage Was Written By Gustan Cho NMLS 873293

FHA 203k Rehab Mortgages are one of the most popular mortgage loan programs out today. The United States Department Of Housing and Urban Development, or HUD, is the parent of the Federal Housing Administration, or FHA. FHA has the FHA 203k Rehab Mortgages which is an acquisition and rehab mortgage loan all combined in one loan and one closing. Here is a loan scenario illustrating using a FHA 203k Rehab Mortgage:

  • For example, say a home buyer wants to purchase a foreclosure where the property is currently not habitable and the sellers want $100,000 and it takes $100,000 to get it rehabbed and livable.
  • So, the home buyer will need a total of $200,000 to have the acquisition and construction for this home purchase project but most lenders will not lend on a property that is not in good condition and habitable.
  • This is when a home buyer can utilize the FHA 203k Rehab Loans to purchase the home and have the rehabilitation funding for the repairs all in one mortgage loan with very little money down payment.
  • Many home buyers, especially first time home buyers, do not have the cash to do the rehab and construction funding and second mortgages are very difficult to secure these days unless there is a lot of equity in the home being rehabbed.
  • The 203k Rehab Mortgage is the answer to many home buyers who have very little cash to put down on a home purchase where the rehab funding is out of the question to make their custom dream home come true.
  • A FHA 203k Rehab Mortgage may be the answer to a home buyer who wants to purchase a fixer upper and turn that fixer upper into their dream home making into a reality.
  • The 203k Rehab Mortgage has been specifically created and launched for home buyers who want to get financing for the cost of home renovations into an acquisition and construction loan with a very low down payment and making it affordable.

How Do I Qualify For FHA 203k Rehab Mortgage Loans?

All mortgage borrowers need to qualify for FHA Loan Requirements and meet the FHA Lending Guidelines . 203k Rehab Mortgage Loans are FHA Loans so there are two parts in the FHA 203k Rehab Mortgage Qualification Requirements:

  • The borrower needs to meet all FHA Mortgage Lending Guidelines
  • FHA 203k Rehab Loans are considered higher risk files so most lenders do have lender overlays
  • FHA 203k Rehab Loans have higher mortgage rates due to being considered higher risk
  • FHA 203k Rehab Loans do not allow for Manual Underwriting
  • FHA 203k Rehab Lenders normally have overlays where most FHA 203k Rehab Mortgage Lenders will require a 640 FICO Credit Scores. The Gustan Cho Team at CrossCountry Mortgage can qualify borrowers for FHA 203k Loans with lower credit scores

How Does The FHA 203k Rehab Loans Work?

The way FHA 203k Rehab Loans work is as follows:

  • FHA 203k Rehab Loan Programs will require the borrower to put a 3.5% down payment on the acquisition and construction based on the after improved value of the property. Homeowners refinancing their homes with a 203k Rehab Mortgage can go up to 110% of the after improved value of the property based on the after improved value on the appraisal
  • Funding for the 203k Rehab Loans consists of the home purchase price, improvements needed to be made on the home
  • Two types of FHA 203k Rehab Loans: Streamline which limits construction budget to $35,000 and the Full Standard FHA 203k Rehab Mortgage Loan Program which there is no limit on the construction budget as long as the property appraises out with the after value appraisal and the the FHA Loan does not go over the maximum FHA Loan Limit cap

Benefits Of 203k Rehab Loans

There are many benefits for  utilizing the 203k Rehab Loan Program.

  • Opportunity to purchase a fixer upper where you could not have been able to and customize your fixer upper into a dream custom home
  • Ability not just to remodel but also to do room addition and add square footage to your home purchase where it will add major value to your home. Basement remodeling, attic remodeling, and room additions are allowed with FHA 203 Rehab Mortgage Loan Programs.
  • Renovations on fixer upper home purchases can be quite expensive. FHA 203k Rehab Mortgage Loans will give you the opportunity to choose the contractor of your choice but choose your own materials and decor on the rehab of your home. Almost as good as having your home build.

If you are interested in getting more information on FHA 203k Rehab Mortgage Loans, please contact The Gustan Cho Team at CrossCountry Mortgage at 262-878-1965 or you can text Gustan Cho on his cell for faster response at 262-716-8151. We are available 7 days a week, evenings, weekends, and holidays. You can also email Gustan Cho at gcho@gustancho.com.

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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