Buying A House With A FHA 203k Loan And Mortgage Guidelines
This ARTICLE On Buying A House With A FHA 203k Loan And Mortgage Guidelines Was PUBLISHED On July 17th, 2019
Tips In Buying A House With A FHA 203k Loan:
Many home buyers think that there is a lot of red tape involved in Buying A House With A FHA 203k Loan.
- This is not the case and an FHA 203k Rehab Loan is an excellent mortgage loan product for homebuyers of fixer-uppers to use
- Homeowners can have the home of their dreams where they can remodel it like they see fit
- Some can even have the next thing to a brand new home
- Homebuyers can do a complete gut and rehab project with an FHA 203k Rehab Loan
- Homebuyers are allowed to do almost anything with an FHA 203k Loan
- Borrowers can do a room addition, second story addition, remodel your unfinished basement, and remodel your unfinished attic
- Borrowers can do new bathrooms, kitchens, new appliances, new HVAC systems, new millwork, new windows, new siding, new roofing, new flooring, and a complete gut and rehab construction project
- An FHA 203k Loan is the closest to a new construction home you can have with a 3.5% down payment on the after improved value
- FHA 203k Loan programs are becoming more and more popular throughout the United States
- More and more homebuyers are buying a house with an FHA 203k Loan
In this article, we will cover and discuss Buying A House With A FHA 203k Loan And Mortgage Guidelines.
Buying A House With A FHA 203k Loan: Types Of FHA 203k Loans
There are two different types of FHA 203k Loans.
- The first is the FHA 203k Loan Streamline which limited the construction budget to a maximum to $35,000
- The second and more popular FHA 203k Loan Program is the Full Standard FHA 203k Loan which there is no construction budget limit
- With the FHA 203k Streamline Loan, you cannot do structural changes to the home or do any room additions
- Homeowners can do kitchen remodeling, bathroom remodeling, basement remodeling, attic remodeling, HVAC, millwork, roofing, siding, windows, flooring, and any other repairs that do not include structural changes or room additions to the existing home
- With the full standard FHA 203k Loan, everything goes and you can do second-story room additions, room additions, and whatever you can do with the FHA 203k Streamline Loan
Homeowners cannot do luxury construction with any FHA 203k Loans such as adding an inground swimming pool, tennis courts, outdoor spa and jacuzzi, and outdoor kitchens.
Buying A House With A FHA 203k Loan And Requirements
FHA 203k Loans are considered riskier mortgage loans than standard FHA Loans. Mortgage interest rates are generally higher than standard FHA Loans.
- Most lenders require higher credit scores on FHA 203k borrowers
- However, I have approved and closed many FHA 203k Loans for borrowers with lower credit scores and higher debt to income ratios
- Just because you are told that you do not qualify for an FHA 203k Loan with one lender does not mean that you do not qualify with a different lender
HUD Credit Score Requirements On 203k Loans
To qualify for an FHA Loan, the borrower needs a minimum credit score of 580 FICO.
- Minimum down payment required on FHA 203k Loan is 3.5% down payment
- The down payment required is on the amount of the after repaired value
- For example, if a home buyer were to purchase a home for $100,000 and the cost of the renovation is an additional $100,000, the total cost of the acquisition and construction is $200,000
- The home buyer will need 3.5% of the $200,000 or $7,000 to go with this FHA 203k Loan transaction
- There are more closing costs with an FHA 203k Loan than a standard FHA Loan
- Homebuyers do not have to worry about closing costs as long as they can get a sellers concession by the home buyer
- HUD allows up to 6% in sellers concessions for home buyers
- Sellers concessions can be used to cover all closing costs but not the down payment
Examples of closing costs are title charges, appraisal fees, HUD consultant fees, inspection fees, pre-paid such as two months escrows for taxes and insurance, one year’s homeowners’ insurance, upfront points to buy down rates, and other costs that are associated with the closing of the home purchase transaction.
FHA 203k Loan Versus Standard FHA Loans
Lenders consider FHA 203k Loans riskier than standard FHA Loans.
- Most lenders do have overlays on FHA 203k Loans
- To qualify for a standard FHA Loan, the borrower needs a 580 FICO credit score for a 3.5% down payment home purchase FHA Loan
- However, most lenders will want to see a 620 FICO credit score
- Maximum debt to income ratios for standard FHA Loans is 56.9% DTI
- However, most lenders will cap the debt to income ratios to a maximum of 50% DTI
We are one of the most aggressive FHA 203k Lenders in the country. If you are interested in qualifying for an FHA 203k Loan, please contact us at Gustan Cho Associates at 262-716-8151 or text us for faster response. Or email us at email@example.com.