FHA 203k Loan Requirements On Michigan Fixer Uppers

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FHA 203k Loan Requirements On Michigan Fixer Uppers

This BLOG On FHA 203k Loan Requirements On Michigan Fixer Uppers Was Written By Alex Carlucci of Gustan Cho Associates

FHA has a special program call FHA 203k Loans which are an acquisition and construction loan program all in one mortgage loan and one closing for home buyers and homeowners needing to purchase a home or refinancing their current home with a construction loan to do rehab on their property. With a FHA 203k Loan, a home buyer can purchase a fixer upper or a foreclosed property that is not habitable and cannot qualify for standard conventional or other mortgage loan program. The beauty with a FHA 203k Loan is that you can pretty much do anything to your home, whether it is basic kitchen and bathroom remodeling or a complete gut rehab or even a tear down and building a new home on its current foundation. There are two types of FHA 203k Loans: The FHA 203k Loan Streamline Rehab Loan and the Standard Full FHA 203k Loan Program.

FHA 203k Loan Requirements On Streamlines

The FHA 203k Streamline Rehab Loan is limited to a construction budget of $35,000. You can do any type of remodeling with the FHA 203k Streamline Rehab Loan such as kitchen remodeling, bathroom remodeling, basement remodeling, attic remodeling, millwork, painting, windows, siding, gutters, HVAC, appliances, and other types of work. However, you cannot do any structural changes to your existing home nor can you do any room additions or add new square footage to your existing house.  FHA 203k Loan Requirements mandate that luxury types of rehabs such as installations of new swimming pools, installing a lake and/or pond, tennis courts, or other types of luxury items cannot be done with FHA 203k Loans. FHA 203k Loans are limited to improvements of the home and not luxury improvements such as outdoor kitchens or other luxury amenities. These FHA 203k Loan Requirements are both for FHA 203k Streamline Rehab Loans and the Full Standard FHA 203k Loans.

FHA 203k Loan Requirements On Full Standard Rehab Loans

The state of Michigan was one of the hardest hit states after the Great Recession of 2008.

  • Due to being home of major automakers, when the Recession hit our country, citizens of Detroit and its surrounding suburbs were the most affected
  • Not only Detroit and surrounding areas, the whole state of Michigan has felt the drop in real estate values like a sudden earthquake without any warning
  • Home values have dropped over 60% in some areas
  • Bankruptcies and foreclosure numbers were among the highest in the country
  • Countless of business owners had to shut down their business after being in business for many generations
  • Finally, in mid 2012, the economy and home values started recovering
  • There are still many vacant and fixer uppers in the market

Michigan home buyers can benefit buy foreclosures, short sales, and fixer uppers with HUD’s FHA 203k Renovation Loans.

About HUD FHA 203k Renovation Loans

There is no construction budget with the full standard FHA 203k Rehab Loan Program as long as the after improved value appraises after the improvement and the home loan meets the maximum FHA Loan Limit.

  • For example, here is a case scenario:
    • maximum FHA Loan Limit is $294,515
    • home buyer is buying a fixer upper for $100,000
    • needs $150,000 to do a complete gut rehab remodeling project on this subject property
    • the home buyer can qualify for a Full Standard FHA 203k Loan for $250,000
    • this holds true as long as the after improved value of the home is appraised at $250,000
    • since the $250,000 is below the maximum FHA Loan Limit of $294,515 the homeowner is good to go
  • With the full standard FHA 203k Loan Program, homeowners can do structural changes to their home
  • They can do second story additions
  • Can add on to existing home
  • Can do a complete gut rehab
  • Can even do a complete tear down and rebuild on its existing foundation
  • One of the greatest benefits for FHA 203k Loans is that the home buyer only needs 3.5% down payment of the after improved value to qualify for both 203k Streamline as well as the full standard 203k Loan

Minimum FHA 203k Loan Requirements

FHA 203k Loan Requirements fall within FHA mortgage lending guidelines. Borrowers needs at least a 580 credit score, needs a 3.5% down payment on the after improved value, and must meet all other FHA Mortgage Lending Guidelines .  We do not have any mortgage lender overlays . So as long as borrowers meet the minimum FHA Guidelines and get an approve/eligible per Automated Underwriting System, we can get FHA 203k Loan approved, closed, and funded. Please contact us at Gustan Cho Associates at 262-716-8151 or text us for faster response. Buyers of fixer uppers can also email us at gcho@gustancho.com if you are interest in getting a FHA 203k Loan. We are FHA 203k Loan Experts with no lender overlays.

  1. Alex Carlucci says

    203k loans are a great way for you to move into a house with more equity than you put into it. Always use a construction general contractor that has done a 203k. There is a lot of paperwork that has to be turned in and it can cause your loan to go south if this isn’t done properly. What happens during the 203k loan process is a HUD counselor is hired, an appraiser and a General Contractor. The three of them and you go to the property and determine what is needed first to get the property to pass an FHA inspection. Hopefully this adds value. Then you begin to add the upgrades that you want and the HUD counselor has to approve these upgrades. When this is done then the HUD counselor will determine if this is acceptable and then he will turn to the appraiser to see final value after all repairs and upgrades. If the value is higher than the purchase price plus expenses and you are happy with the repairs and upgrades your loan will close.

    1. Gustan Cho, NMLS 873293 says

      One great benefit on HUD FHA 203k Loans is that a homeowner can customize their homes to their likings. Its like building a new home.

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