FHA 203k Loan Requirements On Michigan Fixer Uppers

This Article Is About FHA 203k Loan Requirements On Michigan Fixer-Uppers

FHA has a special program call FHA 203k Loans

  • FHA 203k loans are an acquisition and construction loan program all in one mortgage loan
  • There is 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 an 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 programs
  • The beauty of an FHA 203k Loan is that you can pretty much do anything to your home
  • This holds true whether it is basic kitchen and bathroom remodeling or a complete gut rehab
  • Or even a teardown 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

In this article, we will discuss and cover FHA 203k Loan Requirements On Michigan Fixer-Uppers.

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

Examples of work that can be done with streamline 203k’s are the following:

  • Kitchen remodeling
  • Bathroom remodeling
  • Basement remodeling
  • Attic remodeling
  • Millwork
  • Painting
  • Windows
  • Siding
  • Gutters
  • HVAC
  • Appliances
  • 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 203k Loans
  • 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

What are the requirements of FHA 203,000? Loans for full standard rehabilitation 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, but the whole state of Michigan has also 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 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 of buying 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:

  • The 2021 maximum FHA Loan Limit is $356,362
  • The 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 $356,362 the homeowner is good to go.

Full Standard FHA 203k Loans

What are loans in the full FHA 203k standard

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 teardown and rebuild on its existing foundation

One of the greatest benefits for FHA 203k Loans is that the home buyer only needs a 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, need 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 a faster response. Buyers of fixer-uppers can also email us at gcho@gustancho.com if you are interested in getting an FHA 203k Loan. The team at Gustan Cho Associates are FHA 203k Loan Experts with no lender overlays on government and conventional loans.

  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.

  2. Alice Hale says

    Here is what you get once you get approved for your NMLS Michigan MLO license:

    10:13 AM (2 hours ago)
    to me

    Congratulations! Your Michigan Mortgage Loan Originator (MLO) license has been approved. This approval authorizes you to conduct business in Michigan as defined under the Mortgage Loan Originator Licensing Act, 2009 PA 75, MCL 493.131 et seq.
    The following information is provided to assist you in maintaining your NMLS account and to remain compliant with Michigan laws. You may wish to retain this information for future reference.

    Amendments to the Licensee’s Record
    Amendments to the Licensee’s NMLS record are made through NMLS using the Michigan Mortgage Loan Originator License Amendment Checklist. Amendments include:
    •Changes in personal information (i.e. residential address, name, telephone number, e-mail address)
    •Employment and sponsorship
    •Disclosure information (Supporting documentation related to any disclosure question that is changed to a “Yes” answer must be uploaded into your NMLS record)

    Renewal Requirements
    Your MLO license expires December 31 of each year. Approval of the renewal request is granted if all requirements are complete. Renewal requirements include:
    •Submission of renewal request and payment of the annual operating fee through NMLS
    •Submission directly to the Department of Insurance and Financial Services (DIFS) of an original perpetual bond
    •Completion of 8 hours of continuing education (Exception: MLOs who complete pre-licensure education in 2021 are not required to take continuing education in 2021)
    →NOTE: Continuing education must be completed prior to requesting renewal through NMLS
    •Any MLO who requests renewal through NMLS after December 31 is subject to a late penalty of $25 per day up to a $1,000 maximum

    Continuing Education
    •Every Michigan licensed MLO is required to complete at least 8 hours of NMLS approved continuing education annually.
    (Exception: MLOs who complete pre-licensure education in 2021 are not required to take continuing education in 2021)
    Courses are scheduled through NMLS and must include:
    •3 hours of federal law and regulations
    •2 hours of ethics that include fraud, consumer protection, and fair lending issues
    •2 hours of non-traditional mortgage lending
    •1 hour of undefined instruction on mortgage origination.

    Reporting Requirements
    In order to carry out the purposes of investigations and examinations, licensed MLOs shall create or compile reports or prepare other information requested by the Director when instructed to do so. These items include, but are not limited to:
    •Accounting compilations
    •Information lists
    •Data concerning loan transactions

    MLOs will, at a minimum, be asked to report the number and dollar amount of loans originated in the preceding calendar year.

    Mortgage Call Reports
    All companies holding a Michigan mortgage license or registration, and companies employing Michigan licensed MLOs, must complete the NMLS Mortgage Call Report on a quarterly calendar basis. The NMLS Mortgage Call Report is a single report of condition that reflects the entire mortgage activity and financial information for a company. Although your sponsoring company will compile this information and report it as required through NMLS, you are required to maintain mortgage loan originator business information.

    The NMLS Call Center is available to answer any of your questions related to system operations at 1-855-NMLS 123 (1-855-665-7123). NMLS website: http://mortgage.nationwidelicensingsystem.org/Pages/default.aspx.

    You may contact DIFS Consumer Finance Licensing Unit with specific mortgage loan originator licensing questions, toll free, at 1-877-999-6442. DIFS website: http://www.michigan.gov/difs/0,5269,7-303-22535_54462—,00.html

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