FHA 203k Loan With Low Credit Scores And Bad Credit New Jersey

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This BLOG On FHA 203k Loan With Low Credit Scores And Bad Credit New Jersey Was PUBLISHED On June 24th, 2020

What is FHA 203k loans with low credit score and bad credit loans in New Jersey

FHA 203k Loans are an acquisition and construction loan all in one closing.

  • Homebuyers who are interested in buying a fixer-upper, foreclosures, or homes that do not meet construction guidelines for residential loans would need to go with an FHA 203k Loan
  • Lenders will not lend on homes that are in need of repairs or are in poor condition or are not habitable
  • However, FHA 203k Loans allows homes buyers to purchase homes in need of either minor or major repairs and homes that are not habitable
  • Most lenders have tougher mortgage guidelines on 203k Rehab Mortgages than standard regular FHA Loans due to the added layer of risk

Lenders consider home buyers buying fixer-uppers as risky and may impose mortgage overlays.

Lender Overlays

Lender overlays are additional guidelines in addition to the minimum FHA guidelines:

  • Almost all lenders have mortgage lender overlays on FHA 203k Loans due to the risk factors
  • Most lenders require a minimum credit score of 640
  • However, Gustan Cho Associates Mortgage Group can help borrowers qualify for FHA 203k Loan With Low Credit Scores and Bad Credit

Depending on the loan amount, I have helped borrowers with credit scores as low as 580 credit scores qualify for FHA 203k Loans.

About FHA 203k Loans New Jersey

New Jersey is one of the hardest-hit states after the 2008 Real Estate Market Crash.

  • The real estate market in New Jersey has started recovering in early 2012
  • Home values throughout the state of New Jersey have started rising and many areas of New Jersey have seen double-digit housing price increases
  • Due to this substantial housing value increase, both HUD and FHFA have increased FHA and Conforming Loan Limits for two years in a row
  • It is almost impossible to purchase a brand new build home in New Jersey for a reasonable price

Fortunately, for homebuyers of fixer-uppers who are willing to put the time and have the patience in rehabbing their home, they can take advantage of HUD’s 203k Renovation Loan.

FHA 203k Loan With Low Credit Scores: FHA 203k Streamline

What does FHA 203k mean Loan with low credit score: FHA 203k improvement

There are two types of FHA 203k Loans.

The first type of FHA 203k Loan is the FHA 203k Loan Streamline which limits the rehab loan amount to $35,000

Homeowners can do any type of remodeling to their home with an FHA 203k Loan Streamline such as the following:

  • kitchen remodeling
  • bathroom remodeling
  • attic remodeling
  • windows
  • roofing
  • flooring
  • electric
  • plumbing
  • HVAC
  • appliances
  • millwork
  • siding
  • gutters
  • any type of home improvements except for structural improvements and room additions

FHA 203k Loan With Low Credit Scores: Full 203k

The second type of FHA 203k Loan is the full FHA 203k Loan. There is no maximum construction amount allowed. As long as the home will appraise out on an after improved value and the FHA loan is within the maximum FHA loan limit after improved. Homeowners can do all the types of repairs that can be done with a 203k Streamline PLUS structural improvements and room additions with a full 203k.

Down Payment Required On FHA 203k Loans

One of the greatest perks with FHA 203k Loans is that all you need is a 3.5% down payment on a home purchase of the after improved value.

  • For example, here is a case scenario:
  • buyer is purchasing a fixer-upper for $100,000
  • need a construction loan for $100,000
  • after improved value of the property is $200,000
  • will need 3.5% of the $200,000 after improved value plus closing costs
  • Most homebuyers do not need to worry about the closing costs
  • this because closing costs can be covered by sellers concessions or lenders credit

Most FHA 203k borrowers just need to worry about the 3.5% down payment.

  • The down payment on FHA loans can be 100% gifted by family members and/or relatives
  • This holds true as long as a gift letter is signed by the donor
  • Needs to state that the gift is only a gift and not a loan and does not need to be paid back

Contact Us

Why should you contact us?

New Jersey home buyers of fixer-uppers, foreclosures, or homes that need major renovations and need an FHA 203k Loan With Low Credit Scores, contact us at Gustan Cho Associates Mortgage Group at 262-716-8151 or text us for a faster response. Homebuyers can also email us at gcho@gustancho.com. We are available 7 days a week, including holidays and weekends to answer your questions. Or you may APPLY NOW online at www.gustancho.com and by clicking APPLY NOW on the top right of our website.

1 Comment
  1. Gustan Cho, NMLS 873293 says

    Great article by Alexander Thomas Carlucci of Loan Cabin Inc. Alex Carlucci is a contributing editor for Gustan Cho Associates and is the top loan officer for Loan Cabin Inc., a national direct lender known for not having any overlays on government and conforming loans. Loan Cabin Inc., headquartered in Lombard Illinois is headed by Chief Executive Officer Massimo Ressa is licensed in the state of New Jersey.

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